SUBSCRIPTION AGREEMENT
Exhibit 4.8
REDACTED VERSION
TO:
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WEX Pharmaceuticals Inc. (the “Corporation”) |
The undersigned (the “Subscriber”) hereby agrees to purchase from the Corporation
16,327.272 common shares (the “Offered Shares”) of the Corporation for aggregate
consideration of $4,489,999.80 (the “Subscription Price”), representing a subscription
price of $0.275 per Offered Share and agrees to advance to the Corporation Cdn$l5,600,000
(the “Debenture Proceeds”) for a convertible debenture in the principal amount of
Cdn$15,600,000 in the form attached as Schedule “A” (the “Convertible Debenture”), such advance
to be in accordance with the terms of the Convertible Debenture, which Convertible
Debenture will be convertible into common shares of the Corporation and pay interest by the
issuance of common shares of the Corporation in accordance with the terms of the
Convertible Debenture (together the “Debenture Shares” and together with the Convertible
Debenture and the Offered Shares the “Securities”) on the terms and conditions set out in
this subscription agreement (the “Subscription Agreement”).
DATED this l5th day of July, 2007.
| 2 Dai Fu Street | ||
| Tai Po Industrial Estate | ||
| New Territories | ||
C.K. Life Sciences lnt’l., Inc.
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Hong Kong | |
Name of Subscriber
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Subscriber’s Address |
C.K. Life Sciences Int’l., Inc.
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852-2-126-1212 | 852-2-126-1233 | ||
| (Attention: Xxxx Xx) | ||||
| Subscriber’s Telephone Number Fax Number | ||||
By:
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“Kee Xxxx Xxx” | |||
| KEE XXXX XXX, DIRECTOR | ||||
Registration Instructions:
A completed and duly executed Schedule B must accompany this Subscription Agreement.
1. Offering and Subscription. By executing this Subscription Agreement, the Subscriber
irrevocably offers to purchase from the Corporation the Offered Shares set forth on the first
page hereof at the Subscription Price, subject to the terms and conditions set out herein. The
Subscriber acknowledges that the offer is subject to:
| (a) | the acceptance of this subscription by the Corporation; |
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| (b) | the payment of the Subscription Price by the Subscriber; |
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| (c) | receipt of all necessary regulatory approvals, including required shareholder
approval; and |
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| (d) | certain other terms and conditions as set forth herein. |
Upon the Corporation’s acceptance of this subscription, this Subscription Agreement will
constitute an agreement for the purchase by the Subscriber from the Corporation and for the
Corporation to issue and sell to the Subscriber, the number of Offered Shares set forth on the
first page hereof at the Subscription Price on the terms and conditions set forth herein. The
closing of the offering is subject to and will occur in accordance with the terms and conditions
set forth herein and the receipt of all necessary regulatory approvals.
2. Debenture. By executing this Subscription Agreement, the Subscriber irrevocably offers
to advance the Debenture Proceeds set forth on the first page hereof, subject to the terms and
conditions set out herein and in the Convertible Debenture. The Subscriber acknowledges that the
offer is subject to:
| (a) | the acceptance of this subscription by the Corporation; |
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| (b) | the payment of the first instalment of the Debenture Proceeds by the
Subscriber at Closing (as defined below); |
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| (c) | receipt of all necessary regulatory approvals, including required shareholder
approval; and |
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| (d) | certain other terms and conditions as set forth herein. |
Upon the Corporation’s acceptance of this offer, this Subscription Agreement will constitute
an agreement for the purchase by the Subscriber from the Corporation and for the Corporation to
issue and sell to the Subscriber, the Convertible Debenture set forth on the first page hereof
for the Debenture Proceeds on the terms and conditions set forth herein and in the Convertible
Debenture. The closing of the offering is subject to and will occur in accordance with the terms
and conditions set forth herein and the receipt of all necessary regulatory approvals. The
closing of the offering of the Offered Shares and the Convertible Debenture (hereinafter,
collectively the “Closing”) shall occur together on the Closing Date as provided for in Section
11 hereof.
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3. Issuance of Offered Shares. The Subscriber understands that the Offered Shares
subscribed for shall be purchased directly from the Corporation by the Subscriber. Provided the
subscription is accepted by the Corporation, the Corporation will thereupon issue to the Subscriber
on the Closing Date the Offered Shares being subscribed for hereunder registered in the
Subscriber’s name (or in such other name or names as are set forth under “Registration
Instructions” on the first page of this Subscription Agreement or as the Subscriber otherwise
directs the Corporation not less than two business days prior to the Closing Date) and cause to be
issued and delivered to the Subscriber definitive certificates representing such Offered Shares at
the Closing. In the event that this subscription is not accepted by the Corporation, this
Subscription Agreement and any other document in connection therewith delivered to the Corporation
will be returned to the Subscriber.
4. Subscriber’s Representations, Warranties and Covenants. By executing this Subscription
Agreement, the Subscriber on its own behalf and on behalf of a Purchasing Entity if designated
pursuant to Section 20 hereof, represents, warrants and covenants to and with the Corporation (and
acknowledges that the Corporation is relying thereon) that:
| (a) | the Subscriber: |
| (i) | is the beneficial purchaser of the Securities unless a
Purchasing Entity is designated pursuant to Section 20 hereof in which case
the Purchasing Entity shall be the beneficial purchaser; |
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| (ii) | is resident in the jurisdiction set out on the first page of
this Subscription Agreement as the “Subscriber’s Address”; |
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| (iii) | is not, and is not purchasing the Securities for the account
or benefit of, a U.S. Person (as that term is defined in Regulation S
(“Regulation S”) under the United States Securities Act of 1933 (the “1933
Act”)) or for resale in the United States (as “United States” is defined in
Regulation S); |
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| (iv) | was not offered the Securities in the United States; |
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| (v) | at the time the purchase order originated was outside the
United States, and did not execute or deliver this Subscription Agreement or
related documents in the United States; |
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| (vi) | acknowledges that the Securities have not been, nor will they
be, registered under the 1933 Act or the securities laws of any state in the
United States, and may not be offered or sold in the United States or to a
U.S. Person, without registration or an exemption from registration under the
1933 Act and applicable state securities laws and agrees not to offer or sell
the Offered Shares in the United States or to a U.S. Person, without
registration or an exemption from registration under the 1933 Act and
applicable state securities laws; |
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| (vii) | is purchasing the Securities as principal for its own account
and not for the benefit of any other person, and is purchasing a sufficient
number of Securities so that the aggregate acquisition cost to the Subscriber
will not be less than Cdn. $150,000 paid in cash at the time of the trade; and |
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| (viii) | is an “accredited investor” as that term is defined in National Instrument
45-106 (being a person other than individual or investment fund, that has net
assets of at least $5,000,000 as shown on its most recently prepared financial
statements or, in the event the Subscriber designates a Purchasing Entity, such
Purchasing Entity is a person in respect of which all of the owners of interests,
direct, indirect or beneficial, except the voting securities required by law to be
owned by directors, are persons that are accredited investors); |
| (b) | if the Subscriber is a resident of, or otherwise subject to the laws of, a country
other than Canada or the United States (an “International Jurisdiction”): |
| (i) | the delivery of this Subscription Agreement, the acceptance of it by the
Corporation and the issuance of the Securities complies with all applicable laws of
the Subscriber and all other applicable laws and will not cause the Corporation to
become subject to or comply with any disclosure, prospectus or reporting
requirements under any such applicable laws; |
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| (ii) | the Subscriber is knowledgeable of, or has been independently advised as to,
the applicable securities laws of the International Jurisdiction which would apply to
this subscription, if there are any; |
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| (iii) | the Subscriber is purchasing the Securities pursuant to exemptions from the
prospectus and registration requirements under the applicable securities laws of that
International Jurisdiction or, if such is not applicable, is permitted to purchase
the Securities under the applicable securities laws of the International Jurisdiction
without the need to rely on an exemption or the need of the Corporation to rely on an
exemption; and |
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| (iv) | the applicable securities laws do not require the Corporation to make any
filings or disclosures or seek any approvals of any kind whatsoever from any
regulatory authority of any kind whatsoever in the International Jurisdiction; |
| (c) | the Subscriber is purchasing the Securities for investment only and not with a view to
resale or distribution of all or any of the Securities; |
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| (d) | the Subscriber has not been created solely or used solely to purchase securities without
the use of a prospectus by the issuer in reliance on a prospectus exemption, including
without limitation the accredited investor exemption under applicable securities
legislation; |
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| (e) | this Subscription Agreement has been duly and validly authorized, executed and delivered
by, and constitutes a legal, valid, binding and enforceable obligation of, the Subscriber,
except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights, (ii) general
principles of equity that restrict the availability of equitable remedies, and (iii) to the
extent that the enforceability of any indemnification may be limited by applicable laws (collectively, the
“Qualifications”); |
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| (f) | the Subscriber is a valid and subsisting corporation, has the necessary corporate capacity
and authority to execute and deliver this Subscription Agreement and to observe and perform
its covenants and obligations hereunder and has taken all necessary corporate action in
respect thereof; |
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| (g) | the Subscriber undertakes to comply with all provisions of the applicable securities
legislation relating to ownership of, and trading in, securities including, without
limitation, the filing of insider reports and reports of acquisitions; |
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| (h) | the entering into of this Subscription Agreement and the transactions contemplated hereby
will not result in a violation of any of the terms and provisions of any law applicable to
the Subscriber or any of its constating documents, or of any agreement to which it is a party
or by which it is bound; |
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| (i) | the Subscriber acknowledges that in connection with the purchase of the Offered Securities
hereunder it has received no advice as to tax or legal ramifications of this Subscription
Agreement and the Convertible Debenture from the Corporation and has been advised to seek
independent advice from its legal, accounting and tax advisors prior to entering into this
Subscription Agreement; |
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| (j) | the Subscriber is an investor who, by virtue of its net worth and investment experience or
by virtue of consultation with or advice from a person who is not an insider of the
Corporation, but who is a registered advisor or registered dealer, is able to evaluate the
merits and risks of investment in the Securities and is able to bear the economic risk of
loss of such investment; |
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| (k) | the Subscriber has been independently advised as to the applicable resale restrictions,
including the hold periods imposed in respect of the Securities and confirms that no
representation has been made respecting the applicable hold periods for the Securities, and
is aware of the risks and other characteristics of the Securities; |
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| (l) | the Subscriber has not received, nor has it requested, nor does it have any need to
receive, any offering memorandum or any other document describing the business and affairs
of the Corporation that constitutes an offering memorandum as such term is defined under
applicable securities laws, nor has any such document been prepared for delivery to, or
review by, the Subscriber in order to assist the Subscriber in making an investment decision
in respect of the Securities; |
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| (m) | the Subscriber has relied solely upon reports and documents concerning and issued by the
Corporation required to be filed with the securities regulatory authorities in Canada on the
System for Electronic Document Analysis and Retrieval (“SEDAR”) and made available to the
public on SEDAR and upon the representations, warranties and covenants provided herein and
not upon any verbal or other written representation as to fact or otherwise made by or on
behalf of the Corporation or any employees, agents or affiliates thereof; |
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| (n) | the offering and sale of the Securities to the Subscriber was not made or solicited
through, and the Subscriber is not aware of, an advertisement of the Securities in printed
media of general and regular paid circulation (or other printed public media), radio,
television or telecommunications, including electronic display (such as the Internet), or
any other form of advertisement or general solicitation and the Subscriber acknowledges it
did not receive an offering memorandum or similar document (including an offering
memorandum as such term is defined under applicable securities laws) in connection with the
offering and sale of the Securities; |
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| (o) | the Subscriber acknowledges that because the purchase and sale of the Securities is being
made pursuant to prospectus exemptions available under applicable securities laws: |
| (i) | it is restricted from using certain of the civil remedies available under
the applicable securities laws; |
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| (ii) | it may not receive information that might otherwise be required to be
provided to it under the applicable securities laws if the exemptions were not being
used; and |
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| (iii) | the Corporation is relieved from certain obligations that would otherwise
apply under the applicable securities laws if the exemptions were not being used; |
| (p) | the Subscriber: |
| (i) | acknowledges that the Securities purchased hereunder are subject to resale
restrictions imposed under applicable securities laws and the rules of regulatory
bodies having jurisdiction; |
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| (ii) | acknowledges that the certificates representing the Offered Shares and the
Debenture Shares (if the applicable hold period has not expired) may bear legends
substantially in the following form and with the necessary information inserted: |
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“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE
<*INSERT DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE
DISTRIBUTION DATE>.” |
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE
FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF
TRANSACTIONS ON THE TSX.” |
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if the Subscriber wishes to resell the Securities during the four month hold
period described in the above legend, the trade can only happen pursuant to
applicable securities legislation and stock exchange rules. |
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| (iii) | acknowledges that it has been advised by the Corporation that it should
consult its own legal adviser before disposing of all or any part of any Securities
that may be issued to the Subscriber pursuant to this Subscription Agreement or the
Convertible Debenture to avoid breach of relevant securities legislation and stock
exchange rules; and |
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| (iv) | agrees not to resell the Securities, except in accordance with the
provisions of applicable securities legislation and stock exchange rules; |
| (q) | the Subscriber acknowledges that: |
| (i) | no securities commission or similar regulatory authority has reviewed or
passed on the merits of the Securities; |
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| (ii) | there is no government or other insurance covering the Securities; |
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| (iii) | there are risks associated with the purchase of the Securities; |
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| (iv) | there are restrictions on its ability to resell the Securities and it is its
responsibility to find out what those restrictions are and to comply with them before
selling the Securities; and |
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| (v) | it has been advised by the Corporation that the Corporation is relying on
an exemption from the requirements to provide it with a prospectus and to sell
securities through a person registered to sell securities under applicable
securities legislation (including securities legislation of British Columbia) and,
as a consequence of acquiring the Securities pursuant to this exemption, certain
protections, rights and remedies provided by applicable securities legislation
(including securities legislation of British Columbia), including statutory rights
of rescission or damages, will not be available to it; |
| (r) | the Subscriber will execute, deliver, file and otherwise assist the Corporation in filing,
such reports, undertakings and other documents required by applicable securities
legislation, policy or order or by any securities commission, stock exchange or other
regulatory authority with respect to the issue of the Securities, including, if required by
the TSX, a Personal Information Form; |
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| (s) | the Subscriber is not acting jointly or in concert with another person or is bound by or
subject to any agreement, commitment or understanding, whether formal or informal, with any
other person relating to the voting rights attached to the Securities to be purchased
hereunder or in connection with the purchase hereunder; |
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| (t) | as of the date hereof, the Subscriber is not an “insider” or “control person”
of the Corporation, as that term is defined in applicable securities laws; and |
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| (u) | the funds representing the Subscription Price and the Debenture Proceeds
which will be advanced by the Subscriber to the Corporation hereunder will not
represent proceeds of crime for the purposes of the Proceeds of Crime (Money
Laundering) Act (Canada) (the “PCMLA”) and the Subscriber acknowledges that the
Corporation may in the future be required by law to disclose the Subscriber’s name
and other information relating to this Subscription Agreement, the Convertible
Debenture and the Subscriber’s purchase of the Securities hereunder, on a
confidential basis, pursuant to the PCMLA. To the best of its knowledge: |
| (i) | none of the subscription funds to be provided by the Subscriber: |
| (A) | have been or will be derived from or related
to any activity that is deemed criminal under the laws of Canada, the
United States, or any other jurisdiction; or |
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| (B) | are being tendered on behalf of a person or
entity who has not been identified to the Subscriber; and |
| (ii) | it shall promptly notify the Corporation if the Subscriber
discovers that any of such representations ceases to be true, and to provide
the Corporation with appropriate information in connection therewith. |
If the Subscriber designates a Purchasing Entity pursuant to Section 20 hereof: (a) the
representations and warranties in this Subscription Agreement, including without limitation in
this Section 4 shall apply mutatis mutandis to the Purchasing Entity; and (b) the terms and
conditions in this Subscription Agreement applicable to the Subscriber shall apply mutatis
mutandis to the Purchasing Entity.
The Subscriber agrees that the above representations, warranties and covenants in this
Section 4 will be true and correct both as of the execution of this Subscription Agreement and as
of the Closing Time and will survive the purchase of the Securities hereunder and shall continue
in full force and effect for two years from the Closing Date, notwithstanding any subsequent
disposition of the Securities.
5. Acknowledgement of Subscriber. The foregoing representations, warranties and
covenants (including those made in any Schedules attached hereto) are made by the Subscriber with
the intent that they be relied upon by the Corporation in determining the eligibility of the
Subscriber as a purchaser of the Securities and the Subscriber hereby agrees to indemnify the
Corporation against all losses, claims, costs, expenses and damages or liabilities which the
Corporation may suffer or incur, caused or arising from reliance thereon. The Subscriber
undertakes to notify the Corporation immediately of any change in any representation, warranty or
other information relating to the Subscriber or the Purchasing Entity set forth herein (including
those made in any Schedules attached hereto) which takes place prior to the Closing Time.
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6. Corporation’s Representations, Warranties and Covenants. By executing this Subscription
Agreement, the Corporation represents, warrants and covenants to and with the Subscriber (and
acknowledges that the Subscriber is relying thereon) that:
| (a) | Subsidiaries. Each of the entities listed in Section 6(a) of Schedule
“D” (the
“Disclosure Schedule”) is a subsidiary of the Corporation (the “Subsidiaries”).
Other than the Subsidiaries, the Corporation does not own or control any equity
security of any other person. Except as disclosed in Section 6(a) of the Disclosure
Schedule or in the Disclosure Record (as hereinafter defined) the Corporation is
not a participant in any joint venture, partnership or similar arrangement. Except
as disclosed in Section 6(a) of the Disclosure Schedule or the Disclosure Record
the Corporation owns, directly or indirectly, the shares or other equity interests of
each Subsidiary set forth in Section 6(a) of the Disclosure Schedule free and clear
of all Encumbrances (as defined in Section 6(p) below). The jurisdiction of
incorporation and percentage of voting and equity securities currently held by the
Corporation of each Subsidiary is as set out in Section 6(a) of the Disclosure
Schedule. The registered capital of Nanning Maple Leaf Pharmaceutical Co., Ltd.
(“NMLP”) and the contributions to date with respect thereto are also set out in
Section 6(a) of the Disclosure Schedule and except as disclosed in Section 6(a) of
the Disclosure Schedule all contributions required to have been made as of the
date hereof have been made in accordance with applicable law. |
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| (b) | Organization, Good Standing and Qualification. Except as disclosed in
Section 6(b) of the Disclosure Schedule, the Corporation and each of the Subsidiaries
is a corporation duly incorporated, continued or amalgamated and organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation,
continuation or amalgamation. The Corporation and each of the Subsidiaries have all
requisite corporate power, capacity and authority to own and operate its properties and
assets. The Corporation and each of the Subsidiaries is duly qualified to carry on its
business as now conducted and is duly registered, licensed or qualified in good
standing in all jurisdictions in which the nature of its activities, business and its
properties (both owned and leased) makes such licensing, registration or qualification
necessary, except for those jurisdictions in which failure to do so would not have a
material adverse effect and, to its knowledge, no proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification. Except as disclosed in Section 6(b)
of the Disclosure Schedule, the Corporation and each Subsidiary, is not insolvent, and
no acts or proceedings of the Corporation or the Subsidiary have been taken by or
against it or are pending in connection with, and the Corporation or the Subsidiary is
not in the course of, and has not received any notice in respect of, a dissolution,
liquidation, insolvency, bankruptcy, reorganization or receivership. |
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| (c) | Authority. The
Corporation has all requisite corporate power and
authority to execute and deliver this Subscription Agreement, the Convertible
Debenture and to issue and sell the Securities contemplated hereby and, at the Closing
Time, the Offered Shares to be purchased hereunder will have been duly authorized,
allotted and reserved for issuance and upon the Corporation’s receipt of full payment
for the Offered Shares, such Offered Shares will be issued as fully paid shares in the capital
of the Corporation. With respect to the issuance of the Debenture Shares, at the Closing
Time, the Corporation will have duly authorized, allotted and reserved for issuance up to
320,000,000 common shares (subject to adjustment as provided for in the Convertible
Debenture) on full or partial conversion of the Convertible Debenture and all of the
common shares to be issued in payment of interest under the Convertible Debenture and the
Debenture Shares when issued shall be issued as fully paid shares in the capital of the
Corporation. |
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| (d) | TSX Compliance. The Corporation is, and will at the Closing Time be, in compliance
in all material respects with the by-laws, rules and regulations of the TSX including without
limitation all corporate governance requirements of the TSX and no material change relating
to the Corporation has occurred from and after March 31, 2007 that has not been generally
disclosed and that in relation thereto the requisite material change report has not been
filed under applicable securities laws and no such disclosure has been made on a confidential
basis. |
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| (e) | Reporting Issuer. As at the date hereof, the Corporation is a “reporting issuer” or its
equivalent in of British Columbia, Alberta, Ontario and Quebec and is not on the list of
defaulting reporting issuers, or the equivalent thereof, maintained by the applicable
regulatory authority in such jurisdiction. |
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| (f) | Disclosure Record. Each of the Corporation’s prospectuses, annual reports, financial
statements, annual information forms, management discussion and analysis, information
circulars, material change reports, press releases and all other information or documents
filed by the Corporation with the securities regulatory authorities in Canada on SEDAR and
made available to the public on SEDAR and with the TSX on or after March 31, 2005 (the
“Disclosure Record”) did not contain a misrepresentation as at the date of the filing, which
was not subsequently corrected. |
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| (g) | Capitalization; Voting Rights |
| (i) | Section 6(g) of the Disclosure Schedule sets forth for the Corporation
and each Subsidiary: |
| (A) | the authorized capital on the date hereof; |
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| (B) | the number of shares or other securities issued and
outstanding on the date hereof; |
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| (C) | the number of shares or other securities issuable pursuant to
any stock option plan of the Corporation (the “Plan”) or of a Subsidiary; and |
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| (D) | the number of shares or other securities issuable or reserved
for issuance pursuant to other options granted or proposed to be granted to
officers, directors, employees or consultants, warrants, other rights to
acquire securities and other convertible securities outstanding as at the date of this Subscription Agreement, whether issued
pursuant to an established plan or otherwise, and including any agreement
or understanding with respect to the issuance or granting of the same,
other than the Convertible Debenture (the “Outstanding Convertible
Securities”). |
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| (ii) | Except as may be issued or granted pursuant to this Subscription Agreement
or the Convertible Debenture and except as disclosed in Section 6(g) of the
Disclosure Schedule or in the Disclosure Record, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from treasury or from the Corporation or a Subsidiary of any
securities of the Corporation or any securities of a Subsidiary. |
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| (iii) | Except as disclosed in Section 6(g) of the Disclosure Schedule all issued
and outstanding shares in the capital of the Corporation have been duly authorized
and validly issued and are fully paid and were issued in compliance with all
applicable laws. |
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| (iv) | Except as disclosed in Section 6(g) of the Disclosure Schedule or in the
Disclosure Record, no stock purchase plan, stock option plan or other agreement or
understanding between the Corporation and any holder of any equity securities or
rights to purchase equity securities provides for acceleration or other changes in
the vesting provisions or other terms of such agreement or understanding as the
result of any merger, sale of shares or assets, change in control or any other
transaction(s) by the Corporation. |
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| (v) | There are no shareholders’ agreements, voting trust, proxy or other
agreements in any way governing the rights of shareholders of the Corporation to
which the Corporation is a party. |
| (h) | Authorization; Binding Obligations. Subject to the required shareholder and
director approvals being obtained prior to the Closing Time, all corporate action on the
part of the Corporation necessary for the authorization, execution and delivery of this
Subscription Agreement and the Convertible Debenture and the performance of all obligations
of the Corporation hereunder and thereunder and the authorization, sale, issuance and
delivery of the Offered Shares pursuant to the Subscription Agreement have been or will be
taken prior to the Closing Time. The Subscription Agreement constitutes, and the Convertible
Debenture when executed and delivered at Closing will constitute, a valid and binding
obligation of the Corporation enforceable in accordance with its terms, except as limited by
the Qualifications. Other than as provided in this Subscription Agreement, the sale of the
Offered Shares and the Convertible Debenture are not and will not be subject to any
pre-emptive rights or rights of first refusal. |
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| (i) | Financial Statements. The consolidated audited financial statements of
the Corporation for the year ended March 31, 2007, consisting of consolidated balance sheets as at March 31, 2007 and March 31, 2006 and consolidated statements of
operations and deficit, and consolidated statements of cash flow, each for the years ended
March 31, 2007 and March 31, 2006, together with the notes thereon (collectively the
“Financial Statements”) present fairly the financial condition of the Corporation, on a
consolidated basis, as of their dates, and have been prepared in accordance with Canadian
generally accepted accounting principles consistently applied. Since March 31, 2007 (the
“Statement Date”) there has been no material change by the Corporation in its accounting
policies, monthly practices or principles that are material to the Corporation’s
consolidated financial statements, except as disclosed in the notes to the Financial
Statements with respect to periods ending prior to the date of this Subscription
Agreement. |
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| (j) | Internal Controls. The Corporation has established and maintains a system of
disclosure controls and procedures and internal control over financial reporting, and has: |
| (i) | designed such disclosure controls and procedures, or caused them to be
designed under management’s supervision, to provide reasonable assurance that
material information relating to the Corporation is made known to management by
others, particularly during the period in which the financial statements are being
prepared; |
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| (ii) | designed such internal control over financial reporting, or caused it to be
designed under management’s supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the Corporation’s generally accepted
accounting principles; and |
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| (iii) | evaluated the effectiveness of the Corporation’s disclosure controls and
procedures as of the end of the period covered by the Corporation’s most recent
annual filings and have caused the Corporation to disclose in the most recent annual
management’s discussion and analysis the conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period covered by the
Corporation’s most recent annual filings based on such evaluation. |
| (k) | Auditor’s Independence. Ernst & Young LLP and Xxxxxxx Xxxxxx LLP have expressed
their opinion in respect of the audited financial statements of the Corporation which they
audited, were “independent” with respect to the Corporation at all relevant times within the
meaning of the rules and regulations of the Canadian securities regulatory authorities and
there has never been a “reportable event” (within the meaning of National Instrument 51-102)
with either of such auditors. |
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| (l) | Liabilities. Except as set forth in the Financial Statements or the Disclosure
Record, the Corporation (including the Subsidiaries) has no material liabilities and, to its
knowledge, knows of no material contingent liabilities, except current liabilities incurred
in the ordinary course of business subsequent to the Statement Date which in any individual case or in the aggregate, would not have a material adverse
effect. Except as disclosed in the Disclosure Record neither the Corporation nor any
Subsidiary is a guarantor or indemnitor of any indebtedness of any other person. Except as
disclosed in the Disclosure Record, there are no off-balance sheet transactions,
arrangements, obligations (including contingent obligations) or other relationships of the
Corporation or a Subsidiary with unconsolidated entities or other persons that may have a
material current or future effect on the financial condition, changes in financial
condition, results of operations, earnings, cash flow, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses of the Corporation on
a consolidated basis or that would reasonably be expected to be material to an investor in
making a decision to purchase the Securities. |
||
| (m) | Agreements; Action. |
| (i) | Other than as disclosed in Section 6(m) of the Disclosure Schedule or the
Disclosure Record, there are no agreements, understandings or proposed transactions
between the Corporation or any of the Subsidiaries and any of its officers, directors
or affiliates, other than employment agreements entered into in the ordinary course
of business. |
||
| (ii) | Except as disclosed in Section 6(m) of the Disclosure Schedule and in the
Disclosure Record, there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Corporation
or any Subsidiary is a party or to its knowledge by which it is bound which may
involve obligations (contingent or otherwise) of, or payments to, the Corporation or
any Subsidiary in excess of $250,000. |
||
| (iii) | Except as disclosed in the Financial Statements, Section 6(m) of the
Disclosure Schedule or in the Disclosure Record, neither the Corporation nor any
Subsidiary has since the Statement Date, other than in the ordinary course (i)
incurred any indebtedness for money borrowed or any other liabilities that are now
outstanding, (ii) made any loans or advances to any other person, other than ordinary
advances for travel expenses or expense reimbursements, or (iii) sold, exchanged or
otherwise disposed of any of its assets, licenses or rights, except in the ordinary
course of business. |
||
| (iv) | Except as disclosed in Section 6(m) of the Disclosure Schedule or in the
Disclosure Record the Corporation and each Subsidiary has performed all obligations
required to be performed by it as of the date hereof under any material agreement to
which the Corporation or any Subsidiary is a party or by which it is bound. Except as
disclosed in Section 6(m) of the Disclosure Schedule or the Disclosure Record, there
are no material agreements to which the Corporation or any Subsidiary is a party, not
otherwise disclosed, the breach or termination of which by the other party to such
agreement would reasonably be expected to have a material adverse effect on the
Corporation. |
- 13 -
| (n) | Obligations to Related Parties. Except as disclosed in this Section 6(n) or in
the Disclosure Record there are no obligations of the Corporation or of any Subsidiary or
indebtedness or other amounts owing to any of the officers, directors, shareholders, or
employees of the Corporation or any Subsidiary other than: |
| (i) | for payment for services rendered; |
||
| (ii) | reimbursement for reasonable expenses incurred on behalf of the
Corporation or a Subsidiary; |
||
| (iii) | for other standard employee benefits made generally available to all
employees of the same level (including stock option agreements approved by the
Corporation’s Board of Directors (the “Board of Directors”) outstanding under the
Plan); and |
||
| (iv) | as set forth in the Financial Statements or the Disclosure Record. |
To the Corporation’s knowledge, other than as disclosed in the Disclosure Record, none of
the officers, directors or material shareholders of the Corporation or of any Subsidiary
or any members of their immediate families, are indebted to the Corporation or any
Subsidiary or have any direct or indirect ownership interest in any firm or corporation
with which the Corporation or any Subsidiary is affiliated or any firm or corporation
which competes with the Corporation, other than passive investments in publicly traded
companies (representing less than ten percent of such company) which may compete with the
Corporation. Other than as disclosed in the Disclosure Record, no officer, director or
material shareholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Corporation or any Subsidiary
(other than such agreements related to employment or the ownership of options pursuant to
the Plan). Except as disclosed in the Disclosure Record, neither the Corporation nor any
Subsidiary is a guarantor or indemnitor of any indebtedness of any officer, director or
material shareholder of the Corporation or of any Subsidiary or any member of their
immediate families. For the purposes of this section “material shareholder” means any
shareholder who would be required to file xxxxxxx xxxxxxx reports pursuant to the
Securities Act (British Columbia). |
| (o) | Changes. Since March 31, 2006 and except as disclosed in the Disclosure Record or
in Section 6(o) of the Disclosure Schedule, there has not been to the Corporation’s
knowledge: |
| (i) | any change in the assets, liabilities, financial condition or operations of
the Corporation on a consolidated basis from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is reasonably expected to have a material
adverse effect; |
||
| (ii) | any resignation or termination of any officer, key employee or group of
employees of the Corporation or of any Subsidiary, and the Corporation, to its knowledge, does not know of the impending resignation or termination of
employment of any such officer, key employee or group of employees; |
- 14 -
| (iii) | any material change in the contingent obligations of the Corporation on a
consolidated basis, by way of guaranty, endorsement, indemnity, warranty or
otherwise; |
||
| (iv) | any direct or indirect loans made by the Corporation or any Subsidiary to
any shareholder, employee, officer or director of the Corporation or any Subsidiary; |
||
| (v) | any material change in any compensation arrangement or agreement with any
employee, officer, director or shareholder; |
||
| (vi) | any declaration or payment of any dividend or other distribution of the
assets of the Corporation or of any Subsidiary; |
||
| (vii) | any debt, obligation or liability incurred, assumed or guaranteed by the
Corporation or by any Subsidiary, except for current liabilities incurred in the
ordinary course of business; |
||
| (viii) | any sale, assignment or transfer of any material asset; |
||
| (ix) | any change in any material agreement to which the Corporation or any
Subsidiary is a party or by which it is bound which results in a material adverse
effect; or |
||
| (x) | any other event or condition of any character that, either individually or
cumulatively, has resulted in a material adverse effect. |
| (p) | Title to Properties and Assets; Liens, etc. Except as disclosed in the Financial
Statements, the Disclosure Record or in Section 6(q) of the Disclosure Schedule and as may
be disclosed in the Clinical Data Disclosure Schedule (as hereinafter defined): |
| (i) | the Corporation and each Subsidiary has good and marketable title to its
properties and assets, real, personal or intangible, free and clear of all
mortgages, pledges, liens, charges, security interests, claims, adverse interests or
other encumbrances whatsoever (collectively the “Encumbrances”), other than those
resulting from taxes which have not yet become delinquent; |
||
| (ii) | any real property and facilities held under lease by the Corporation or any
Subsidiary is held by it under valid, subsisting and enforceable leases, except to
the extent that enforcement may be limited by the Qualifications; and |
- 15 -
| (iii) | the Corporation and each Subsidiary, as applicable, is in compliance with all
material terms of each lease for real property or material lease for personal
property to which it is a party or is otherwise bound. |
| (q) | Intellectual Property. |
| (i) | “Intellectual Property” means all intellectual property of the Corporation and
all its Subsidiaries and used or currently being developed for use in the business of
the Corporation and its Subsidiaries (the “Business”) and all rights of the
Corporation and its Subsidiaries therein, including all claims for past infringement,
worldwide, whether registered or unregistered, including without limitation: |
| (A) | all patents, patent applications and other patent rights,
used in the Business, including divisional and continuation patents (the
“Patents”) |
||
| (B) | all registered and unregistered trade-marks, service marks,
logos, slogans, corporate names, business names, and other indicia of origin, and all applications and registrations therefor (the
“Trademarks”); |
- 16 -
| (C) | registered and unregistered copyrights and mask works, including all
copyright in and to computer software programs, and applications and registration of
such copyright; |
||
| (D) | internet domain names (the “Domain Names”), applications and
reservations for internet domain names, uniform resource locators and the
corresponding Internet sites; |
||
| (E) | industrial designs; |
||
| (F) | trade secrets and proprietary information not otherwise listed in
Sections 6(q)(i)(A) through 6(q)(i)(E) above, including, without
limitation, all inventions (whether or not patentable), invention
disclosures, moral and economic rights of authors and inventors
(however denominated), confidential information, technical data,
clinical data and documentation, reports and information relating
to clinical trials, including without limitation all preclinical data,
all clinical trial data from all phases, all clinical trial protocols, all
documentation submitted to regulatory boards including in Canada,
the United States, China and Europe, all production SOP
documents, clinical research statistic data, correspondence
documents and study reports with regulatory boards, Drug Master
Files and Investigator brochures (collectively, the “Clinical Data”)
customer lists, corporate and business names, trade names, trade
dress, brand names, know-how, show-how, mask works, formulae,
methods (whether or not patentable), designs, processes,
procedures, technology, business methods, source codes, object
codes, computer software programs (in either source code or object
code form) databases, data collections and other proprietary
information or material of any type, and all derivatives,
improvements and refinements thereof, howsoever recorded, or
unrecorded (the “Proprietary Information”); and |
||
| (G) | any goodwill associated with any of the foregoing. |
| (ii) | “Critical Intellectual Property” means all Intellectual Property related to Tetrodotoxin in
Canada, the United States, Europe and China, including the Critical Patents, as defined
herein. |
||
| (iii) | Section 6(q) of the Disclosure Schedule sets out to the best of the Corporation’s
knowledge a full, complete, accurate and true list of the Patents, Trademarks and Domain
Names owned by the Corporation and its Subsidiaries, as applicable, or licensed from third
parties, other than normal and routine off-the-shelf software license agreements, in each
case broken down by Corporation-owned Intellectual Property and Corporation- |
- 17 -
licensed Intellectual Property. With respect to the Critical Intellectual Property owned by the Corporation and its Subsidiaries, the Corporation and
its Subsidiaries, have paid all necessary fees and filed all appropriate affidavits and
renewals with the appropriate administrative or governmental office in Canada, the United
States and China and with the European Patent Office. To the best of the Corporation’s
knowledge the Intellectual Property including the Critical Intellectual Property listed in
Section 6(q) of the Disclosure Schedule and that may be listed in the Clinical Data
Disclosure Schedule is the only intellectual property necessary for and material to the
operation of the Business as currently conducted (it being understood that the Corporation
is a research and development company that will need and is currently working to develop
other Intellectual Property to achieve its objectives with respect to Tetrodotoxin). The
Critical Intellectual Property listed in Section 6(q) is subsisting and enforceable, and to
the knowledge of the Corporation following due inquiry, the Intellectual Property listed in
Section 6(q) of the Disclosure Schedule is valid, subsisting and enforceable except as
disclosed in the Disclosure Record and in Section 6(q) of the Disclosure Schedule. |
|||
| (iv) | As of the date hereof, the Corporation and its Subsidiaries, as applicable, own,
directly and exclusively, all right, title and interest in and to all Intellectual Property
owned by it as identified in Section 6(q) of the Disclosure Schedule and that may be
identified in the Clinical Data Disclosure Schedule, with good and marketable title, free and
clear of all Encumbrances or any other rights of others except as set out therein and the
Disclosure Record. As of Closing, the Corporation and its Subsidiaries, as
applicable, will own, directly and exclusively, all right, title and interest in and to all
Critical Intellectual Property owned by it as identified in Section 6(q) of the Disclosure
Schedule and that may be identified in the Clinical Data Disclosure Schedule, with good
and marketable title, free and clear of all Encumbrances or any other rights of others,
subject to the licenses listed Section 6(q) of the Disclosure Schedule. As of the Closing,
any third party who has any moral rights or similar rights in or to such Critical
Intellectual Property will have irrevocably waived such rights in favour of the Corporation
at Closing. As concerns the Intellectual Property other than the Critical Intellectual
Property, neither the Corporation nor any Subsidiary has knowledge of any claims to ownership
of the Intellectual Property by any persons, including any employees, independent contractors
or developers, who were employed or retained by the Corporation or a Subsidiary prior to April
1, 2006 and confirm that since that date all inventors including employees or independent
contractors who were employed or retained by the Corporation or a Subsidiary have transferred
and assigned and waived all their rights in such Intellectual Property to the Corporation.
To the knowledge of the Corporation and except as disclosed in the Disclosure Record and
Section 6(q) of the Disclosure Schedule, the Corporation and its Subsidiaries, as applicable,
hold valid licenses for all third-party |
- 18 -
owned Intellectual Property. Except as disclosed in
the Disclosure Record and Section 6(q) of the Disclosure Schedule, in each case in which the Corporation or any of
its Subsidiaries has acquired ownership of any registered or applied-for Intellectual
Property from another person, the Corporation or a Subsidiary has recorded or had recorded
such acquisition with the U.S. Patent and Trademark Office, the U.S. Copyright Office, or
their respective equivalent offices in Canada, China and Europe, in each case in
accordance with all applicable legal requirements. Except as disclosed in the Disclosure
Record and Section 6(q) of the Disclosure Schedule, no shareholder of the Corporation or
any of its Subsidiaries nor any person who is related to or not dealing at arm’s length
with a shareholder owns or has any rights to the use of the Corporation’s or any of its
Subsidiaries Intellectual Property. |
|||
| (v) | Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure Schedule,
the Corporation or a Subsidiary has not, except in the ordinary course of business in
connection with the distribution of its products and licenses to end users: |
| (A) | transferred, conveyed, sold, assigned, pledged, mortgaged or granted a
security interest in any material Intellectual Property owned by the Corporation and
its Subsidiaries, as applicable, to any third party; |
||
| (B) | entered into any license, franchise or other agreement with respect to
any material Intellectual Property owned by the Corporation and its Subsidiaries,
as applicable, with any third party; or |
||
| (C) | otherwise encumbered any of the material Intellectual Property owned by
the Corporation and its Subsidiaries, as applicable. |
| (vi) | To the best of the Corporation’s knowledge except as disclosed in the Disclosure Record and
Section 6(q) of the Disclosure Schedule, all of the licences and sublicences and consent,
royalty or other agreements concerning Intellectual Property that are material to the
conduct of the Business as currently conducted or as currently proposed to be conducted to
which the Corporation or any of its Subsidiaries is a party are valid and binding
obligations of the Corporation or its Subsidiaries, as the case may be enforceable in
accordance with their terms, except to the extent that enforcement thereof may be limited by
the Qualifications, and there exists no event or condition that will result in a material
violation or breach of or constitute (with or without due notice or lapse of time or both) a
default by the Corporation or any of the Subsidiaries under any such licence agreement.
Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure Schedule,
there are no royalties, honoraria, fees or other payments payable by the Corporation or any
of its Subsidiaries to any person by reason of the ownership, use, license, sale or
disposition of any of the material Intellectual Property. |
- 19 -
| (vii) | The Corporation and its Subsidiaries, as applicable, have taken to the date hereof
and will continue to take all steps necessary to validly maintain, and have not taken to
the date hereof and will not take any steps that could constitute abandonment of, the
Critical Intellectual Property owned by the Corporation and its Subsidiaries which are
registered in Canada, China, the United States or with the European Patent Office,
including paying all necessary fees and filing all appropriate affidavits and renewals
with the appropriate administrative or governmental office in Canada, China and the
United States and with the European Patent Office. |
||
| (viii) | In the United States the Corporation qualifies as a “small entity” and pays small entity
fees in respect of patents or applications. In Canada, China and with the European Patent
Office, no fee has been paid on the basis that the applicant or patentee qualified as a small
entity. |
||
| (ix) | Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure Schedule, to
the knowledge of the Corporation, the Critical Intellectual Property owned by the Corporation
and its Subsidiaries and currently used to conduct the Business does not conflict with,
misappropriate or infringe upon or otherwise violate any intellectual property rights of
others. Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure
Schedule, there are no unresolved pending or, to the knowledge of Corporation, threatened
actions, litigation or administrative proceedings (“Proceedings”) that allege that the
Corporation or a Subsidiary has infringed or misappropriated the intellectual property rights
of any third party. |
||
| (x) | Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure Schedule,
there are no unresolved pending or, to the knowledge of Corporation, threatened Proceedings
that challenge or otherwise question the validity, title or ownership of any Intellectual
Property, or the right to use any Intellectual Property, that the Corporation or a
Subsidiary owns and/or currently uses to conduct the Business. |
||
| (xi) | To the knowledge of Corporation and the Subsidiaries, except as disclosed in the Disclosure
Record and Section 6(q) of the Disclosure Schedule, there is no and has not been any
conflict, unauthorized use, infringement or misappropriation of any of the Intellectual
Property owned, used or licensed by or to the Corporation or a Subsidiary or any breach at
any time of any duty or obligation owed to the Corporation or a Subsidiary in respect of the
Intellectual Property. |
||
| (xii) | Except as disclosed in the Disclosure Record and Section 6(q) of the Disclosure Schedule,
the Corporation and each Subsidiary has taken reasonable commercial measures to maintain the
secrecy of its Intellectual Property that it considers to be trade secrets or confidential
information and to the best of their knowledge, all technical information capable of patent
protection developed by and belonging to the Corporation or any of its Subsidiaries or licensed to the Corporation or any of its Subsidiaries which
has not been patented has been kept confidential. |
- 20 -
| (xiii) | As concerns the Intellectual Property, each employee and contractor to the
Corporation or a Subsidiary since April 1, 2006 has signed a confidentiality and
non-disclosure agreement, and there have not been any breaches of such confidentiality
and non-disclosure agreements, to the knowledge of the Corporation and the
Subsidiaries. As concerning persons involved in the development of the Intellectual
Property prior to April 1, 2006, to the knowledge of the Corporation and the
Subsidiaries; there has not been any public disclosure of Propriety Information
considered confidential. Each of the Corporation and the Subsidiaries has taken
reasonable commercial measures to maintain the secrecy of its Critical Intellectual
Property that it considers to be trade secrets or confidential information and to the
best of their knowledge, all technical information capable of patent protection
developed by and belonging to the Corporation or any of its Subsidiaries or licensed
to the Corporation or any of its Subsidiaries which has not been patented has been
kept confidential. To the knowledge of the Corporation and each of the Subsidiaries,
its employment of any of its employees or the retainer of any consultant does not
violate any non-disclosure or non-competition agreement between any employee or
consultant and a third party. |
||
| (xiv) | Except as disclosed in the Disclosure Record and Section 6(q) of the
Disclosure Schedule, the Corporation and the Subsidiaries are not a party to any
agreement, contract, or judicial order that in any way limits or restricts any
Critical Intellectual Property that the Corporation or a Subsidiary owns and/or
currently uses to conduct the Business, other than normal and routine off-the-shelf
software license agreements. |
||
| (xv) | The execution and delivery of this Subscription Agreement and the
Convertible Debenture and the consummation of the transactions contemplated thereby
will not: |
| (A) | breach, violate or conflict with any instrument or
agreement governing any Intellectual Property right owned, used by or
licensed to the Corporation or any of its Subsidiaries; or |
||
| (B) | cause the forfeiture or termination of any Intellectual
Property right owned, used by or licensed to the Corporation or any of its
Subsidiaries to use, sell, license or dispose of, or to bring any action for
the infringement of, any Intellectual Property right owned, used by or
licensed to the Corporation or any of its Subsidiaries (or any portion
thereof). |
- 21 -
| (r) | Environmental Matters. |
| (i) | Each of the Corporation and the Subsidiaries carries on its business
and operates and maintains the properties and assets used in its business in
compliance with all applicable federal, provincial, state, municipal or local statutes,
regulations, by-laws, Environmental Permits (as defined in Section 6(r)(ii) below), orders
or rules, and any policies, standards, codes or guidelines of any applicable governmental
or regulatory body or agency in the People’s Republic of China, imposing any requirements
or obligations relating to the ambient air, all layers of the atmosphere, surface water,
underground water, all land, all living organisms, the interacting natural systems that
include components of air, land, water and living organisms, the transportation of
dangerous goods and occupational health and safety including those pertaining to: |
| (A) | reporting, licensing, permitting, investigating, remediating and cleaning
up in connection with any presence or release, or the threat of the same, of
Hazardous Substances (as defined in Section 6(r)(iii) below), and |
||
| (B) | the generation, manufacture, processing, distribution, use, re-use,
treatment, storage, disposal, transport, labelling, handling and the like of
Hazardous Substances (the “Environmental Law”). |
| (ii) | Each of the Corporation and the Subsidiaries has all permits, licences, approvals, consents,
authorizations, registrations and certificates required under Environmental Law (the
“Environmental Permits”) required for it to operate its business and to own, use and operate
the properties and assets used in such business, except as disclosed in Section 6(r) of the
Disclosure Schedule. The particulars of all such Environmental Permits are summarized in
Section 6(r) of the Disclosure Schedule. Each such Environmental Permit held by the
respective Corporation or Subsidiary is valid, subsisting and in good standing, to its
knowledge, neither the Corporation nor any Subsidiary is in default or breach of any such
Environmental Permit issued to it and no grounds exist to revoke or amend any such
Environmental Permit. There are no Actions against or involving the Corporation or any
Subsidiary either in progress, pending or, to the knowledge of the Corporation, threatened
which allege the violation of, or non-compliance with, any Environmental Law. |
||
| (iii) | Since April 1, 2006, neither the Corporation nor any of the Subsidiaries have used any of
the facilities or real property owned, leased, occupied or used by it (including any real
property previously owned, leased, occupied or used by any of them) (for the purposes of
this Section 6(r), the “Real Property”), or permitted them to be used, to refine, treat,
dispose, produce or process any substance, material or waste that is regulated by, or forms
the basis of liability, now or hereafter, under any applicable Environmental Laws (the
“Hazardous Substances”) except in compliance with Environmental Law and Environmental
Permits held by such Corporation or Subsidiary. |
- 22 -
| (iv) | Neither the Corporation nor any of the Subsidiaries nor any other person
responsible under Environmental Law for acts of any of the Corporation or the
Subsidiaries has been convicted of an offence or been subjected to any Action or
been subject to any order or other sanction requiring investigation or remediation
of any real property or been fined or otherwise sentenced for non-compliance with
any Environmental Law, and has not settled any prosecution or other proceeding
short of conviction in connection therewith. |
||
| (v) | Since April 1, 2006, neither the Corporation nor any of the Subsidiaries
have caused or permitted the release of any Hazardous Substance at, on or under the
Real Property, or the release of any Hazardous Substance off-site of the Real
Property, except in compliance in all material respects with Environmental Law and
with Environmental Permits held by the applicable Corporation or Subsidiary. No part
of the Real Property has ever been used by any of the Corporation or the
Subsidiaries or, to the knowledge of the Corporation, by any other person as a waste
disposal site or land fill. All Hazardous Substances and all other wastes used by
the Corporation and any Subsidiary or resulting from their respective business have
been disposed of and stored in compliance with Environmental Law and Environmental
Permits held by the applicable Corporation or Subsidiary. |
||
| (vi) | Neither the Corporation nor any of the Subsidiaries have received written
notice, nor does the Corporation have knowledge of any facts that could give rise to
any notice, that any of the Corporation or any Subsidiary are potentially responsible
for any remedial or other corrective action or any work, repairs, construction or
capital expenditures to be made under any Environmental Law with respect to their
respective business or the Real Property. |
||
| (vii) | The Corporation has no knowledge of any Hazardous Substance originating
from any adjoining or neighbouring properties, which has or is suspected to be
migrating onto, into or under the Real Property or otherwise affecting the business
of the Corporation or any Subsidiary. |
| (s) | Compliance with Other Instruments. Except as disclosed in Section 6(s) of the
Disclosure Schedule or the Disclosure Record the Corporation is not in violation or default
of any term of its constating documents or, in any material respect of any provision of any
mortgage, indenture, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order or writ. |
||
| (t) | Litigation. Except as disclosed in Section 6(t) of the Disclosure Schedule or in
the Disclosure Record there is no action, suit, proceeding or investigation pending or, to
the Corporation’s knowledge, currently threatened against the Corporation or any of the
Subsidiaries or any of their respective properties or assets before or by any court,
arbitrator, governmental or administrative agency or regulatory authority (federal, state,
provincial, local or foreign) (collectively, an “Action”). |
- 23 -
Other than as disclosed in the Disclosure Record or the Disclosure Schedule, neither the
Corporation nor any of its Subsidiaries, nor any director or officer thereof is, or has
been, subject of any Action, including a claim of violation of or liability, under
securities laws or a claim of breach of fiduciary duty. |
|||
| (u) | Tax Returns and Payments. Except as disclosed in the Disclosure Record and
Section 6(u) of the Disclosure Schedule: |
| (i) | all taxes (including income tax, capital tax, goods and services tax,
sales tax, payroll taxes, health tax, custom and land transfer taxes, duties,
royalties, levies, imposts, assessments, deductions, charges or withholdings and all
liabilities with respect thereto including any penalty and interest payable with
respect thereto) (collectively, the “Taxes”) due and payable by the Corporation and
the Subsidiaries have been paid, except those which are being bona fide and in good
faith contested as set forth in Section 6(u) of the Disclosure Schedule; |
||
| (ii) | all tax returns, declarations, remittances and filings required to be filed
by the Corporation and the Subsidiaries have been filed with all appropriate
governmental authorities and all such returns, declarations, remittances and filings
are complete and accurate; |
||
| (iii) | no domestic or foreign taxation authority has asserted or, to the
Corporation’s knowledge, threatened to assert any assessment, claim or liability for
Taxes due or to become due in connection with any review or examination of the tax
returns of the Corporation or any Subsidiary filed for any year which would have a
material adverse effect; and |
||
| (iv) | the Corporation has established on its books and records reserves that are
adequate for the payment of all taxes not yet due and payable and there are no liens
for taxes on the assets of the Corporation and, to the knowledge of the Corporation,
there are no audits pending of the tax returns of the Corporation (whether federal,
state, provincial, local or foreign) and there are no claims which have been
asserted or which, to the Corporation’s knowledge, have been threatened relating to
any such tax returns, which audits and claims, if determined adversely, would result
in the assertion by any governmental agency of any deficiency that would have a
material adverse effect. |
| (v) | Compliance with Laws; Permits and Certificates. Except as disclosed in
Section 6(v) of the Disclosure Schedule or the Disclosure Record, neither the Corporation
nor any of the Subsidiaries is in violation of any applicable statute, rule, regulation,
order or restriction of any domestic government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties, including but not
limited to those relating to privacy, labour and health and safety, which violation would
have a material adverse effect. No governmental orders, permissions, consents, approvals or
authorizations, are required to be obtained and no registrations or declarations are
required to be filed in |
- 24 -
connection with the execution and delivery of this Subscription
Agreement and the issuance of the Offered Shares, the Convertible Debenture or the Debenture Shares
except such as have been or will be duly and validly obtained or filed prior to the
Closing Date, or with respect to any filings that must be made after the Closing Date, as
will be filed in a timely manner. Except as disclosed in the Disclosure Record the
Corporation and each Subsidiary has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by it, the lack
of which could reasonably be expected to have a material adverse effect and believes it
can obtain, without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. Except as disclosed in the Disclosure Record neither
the Corporation nor any Subsidiary is in default in any material respect under any of such
franchises, permits, licenses or other similar authority. |
||
| (w) | Offering Valid. The Corporation has complied and will comply with all applicable
securities laws in connection with the offer, issuance and sale of the Securities pursuant to
this Subscription Agreement. Neither the Corporation nor any person acting on its behalf has
engaged in any form of general solicitation or general advertising in connection with the
offer or sale of the Securities. The Corporation will file or cause to be filed, in
connection with the issuance and sale of the Securities, all required forms and reports
within the time periods therein prescribed and shall pay all required fees in connection
therewith. The Corporation hereby confirms that it has not delivered to the Subscriber an
offering memorandum as defined in Ontario Securities Commission Rule 14-501. |
|
| (x) | Full Disclosure. Except as disclosed in the Disclosure Record or in Section
6(x) of the Disclosure Schedule there is no material fact (as defined in the Securities Act
(Ontario) and hereinafter a “material fact”) known to the Corporation which materially
adversely affects or is reasonably likely to materially adversely affect the business,
properties, assets or financial condition of the Corporation and its Subsidiaries taken as a
whole. |
|
| (y) | Minute Books. Except as disclosed in Section 6(y) of the Disclosure Schedule, the
minute books of the Corporation and of the Subsidiaries contain a complete summary of all
meetings and all actions by written consent without a meeting of directors and shareholders
and reflect all transactions referred to in such minutes and resolutions accurately in all
material respects. |
|
| (z) | Use of Proceeds. The Subscription Price and the Debenture Proceeds shall be used as
set forth in Schedule “C” (the “Use of Proceeds”). |
|
| (aa) | No Conflicting Agreements. The Corporation will not take any action, enter
into any agreement or make any commitment that would conflict or interfere, in any material
respect, with its obligations to the Subscriber under this Subscription Agreement or under
the Convertible Debenture. |
- 25 -
| (bb) | Insurance. Except as disclosed in the Disclosure Record and Section 6(bb) of the
Disclosure Schedule, the Corporation and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses and markets in which the Corporation and the Subsidiaries are engaged, including, but not limited to, directors’
and officers’ insurance coverage. To the Corporation’s knowledge, such insurance contracts
and policies are accurate and complete. Neither the Corporation nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost. |
|
| (cc) | No Conflicts. The execution, delivery and performance of this Subscription
Agreement and the Convertible Debenture by the Corporation and the consummation by the
Corporation of the transactions contemplated thereby do not and will not: |
| (i) | conflict with or violate any provision of the Corporation’s articles or
by-laws; or |
||
| (ii) | conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of any
Encumbrance upon any of the properties or assets of the Corporation or any
Subsidiary, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of any agreement, credit
facility, debt or other instrument (evidencing a Corporation or Subsidiary debt or
otherwise) or other understanding to which the Corporation or any Subsidiary is a
party or by which any property or asset of the Corporation or any Subsidiary is bound
or affected; or |
||
| (iii) | conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Corporation or a Subsidiary is subject (including federal,
provincial and state securities laws and regulations), or by which any property or
asset of the Corporation or a Subsidiary is bound or affected; except in the case of
each of Sections 6(cc)(ii) and 6(cc)(iii), such as could not have or reasonably be
expected to result in a material adverse effect. |
| (dd) | Notification of Material Change. The Corporation will promptly notify the
Subscriber in writing if, prior to the Closing Time, there shall occur any material change
(as defined in the Securities Act (Ontario) and hereinafter a “material change”) or change
in a material fact (in either case, whether actual, anticipated, contemplated, proposed or
threatened and other than a change or change in fact relating solely to the Subscriber) or
any event or development involving a prospective material change or a change in a material
fact or any other material change. |
|
| (ee) | Not Withheld Information. The Corporation has not intentionally withheld from the
Subscriber any material facts. |
- 26 -
| (ff) | Clinical Studies. The clinical, pre-clinical and other studies and tests
conducted by or on behalf of or sponsored by the Corporation or in which the Corporation or
its products under development have participated were and, if still pending, are being
conducted, and will in the future be conducted, in accordance with good clinical practice
or good laboratory practice and medical standard-of-care procedures, as applicable. The
Corporation has operated and currently is in compliance, and in future will be in
compliance, in all material respects with all applicable rules, regulations and policies of
the Health Products and Foods Branch of Health Canada, the U.S. Food and Drug
Administration, the State Food and Drug Administration of the People’s Republic of China
and the European Medicines Evaluation Agency or any other regulatory or governmental agency
having jurisdiction over the Corporation or its activities; and the Corporation has not
received any notices or other correspondence from such regulatory authorities or any other
governmental agency requiring the termination, suspension or material modification of any
clinical or pre-clinical studies or tests. Except as disclosed in the Disclosure Record, or
the Proprietary Information in the nature of data and documentation, reports and
information relating to clinical trials (including without limitation all Clinical Data)
provided to the Subscriber, the Corporation has no material information with respect to the
clinical, pre-clinical and other studies and tests conducted by or on behalf of or
sponsored by the Corporation or in which the Corporation or its products under development
have participated and except as disclosed in the Disclosure Record and the Proprietary
Information provided to the Subscriber, the Corporation has not received any material
correspondence from any regulatory body in respect of the Corporation’s intellectual
Property or clinical, pre-clinical and other studies and trials. |
||
| (gg) | Information. The Corporation covenants and agrees that: |
| (i) | during the period commencing with the date hereof and ending at the Closing
Time (as defined in Section 11), the Corporation will promptly inform the Subscriber
of the full particulars of: |
| (A) | the occurrence or discovery of a material fact or the
discovery of an existing material fact or event, which, in any such case,
is, or may be, of such a nature as to render any representation or warranty
contained herein untrue, false or misleading in a material respect or result
in misrepresentations in the Disclosure Record; |
||
| (B) | the discovery by the Corporation of any misrepresentation
in the Disclosure Record or in any information regarding the Corporation
previously provided to the Subscriber by the Corporation, including herein;
and |
||
| (C) | any notice by judicial, governmental, securities commission
or stock exchange authority requesting any information, meeting or hearing
relating to the Corporation, its business or operations or to this offering, in each case, that occurred or was discovered, as the case may be, during such
period; |
- 27 -
| (ii) | during the period commencing with the date hereof and ending at the Closing
Time, the Corporation will promptly inform the Subscriber of the full particulars of: |
| (A) | the issuance of any order to cease, suspend or halt trading
of any securities of the Corporation or of the institution or threat of
institution of any proceedings for that purpose; or |
||
| (B) | the receipt by the Corporation of any communication from any
securities commission or stock exchange relating to any part of the offering
of the Securities or any of the securities in the capital of Corporation; and |
| (iii) | during the period commencing on the date hereof and ending at the Closing
Time, the Corporation will use reasonable efforts to provide to the Subscriber, prior
to filing or issuance thereof, any material change report and any press release,
provided that, for greater certainty, no such press release or report shall be
subject to the prior approval or consent of the Subscriber. |
| (hh) | Management. The Corporation covenants and agrees that so long as (1) the
Convertible Debenture or any portion thereof (including accrued interest) remains outstanding
or (2) the Subscriber beneficially owns or controls, directly or indirectly, 10% or more of
the outstanding common shares of the Corporation: |
| (i) | the Subscriber will have the right to appoint the number of directors (the
“Designees”) as is determined by the following formula: |
| total number of common shares issued and held by the Subscriber on the date of appointment | X | number of sitting directors | ||||
| total number of common shares issued and outstanding in the capital of the Corporation on the date of appointment |
rounded up to the nearest whole number (less, for greater certainty, the number
of directors appointed or nominated by the Subscriber who are currently sitting)
to a maximum of one half of the number of sitting directors; |
| (ii) | the Corporation and its Board of Directors will not appoint or dismiss the
Chairman, the Vice-Chairman if applicable, or the Chairman of the Audit Committee
without the prior approval of the Subscriber; |
||
| (iii) | the Corporation acknowledges and agrees that one of the Subscriber’s
representatives on the Board of Directors is to fill the position of Chairman of the
Board of Directors; |
- 28 -
| (iv) | subject to applicable law, the Subscriber shall be entitled to designate the Chief
Executive Officer, the Chief Financial Officer and the Chief Scientific Officer of the
Corporation (collectively, the “Designated Officers”) and the Chairman of NMLP and the
Board of Directors of the Corporation shall appoint the Designated Officers as so
designated by the Subscriber from time to time (and for greater certainty shall terminate
an incumbent Designated Officer if directed to do so by the Subscriber). |
As of the execution of this Subscription Agreement by the parties hereto, two nominees (the
“Nominees”) of the Subscriber shall be appointed to the Board of Directors of the Corporation,
which shall thereby be increased from seven to nine on an interim basis, until the next annual
meeting of shareholders of the Corporation, which the Corporation agrees to call and hold as soon
as possible, and in any event no later than September 10, 2007 (the “2007 Annual Meeting”) and the
Corporation will cause the Nominees to be named in the Corporation’s information circular and
proxy materials as proposed nominees for election as directors of the Corporation at such meeting
and the Board of Directors shall request that the shareholders fix the number of directors at
seven and shall nominate the Nominees. The Subscriber agrees that if Closing does not occur, the
Nominees will resign from the Board of Directors of the Corporation and the Subscriber shall
provide executed resignations from the Nominees upon the signing of this Subscription Agreement
reflecting such agreement. |
|||
The Corporation’s obligations set forth in this Section 6(hh) with respect to the Nominees,
Designees and the Designated Officers are subject to (i) the Subscriber’s Nominees, Designees and
Designated Officers meeting the requirements of all applicable securities and corporate
legislation, regulations and policies for officers and directors, including those relating to
residency requirements and proper consents to act in such capacity are provided to the Corporation
prior to the time of the appointment or designation; (ii) that if the rights set out above arise
out of rights attached to a preference share issued by the Corporation that the Subscriber holds
such preference share in the capital of the Corporation and (iii) the Subscriber providing the
Corporation notice of the names and other information required by applicable securities and
corporate law of the Nominees within 5 business days of being requested in writing to do so by the
Corporation, which request shall not be less than 40 days in advance of the 2007 Annual Meeting at
which Nominees are to be elected. The Subscriber acknowledges that members of the Corporation’s
Audit Committee must be “independent” and “financially literate” within the meaning of
Multilateral Instrument 52-110 — Audit Committees. |
|||
The Subscriber acknowledges that the Corporation shall be required to amend its constating
documents to provide the Subscriber with the right to appoint the directors and designate the
officers as set out above and that shareholder approval will be required. As set out in Section
10(a), there will be a condition of Closing in favour of the Subscriber that the constating
documents of the Corporation be amended as necessary in order to permit the appointment by the
Subscriber of directors and officers of the Corporation as provided for in Section 6(hh). |
- 29 -
| (ii) | Additional Covenants. The Corporation covenants and agrees that: |
| (i) | the Corporation will duly, punctually and faithfully perform all of the
obligations to be performed by it under this Subscription Agreement; |
||
| (ii) | on or prior to the Closing Date, the Corporation will take such commercially
reasonable steps as may be necessary to obtain the approval of the shareholders of the
Corporation and of all governmental or regulatory authorities having jurisdiction over
the transactions contemplated by this Subscription Agreement; |
||
| (iii) | the Corporation will use its commercially reasonable best efforts to maintain
the listing of the common shares of the Corporation on the TSX and its status as a
reporting issuer in good standing under all applicable securities laws, regulations
and policies of British Columbia, Ontario, Alberta and Quebec; and |
||
| (iv) | until the Closing Date, the Corporation shall at all times allow the
Subscribers and its representatives to conduct all due diligence investigations and
examinations which the Subscriber may reasonably require; |
||
| (v) | |||
| (vi) | |||
| (vii) | in advance of Closing, the Corporation will prepare a disclosure schedule
that sets out the following particulars for each Critical Patent listed in Section
6(q) of the Disclosure Schedule in Canada, the United States, China and Europe:
title, application and registration numbers, filing and issuance dates
and details of all due dates for further filings, maintenance and other payments
or other actions falling due in respect of the Patents, the current status of the
corresponding registrations, filings, applications, expiry dates and payments (the
“Patent Disclosure Schedule”); |
- 30 -
| (viii) | in advance of Closing, the Corporation will prepare a list of all
material Proprietary Information and material copy right works and Clinical
Data related to the Critical Intellectual Property in Canada, the United
States, China and Europe, (the “Clinical Data Disclosure Schedule”) and
provide the Subscriber with access to such documentation prior to the
Closing; and |
||
| (ix) | the Corporation grants the Subscriber a right of first
refusal to provide financing to the Corporation on the terms set by the
Corporation (the “Terms”) and provided to the Subscriber in writing at the
commencement of the 21st month after the Closing Date, which right
shall terminate within one week of the notice being given to the Subscriber
unless the Subscriber has provided written notice to the Corporation that it
has exercised the right and will provide the financing on the terms within 3
weeks of the notice of exercise and such financing has been provided to the
Corporation prior to the commencement of the 22nd month after the
Closing Date. If the Subscriber does not exercise or complete the exercise of
its right of first refusal the Corporation shall be entitled during the 22nd
to 24th months after the Closing Date to carry out a financing on terms no
more favourable to its counterparties than the Terms. The Terms are subject
to Section 3.3 of the Convertible Debenture; |
||
| (x) | the Corporation covenants and agrees that prior to the Closing
Date it will not commence a rights offering; and |
||
| (xi) | the Corporation covenants and agrees that so long as (1) the
Convertible Debenture or any portion thereof (including accrued interest)
remains outstanding or (2) the Subscriber beneficially owns or controls,
directly or indirectly, 10% or more of the outstanding common shares of the
Corporation will not commence a rights offering without the prior written
consent of the Subscriber, which consent may be unreasonably withheld by the
Subscriber. |
The Corporation agrees that the above representations, warranties and covenants will be true
and correct both as of the execution of this Subscription Agreement by the Corporation and as of
the Closing Time.
Notwithstanding any contrary provision in this Subscription Agreement including any schedule
hereto, no investigation or opportunity afforded the Subscriber or its advisors to conduct due
diligence shall in any way affect, or limit liability for, any representation, warranty or
covenant of the Corporation contained in the Subscription Agreement. The Subscriber will be
deemed to have relied solely upon the representations, warranties and covenants contained in the
Subscription Agreement, notwithstanding any contrary information that may have been provided or
made available to the Subscriber or any of the Subscriber’s representatives or that the
Subscriber discovered in the course of any such investigation either prior to or subsequent to
the date of this Subscription Agreement.
- 31 -
All representations, warranties and covenants of the Corporation contained in any
certificate or other document executed and delivered by the Corporation to the Subscriber
hereunder will be deemed to be incorporated into this Subscription Agreement with the same effect
as if each constituted a representation, warranty or covenant of the Corporation in favour of the
Subscriber herein.
7. Acknowledgement of Corporation. The Corporation acknowledges and agrees that the
representations, warranties and covenants of the Corporation herein contained or deemed to be
contained herein will survive the purchase of the Securities hereunder, and notwithstanding the
subsequent disposition of the Securities, shall continue in full force and effect for the longer
of:
| (a) | two years from the Closing Date; and |
||
| (b) | such time as the Convertible Debenture or any portion thereof
remains outstanding. |
Further, the Subscriber acknowledges and agrees that such representations, warranties and
covenants of the Corporation were made with the intent that they be relied upon by the Subscriber
and the Corporation hereby agrees to indemnify the Subscriber against all losses, claims, costs,
expenses and damages or liabilities which the Subscriber may suffer or incur, caused or arising
from reliance thereon. The Corporation undertakes to notify the Subscriber immediately of any
change in any representation, warranty or other information relating to the Corporation set forth
herein which takes place prior to the Closing Time.
8. Delivery of Subscription Agreement. The Subscriber agrees to deliver to the
Corporation on or before two business day of the signing of this Subscription Agreement the
following:
| (a) | a completed and duly executed Private Placement Questionnaire attached hereto
as Schedule “B”; and |
||
| (b) | such other documents as may be required as contemplated herein or required
under applicable securities legislation or stock exchange rules. |
The Subscriber acknowledges and agrees that such other documents, when executed and
delivered by the Subscriber or the beneficial purchaser, as the case may be, will form part of
and will be incorporated into this Subscription Agreement with the same effect as if each
constituted a representation and warranty or covenant of the Subscriber hereunder in favour of
the Corporation and agrees that such representations, warranties and covenants will be true and
correct both as of the execution of this Subscription Agreement and as of the Closing Time and
will survive the purchase of the Securities hereunder and shall continue in full force and effect
for two years from the Closing Date, notwithstanding any subsequent disposition of the
Securities. The Subscriber and each such beneficial purchaser consents to the filing of any such
documents as may be required to be filed with any securities regulatory authority or stock
exchange in connection with the transactions contemplated hereby.
- 32 -
9. Delivery of Payment. The Subscriber agrees to deliver at the Closing on the Closing
Date funds representing:
| (a) | the Subscription Price; and |
| (b) | the first instalment of the Debenture Proceeds in accordance with the
terms of the Convertible Debenture, |
by wire transfer to the Corporation.
The Corporation will provide wire transfer instructions to the Subscriber on the date that is
no less than two days prior to the Closing Date.
The Subscriber shall be entitled to deduct from the amounts otherwise payable to the
Corporation on Closing the Absorbed Costs as provided for in Section 12 hereof. Further, in the
event the Subscriber has provided bridge loan financing (the “Bridge Loan”) to the Corporation
prior to Closing and the maturity date of such financing is the Closing Date hereunder, the
Subscriber shall be entitled to direct that all amounts owing to it by the Corporation in respect
of the Bridge Loan (including fees and expenses) be applied against the amounts otherwise payable
to the Corporation on Closing.
10. Conditions to Subscriber’s and Corporation’s Obligations.
| (a) | Conditions to Subscriber’s Obligations. The obligations of the
Subscriber to purchase the Securities on Closing shall be conditional upon and subject
to the following conditions, which conditions may be waived in writing in whole or in
part by the Subscriber in its discretion and upon such terms as it may consider
appropriate: |
| (i) | the Board of Directors shall have authorized and approved the
execution and delivery by the Corporation of this Subscription Agreement and
the Convertible Debenture and all other agreements and instruments prepared in
connection with the offering hereunder, the sale of the Securities, the
reservation, allotment and issuance of up to 320,000,000 common shares (subject
to adjustment as provided for in the Convertible Debenture) to be issued on the
full or partial conversion of the Convertible Debenture, all of the common
shares in payment of interest under the Convertible Debenture and 16,327,272
common shares in respect of the Offered Shares and all matters relating to the
foregoing; |
||
| (ii) | the constating documents of the Corporation shall have been
amended in a form satisfactory to the Subscriber, acting reasonably, as
necessary to grant the Subscriber the director and officer appointment rights
set out in Section 6(hh); |
||
| (iii) | the Subscriber’s Designees, as contemplated by Section 6(hh),
shall have been appointed effective the Closing Time; |
- 33 -
| (iv) | the representations and warranties of the Corporation contained
herein will be true and correct at and as of Closing as though such
representations and warranties were made again at and as of such time and the
Corporation will deliver a certificate at Closing addressed to the Subscriber,
signed by its Chief Executive Officer, certifying that: |
| (A) | there has been no material adverse change (actual, proposed or prospective,
whether financial or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the Corporation, on a
consolidated basis, since the Statement Date except as disclosed in the
Disclosure Record; |
||
| (B) | the representations and warranties of the Corporation contained in this
Subscription Agreement are true and correct at the Closing Time, with the same force
and effect as if made by the Corporation as at the Closing Time; |
||
| (C) | the Corporation has complied with all the covenants and satisfied all the
terms and conditions of this Subscription Agreement on its part to be complied with
or satisfied at or prior to the Closing Time; |
||
| (D) | the charter documents, including any amendments thereto, attached to the
officer’s certificate are full, true and correct copies and are in full force and
effect; and |
||
| (E) | the resolutions of the Board of Directors relating to the
Subscription Agreement and the Convertible Debenture and the
transactions contemplated in this Subscription Agreement are full,
true and correct copies and are in full force and effect, unamended
and set out accurately the incumbency and specimen signatures of
signing officers; |
| (v) | the Subscriber shall have received a favourable legal opinion addressed to the Subscriber,
in form and substance satisfactory to the Subscriber and its counsel, acting reasonably
covering the subject matter set forth in Schedule E and such other matters as may be
requested by the Subscriber’s and its counsel acting reasonably, dated as of the Closing
Date, from Fasken Xxxxxxxxx XxXxxxxx LLP, British Columbia counsel to the Corporation; |
||
| (vi) | the Subscriber shall have received favourable legal opinions addressed to the Subscriber,
in form and substance satisfactory to the Subscriber and its counsel, acting reasonably,
from the Corporation’s Hong Kong counsel and its counsel in the People’s Republic of China,
in the later case covering the subject matter set forth in Schedule F and such other matters
as may be requested by the Subscriber’s and its counsel acting reasonably, dated as of the
Closing Date; |
||
| (vii) | the Board of Directors shall have waived any application of the Shareholder Rights Plan of
the Corporation to the issuance of the Securities to the Subscriber; |
||
| (viii) | the Subscriber shall have received evidence that the conditional approval of the TSX has
been obtained by the Corporation for the sale of up to
320,000,000 common shares to be issued on the full or partial conversion of the
Convertible Debenture, all of the common shares in payment of interest under the
Convertible Debenture and 16,327,272 common shares in respect of the Offered Shares
hereunder and the listing of up to 320,000,000 common shares to be issued on the full or
partial conversion of the Convertible Debenture, all of the common shares in payment of
interest under the Convertible Debenture and 16,327,272 common shares in respect of the
Offered Shares on the TSX; |
- 34 -
| (ix) | the delivery by the Corporation of such other certificates, statutory declarations,
agreements or materials, in form and substance satisfactory to the Subscriber and the
Subscriber’s counsel, acting reasonably, as the Subscriber may reasonably request; |
||
| (x) | the Corporation shall have in all material respects complied with and fulfilled all of
the terms and covenants of this Subscription Agreement on its part to be complied with or
fulfilled up to the Closing Time and shall have satisfied all conditions set out herein; |
||
| (xi) | the Corporation shall have provided the Subscriber with the Patent Disclosure Schedule
and the Clinical Data Disclosure Schedule (and access to the Clinical Data Disclosure
Schedule documentation), and delivery of said Schedules shall constitute the representation
and warranty of the Corporation hereunder as to the truth, correctness and completeness of
the Schedules, which shall be in a form satisfactory to the Subscriber acting reasonably; |
||
| (xii) | the Subscriber shall be satisfied in its sole and absolute discretion with the results of
its due diligence investigation of the Corporation; |
||
| (xiii) | the Subscriber shall be satisfied in its sole and absolute discretion with the, status of
the litigation; |
||
| (xiv) | all necessary regulatory and shareholder approvals with respect to the sale of the
Securities and the amendment of the constating documents of the Corporation to provide for
the rights relating to the appointment of directors and officers
described in Section 6(hh)
above, shall have been obtained; |
||
| (xv) | the Subscriber shall be satisfied in its sole and absolute discretion with the terms of
the agreements and amendments in place among the Corporation and the holders of its
convertible debentures originally issued on June 14, 2004 with respect to the terms of
said debentures, including but not limited to repayment and conversion thereof; |
- 35 -
| (xvi) | |||
| (xvii) | |||
| (xviii) | the Corporation and the Subscriber shall have entered into a registration rights agreement
in a form satisfactory to Subscriber, acting reasonably, with respect to requests by the
Subscriber that the Corporation effect a qualification by prospectus of common shares of the
Corporation held by the Subscriber for distribution to the public in Canada by secondary
offering; |
||
| (xix) | the Subscriber shall be satisfied in its sole and absolute discretion with the status of
the transfer by Laboratorios Del Xx. Xxxxxx, S. A. of Intellectual Property to the
Corporation and its Subsidiaries pursuant to the Collaboration Termination Agreement of May
10, 2007; |
||
| (xx) | the Subscriber shall be satisfied in its sole and absolute discretion with the status of
the Finder’s Fee |
||
| (xxi) | no order to cease or suspend trading in the securities of the Corporation, or an order
prohibiting or restricting the distribution of any of the Securities, is made and no other
order, judgment, injunction decree, award or writ of any court, tribunal, arbitrator,
governmental or regulatory authority will have been entered that prohibits or restricts the
Closing; |
||
| (xxii) | there shall not develop, occur or come into effect or existence any event, (including
without limiting the generality of the foregoing, an act of terrorism or accident), action,
state, condition or major financial occurrence of national or international consequence, any
law, action by government or regulation, inquiry or any other occurrence of any nature
whatsoever, which, in the Subscriber’s reasonable opinion, has a material adverse effect or
would reasonably be expected to have a material adverse effect on, or involve, the business,
operations, assets, or affairs, financial or otherwise, of the Corporation (on a
consolidated basis); and |
||
| (xxiii) | there shall not occur any material change or change in or discovery of a material fact
in respect of the Corporation which, in the reasonable
opinion of the Subscriber, would be reasonably expected to have a material adverse
effect on the business, operations, assets or affairs, financial or otherwise, of
the Corporation (on a consolidated basis). |
- 36 -
| (b) | Conditions to Corporation’s Obligations. The obligations of the Corporation to
complete the Subscription contemplated hereby on Closing shall be conditional upon and
subject to the following conditions, which conditions may be waived in writing in whole or in
part by the Corporation in its discretion and upon such terms as it may consider appropriate: |
| (i) | the Subscriber has complied with all the covenants and satisfied all the terms
and conditions of this Subscription Agreement on its part to be complied with or
satisfied at or prior to the Closing Time, including payment by the Subscriber of: |
| (A) | the Subscription Price; and |
||
| (B) | the first instalment of the Debenture Proceeds in accordance
with the terms of the Convertible Debenture; |
| (ii) | all necessary regulatory, stock exchange and shareholder approvals with
respect to the sale of the Securities and the amendment of the constating documents
of the Corporation to provide for the rights relating to the appointment of directors
and officers described in Section 6(hh) above, shall have been obtained; |
||
| (iii) | the Corporation shall be satisfied in its sole and absolute discretion with
the status of the Finder’s Fee |
||
| (iv) | the representations and warranties of the Subscriber contained herein will be
true and correct at and as of Closing as though such representations and warranties
were made again at and as of such time; |
||
| (v) | no order to cease or suspend trading in the securities of the Corporation, or
an order prohibiting or restricting the distribution of any of the Securities, is made
and no other order, judgment, injunction, decree, award or writ of any court,
tribunal, arbitrator, governmental or regulatory authority will have been entered that
prohibits or restricts the Closing; and |
||
| (vi) |
- 37 -
11. Closing. Subject to the terms and conditions herein, the Closing of the sale of the
Securities will be completed at the Vancouver offices of the Corporation’s legal counsel, Fasken
Xxxxxxxxx DuMoulin LLP, or such other place as the Corporation may decide, at 5:00 a.m. (Vancouver
time) (the “Closing Time”), on August 30, 2007 (the “Closing Date”) or such other date or time as
the Corporation and the Subscriber may agree upon.
At the Closing Time, the Corporation shall deliver to the Subscriber:
| (a) | the Convertible Debenture and share certificates representing the Offered
Shares duly registered as the Subscriber has in writing directed; |
||
| (b) | the requisite legal opinions, certificates and documents as contemplated in
Section 10(a) hereof; and |
||
| (c) | such further documentation required to be provided by the Corporation
pursuant to this Subscription Agreement or as the Subscriber or its counsel may
require, acting reasonably. |
At the Closing Time, the Subscriber shall deliver to the Corporation:
| (a) | such documentation required to be provided by the Subscriber pursuant to
this Subscription Agreement; and |
||
| (b) | payment in accordance with Section 9 hereof. |
12. Costs. Provided that the Corporation receives the Subscription Proceeds, the first
instalment of the Debenture Proceeds and a detailed invoice, the Corporation will pay 77.65% of
all costs and expenses incurred by the Subscriber in relation to the negotiation and preparation
of this Subscription Agreement, the Convertible Debenture and associated matters (the “Absorbed
Costs”). All such costs and expenses incurred by the Corporation shall be borne by the
Corporation.
13. Confidentiality and Privacy. By accepting the Subscription Agreement, the Corporation
agrees that it will not collect any information about the Subscriber except that which is
provided by the Subscriber in the Subscription Agreement (the “Subscriber Information”). The
Corporation also agrees that it will keep all Subscriber Information confidential, and will use
and disclose the Subscriber Information only for the purposes described below, unless
| (a) | the Corporation informs the Subscriber of a proposed use or disclosure of the
Subscriber Information and the Subscriber consents; or |
||
| (b) | the use or disclosure is permitted by law to be made without the consent of
the Subscriber, or is required by law, or by the by-laws, rules, regulations or
policies or any regulatory organization governing the Corporation. |
- 38 -
By signing the Subscription Agreement, the Subscriber agrees that the Corporation may collect
and use the Subscriber Information for the following purposes:
| (a) | to deliver to regulatory authorities any personal information provided by
the Subscriber respecting itself (and any beneficial purchaser) including such
Subscriber’s (or beneficial purchaser’s) full name, residential address and telephone
number, the amount of Offered Shares and Convertible Debenture purchased, the
Subscription Price, the exemption relied on by the Subscriber and the date of
distribution, such information being collected indirectly by regulatory authorities
under the authority granted pursuant to applicable securities laws for the purposes
of the administration and enforcement of applicable securities laws and pursuant to
the indirect collection of such information by regulatory authorities; |
||
| (b) | to provide the Subscriber with information; and |
||
| (c) | to otherwise administer the Subscriber’s investment in the Corporation in
accordance with the terms of this Subscription Agreement. |
14. Collection of Personal Information. The Subscriber acknowledges and consents to the
fact the Corporation is collecting the Subscriber’s personal information for the purpose of
completing the Subscriber’s subscription. The Subscriber acknowledges and consents to the
Corporation retaining the personal information for as long as permitted or required by applicable
law or business practices. The Subscriber further acknowledges and consents to the Corporation
delivering to the regulatory authorities any personal information provided by the Subscriber
respecting itself.
15. Public Announcements. Except as otherwise required by law or any regulatory authority
or stock exchange, neither the Corporation nor the Subscriber will announce or disclose the
financing contemplated hereunder or the specific terms thereof to the public without the prior
consent of the other. In the event that the Corporation or the Subscriber is compelled to make
any such disclosure under any applicable law or by any regulatory authority or stock exchange
having jurisdiction, that party will first consult with the other and will provide the other with
a reasonable opportunity to comment on any proposed proxy circular, press release, material
change report or other form of disclosure before it is finalized.
16. English Language. The Subscriber hereby acknowledges that it has consented that the
Subscription Agreement and all documents evidencing or relating in any way to the purchase be
drawn up in the English language only. Nous reconnaissons par les
présentes avoir consenti
que tous les documents faisant foi ou se rapportant de quelque
manière a notre achat soient
rédigés en anglais seulement.
17. Execution of Subscription Agreement. The Corporation shall be entitled to rely on
delivery by facsimile machine of an executed copy of this Subscription Agreement, and acceptance
by the Corporation of such facsimile copy shall be equally effective to create a valid and
binding agreement between the Subscriber and the Corporation in accordance with the terms
hereof.
- 39 -
18. Counterparts. This Subscription Agreement may be executed in any number of
counterparts, each of which when delivered, either in original or facsimile form, shall be deemed
to be an original and all of which together shall constitute one and the same document.
19. Governing Law. The contract arising out of this Subscription Agreement shall be
governed by and construed in accordance with the laws of the Province of British Columbia and the
laws of Canada applicable therein without regard to principles of conflicts of law. The Subscriber
irrevocably attorns to the jurisdiction of the courts in the Province of British Columbia, with
respect to matters arising out of this Subscription Agreement.
20. Purchasing Entity. Prior to Closing, the Subscriber shall be entitled to designate a
wholly-owned subsidiary (direct or indirect) to be the purchaser of the Securities (the
“Purchasing Entity”) instead of the Subscriber itself. The Subscriber shall advise the Corporation
of the jurisdiction in which any such Purchasing Entity is resident. Except as otherwise provided
in this Subscription Agreement, this Subscription Agreement shall not be assignable or
transferable by any party without the written consent of the other party hereto.
If the Subscriber designates a Purchasing Entity pursuant to this Section 20, the Subscriber
is the duly authorized trustee or agent of the Purchasing Entity with due and proper power and
authority to execute and deliver, on behalf of the Purchasing Entity, this Subscription Agreement
and all other documentation in connection with the purchase of the Securities hereunder, to agree
to the terms and conditions herein and therein set out and to make the representations,
warranties, acknowledgements and covenants herein and therein contained, all as if the Purchasing
Entity were the Subscriber and the subscription constitutes a legal, valid, binding and
enforceable obligation of the Purchasing Entity, except as may be limited by the Qualifications,
and the Subscriber’s actions as trustee or agent are in compliance with applicable law and the
Subscriber acknowledges that the Corporation is required by law to disclose to certain regulatory
authorities the identity of the Purchasing Entity of the Securities for whom the Subscriber may be
acting.
21. Successors and Assigns. The terms and conditions of this Subscription Agreement shall
be binding upon and enure to the benefit of the Subscriber and the Corporation and their
respective successors and assigns.
22. Entire Agreement and Headings. This Subscription Agreement (including the schedules
hereto) contains the entire agreement of the parties hereto relating to the subject matter hereof
and there are no representations, covenants or other agreements relating to the subject matter
hereof except as stated or referred to herein. This Subscription Agreement may be amended or
modified in any respect by written instrument only. The headings contained herein are for
convenience only and shall not affect the meanings or interpretation hereof.
23. Interpretation. Unless the context requires otherwise, words importing the singular
include the plural and vice versa, and words importing gender include any gender.
Each of the terms “including”, “include” and “includes”, when used in this Subscription
Agreement, is not limiting whether or not non-limiting language (such as “without limitation”,
“without limiting the foregoing”, “but not limited to” or words of similar import) is used with
reference thereto.
- 40 -
The expressions “herein”,
“hereto”, “hereof”,
“hereby”, “hereunder” and other similar terms
refer to this Subscription Agreement as a whole, together with the schedules and any amendments
hereto, and not just to the particular section in which those words appear.
24. Survival. Subject to Section 7 hereof, this Subscription Agreement, including without
limitation the representations, warranties and covenants contained herein, shall survive and
continue in full force and effect for two years from the Closing Date (other than covenants which
on their terms extend for a longer period) and be binding upon the Subscriber and the Corporation
notwithstanding the completion of the purchase of the Securities by the Subscriber pursuant
hereto, the completion of the offering of the Securities of the Corporation and any subsequent
disposition by the Subscriber of the Securities.
25. Currency.
All dollar amounts referred to herein are in Canadian dollars.
26. Statutory References. Any reference to a statute or enactment herein is a reference to
a statute or enactment as amended.
27. Time of Essence.
Time shall be of the essence in this Subscription Agreement.
28. Notices. Any notice or other communication to be given hereunder shall, in the case of
notice to be given to the Corporation, be addressed to:
WEX Pharmaceuticals Inc.
Xxxxx 0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Dr. Edge Wang
Facsimile No.: 000-000-0000
Xxxxx 0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Dr. Edge Wang
Facsimile No.: 000-000-0000
and in the case of notice to be given to the Subscriber, be addressed to the Subscriber at the
Subscriber’s address set out on the first page of this Subscription Agreement.
Any such notice or other communication shall be in writing and may be given by facsimile or
delivery, and shall be deemed to have been given 12 hours after being faxed or upon receipt by a
responsible officer of the addressee if delivered.
29. Effective Date. This Subscription Agreement is intended to and shall take effect on
the date the Subscription Agreement was accepted by the Corporation below, notwithstanding the
actual date of execution or delivery by the Subscriber.
- 41 -
ACCEPTANCE
The
foregoing is acknowledged, accepted and agreed to in Vancouver, British Columbia,
this 15th
day of July, 2007.
| WEX PHARMACEUTICALS INC. | ||||
| Per: | “Edge Wang” | |||
| Authorized Signatory | ||||
- 42 -
SCHEDULE “A”
Form Of Convertible Debenture
(SEE ATTACHED)
Unless permitted under securities legislation, the holder of these securities shall not trade
the securities before <*>, 2007.
Convertible Debenture
incorporated under the laws of Canada
This Debenture is issued as of and dated for reference the <*>
day of <*>, 2007 (the “Issue Date”) by Wex Pharmaceuticals Inc.
(the “Corporation”), whose chief executive office is located at 0000-000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, to and in favour of [C.K. Life Sciences
Int’l., Inc.] [NTD: Identity of Holder to be confirmed prior to Closing.]
(the “Holder”), a company registered in the [British Virgin Islands
and having an office at 2 Dai Fu Street, Tai Po Industrial Park, Hong Kong.]
For
valuable consideration (the receipt and sufficiency of which are hereby conclusively
acknowledged), the Corporation covenants, agrees, acknowledges, represents and warrants to and in
favour of the Holder as follows:
ARTICLE 1
Interpretation
Interpretation
1.1 Definitions
Each word and phrase defined in Schedule “A” is used in this Debenture (whether with or without
initial capitals) with the respective defined meaning assigned to it in Schedule “A”.
1.2 Statutes
A reference in this Debenture to a statute refers to that statute as it may be amended from time
to time, and to any restated or successor legislation of comparable effect.
1.3 Agreements
Each reference in this Debenture to any Agreement (including this Debenture, the Subscription
Agreement and any other defined term that is an Agreement) shall be construed so as to mean such
Agreement (including any attached schedules, appendices and exhibits) as amended, supplemented,
and otherwise modified from time to time and each amendment and restatement, novation and
replacement of it from time to time.
1.4 Successors
Each reference in this Debenture to any body corporate (including any party hereto) shall be
construed so as to include such body corporate and its successors, both immediate and derivative,
to the extent the context so admits.
1.5 Subdivisions and Headings
The division of this Debenture into Articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the construction or
interpretation of this Debenture.
1.6 Number and Gender
In this Debenture, words (including defined terms) in the singular include the plural and
vice-versa (the necessary changes being made to fit the context) and words in one gender include
all genders.
ARTICLE 2
Promise to Pay
Promise to Pay
2.1 Promise to Pay
For value received, the Corporation hereby promises to pay to or to the order of the Holder, on the
Maturity Date, or on such earlier date as the principal moneys may become payable in accordance
with the terms hereof, a principal sum (the “Principal Amount”) equal to the sum of the Initial
Advance and all Subsequent Advances which aggregate principal amount shall not exceed Fifteen
Million Six Hundred Thousand Canadian Dollars (Cdn.$l5,600,000) at the office of the Holder
described at the commencement of this Debenture, or at such other place as the Holder may designate
from time to time by notice to the Corporation, and shall pay interest thereon accrued from the
date of advance until the Principal Amount is repaid, subject to sections 4.4 and 6.1, at the rate
of LIBOR, plus four percent per annum. Interest will be calculated semi-annually, not in
advance, both before and after maturity, default or judgment, together with interest on overdue
interest at the Default Interest Rate. Interest shall be paid on September 30, 2007 and
thereafter semi-annually on March 31st and September 30th of each year, or
otherwise upon Default by way of the issuance of Common Shares at the Interest Price in effect at
the date of the interest payment. The Common Shares will be issued to the Holder within three
business days of the earlier of the date specified in a written notice delivered by the Holder to
the Corporation, the Maturity Date or in the event a certificate is delivered to the Holder
pursuant to section 5.2, the Extended Maturity Date, and an Event of Default (unless waived by the
Holder with respect to an Event of Default). For greater certainty the first interest payment will
be for the period commencing on the date hereof and ending on September 30, 2007. The foregoing
payments are to be made in accordance with the terms of this Debenture.
2.2 Initial Advance
The Initial Advance will be made by the Holder to the Corporation on the Issue Date.
- 2 -
2.3 Subsequent Advances
The Holder shall make Subsequent Advances to the Corporation on the seventh day following the end
of each financial quarter specified below in the respective amount specified below:
| Quarter End | Amount of Subsequent Advance | |||
December 31, 2007 |
$ | 1,500,000 | ||
March 31, 2008 |
$ | 2,000,000 | ||
June 30, 2008 |
$ | 2,000,000 | ||
September 30, 2008 |
$ | 2,000,000 | ||
December 31, 2008 |
$ | 2,000,000 | ||
March 31, 2009 |
$ | 4,100,000 | ||
provided that:
| (a) | the Corporation delivers to the Holder a written request specifying the amount
of the Subsequent Advance at least 20 days before the date of the Subsequent Advance as
well as a Compliance Certificate which provides, inter alia, that the Corporation is in
compliance with the Business Plan; |
||
| (b) | the representations, warranties and covenants of the Holder set forth herein
and in the Subscription Agreement are true and correct on and as of such date, all as
though made on and as of such date (other than changes identified in the Compliance
Certificate which do not constitute a Default hereunder); |
||
| (c) | no event or condition has occurred and is continuing or would result from such
Subsequent Advance which would constitute a Default; |
||
| (d) | such Subsequent Advance will not violate any Applicable Law then in effect; and |
||
| (e) | in the event of a rights offering or other financing by the Corporation, the
Holder reserves the right to adjust the amount of Subsequent Advances (including
reduction thereof) and/or the times of payment set out above. If a change of
Subsequent Advances is necessary, the Holder and the Corporation shall by mutual
agreement determine the amount and timing of Subsequent Advances and any resulting
change to the Business Plan or the Use of Proceeds in Schedule “C” to the Subscription
Agreement. |
In the event that any of these conditions are not satisfied, the Holder shall have no obligation to
make a Subsequent Advance.
2.4 Grid
The Corporation hereby appoints the Holder as its duly authorized agent to record on the Grid:
| (a) | any and all Advances made by the Holder to the Corporation; and |
- 3 -
| (b) | all payments made by the Corporation on account of the Principal Amount
outstanding from time to time under this Debenture, and to adjust the balance of the
Principal Amount owing under this Debenture by the Corporation to the Holder from
time to time to reflect payments made by the Corporation. The Principal Amount
outstanding from time to time under this Debenture as evidenced on the Grid shall,
absent manifest error, constitute presumptive evidence thereof; provided that
notwithstanding the state of the Grid, the failure of the Holder to record any
amounts owing hereunder on the Grid shall not affect the obligation of the
Corporation to pay to the Holder the amounts due and payable by the Corporation
hereunder. |
ARTICLE 3
Covenants
Covenants
3.1 Positive Covenants
The Corporation agrees with the Holder, until the date the Principal Amount and any accrued and
unpaid interest thereon have been paid, the Corporation will:
| (a) | at all times preserve and maintain its corporate existence and that of its
Principal Subsidiaries; |
||
| (b) | duly and punctually pay the principal amount and any accrued and unpaid
interest thereon and all other monies required to be paid to the Holder pursuant to
this Debenture in the manner set forth herein; |
||
| (c) | duly observe and perform each and every one of its covenants and agreements
set forth in this Debenture and the Subscription Agreement; |
||
| (d) | ensure that all Common Shares that shall be issued in payment of interest or
upon the full or partial conversion of this Debenture, shall be fully-paid and non
assessable; |
||
| (e) | fulfill all the obligations of securities legislation, rules, regulations and
policies in those Canadian jurisdictions in which it is a reporting issuer; |
||
| (f) | maintain its status as a reporting issuer not in default in those Canadian
jurisdictions in which it is currently a reporting issuer; |
||
| (g) | fulfill all its contractual obligations with the Exchange and all other
Canadian regulatory bodies; |
||
| (h) | ensure that all Common Shares outstanding and issued from time to time
(including, without limitation, up to 320,000,000 Common Shares (subject to
adjustment as herein provided) to be issued on the full or partial conversion of this
Debenture and all of the Common Shares to be issued in payment of interest under this Debenture) continue to be or are listed and posted for trading on the Exchange; |
- 4 -
| (i) | maintain, repair, and use its assets (including, without limitation, the Material Assets)
and conduct its business in a prudent, proper and efficient manner consistent with good
business practices and in accordance with the Business Plan so as to preserve and protect its
assets and the earnings, incomes and profits of the Corporation; |
||
| (j) | keep proper records and books of account in accordance with GAAP; |
||
| (k) | pay all taxes when due, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves under GAAP have been established; |
||
| (l) | at all times maintain insurance by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the businesses and
markets in which the Corporation and Subsidiaries are engaged, including, but not limited to,
directors’ and officers’ insurance coverage, all as more particularly provided in the
Subscription Agreement; |
||
| (m) | duly comply with all requirements of any Governmental Body and all Applicable Laws
applicable to the Corporation and the Subsidiaries; |
||
| (n) | will forthwith upon becoming aware of the occurrence of a Default, provide the Holder with
immediate notice thereof; |
||
| (o) | provided the Corporation receives the Initial Advance and other than with respect to (i)
below has received any Subsequent Advance that has become payable from time to time in
accordance with section 2.3, the Corporation will pay on demand any and all reasonable costs,
charges and expenses, including any legal costs incurred by the Holder on the basis as
between a solicitor and his own client, of and incidental to: |
| (i) | the negotiation and preparation of this Debenture, the Subscription
Agreement and associated matters in accordance with and subject to the Subscription
Agreement; |
||
| (ii) | any matter the Corporation asks the Holder to consider in connection with
this Debenture after the grant of this Debenture; |
||
| (iii) | the Holder’s performance of any covenant in this Debenture; |
||
| (iv) | any default by the Corporation; and |
- 5 -
| (v) | any steps or proceedings taken under this Debenture or otherwise by reason of
non-payment or procuring payment of the monies payable under the Debenture, and |
all such costs, charges and expenses will bear interest at the rate aforesaid from the date
of the Holder incurring or being charged the same; |
|||
| (p) | pay all reasonable expenses of any nominees of the Holder appointed or elected to the board
of directors of the Corporation reasonably incurred in attending at meetings of the board of
directors or any committees thereof; |
||
| (q) | in the event the Holder elects at any time not to have a nominee on the board of directors
of the Corporation, give notice to the Holder of all meetings of the board of directors of
the Corporation to permit a representative of the Holder to attend any Board meetings of the
Corporation as an observer. The reasonable expenses of the observer will be paid in the same
manner as the expenses of the Holder’s nominees on the board of directors of the Corporation; |
||
| (r) | if so requested by the Holder, take all necessary steps to indemnify the Holder’s nominee
director in accordance with the applicable law and the constating documents of the
Corporation; |
||
| (s) | send to the Holder by both e-mail and regular mail: |
| (i) | quarterly unaudited consolidated financial statements of the Corporation and
related management discussion and analysis to the Holder within 45 days after the end
of each fiscal quarter; |
||
| (ii) | annual audited consolidated financial statements of the Corporation within
90 days of the end of each fiscal year; |
||
| (iii) | copies of all reports, financial statements and any other documents sent
to the Corporation’s shareholders; |
||
| (iv) | a copy of the Business Plan within 15 days of approval by the board of
directors of the Corporation; |
||
| (v) | monthly management accounts, which include profit and loss, balance sheet and
cash flow variance analysis in the same format as Schedule “C” to the Subscription
Agreement, and management comments on adherence to or deviation from the Business
Plan within 20 days of the end of each month; and |
||
| (vi) | a Compliance Certificate within 45 days in respect of the first, second and
third financial quarters and within 90 days in respect of the fourth financial
quarter. |
- 6 -
| (t) | provide any other financial information relating to the Corporation and the
Subsidiaries reasonably requested by the Holder; |
||
| (u) | promptly inform the Holder of the full particulars if a material change
(actual, anticipated or threatened) or any change in a material fact occurs in the
affairs of the Corporation or any of the Principal Subsidiaries; |
||
| (v) | ensure that the Corporation and each of its Principal Subsidiaries will keep
in good standing all requisite licences, approvals, consents, agreements and
authorizations necessary to enable the Corporation and its Principal Subsidiaries to
conduct operations, (it being understood that certain non-material licenses,
approvals, consents, agreements and authorizations will be permitted to lapse); |
||
| (w) | promptly provide the Holder with written notice of any material litigation; |
||
| (x) | use the Principal Amount only for the purposes specified in the Business
Plan; and |
||
| (y) | at: |
| (i) | any reasonable time or times and upon reasonable prior notice,
permit the Holder to visit the properties of any of the Corporation or the
Subsidiaries, and to discuss the affairs, finances and accounts of the
Corporation or the Subsidiaries with executive management including the
officers appointed as (or performing the functions of) the chief executive
officer and chief financial officer thereof; and |
||
| (ii) | at least quarterly, permit the Holder to meet with the
Corporation’s chief financial officer for the purpose of reviewing the
affairs, finances and accounts of the Corporation or the Subsidiaries. |
3.2 Negative Covenants
Subject to section 3.3, without the prior written consent of the Holder or unless permitted
pursuant to the Business Plan, the Corporation shall not and shall not permit any Subsidiary, to:
| (a) | change the nature of its business or do any act or thing that would
materially adversely affect its business, property, prospects or financial condition; |
||
| (b) | except in relation to the Plan or this Debenture, issue any securities or any
options, warrants or securities convertible into shares or re-price any existing
options; |
||
| (c) | except in the ordinary course of business for amounts not exceeding $500,000
and subject to the UOB Termination Agreements, borrow, create, incur, assume or
suffer to exist any indebtedness; |
- 7 -
| (d) | sell, lease, assign, transfer, license or otherwise dispose of all or substantially
all of its assets or any of its Material Assets; |
||
| (e) | redeem or repurchase shares, pay or declare dividends (or any other return of capital); |
||
| (f) | utilize the Principal Amount save as provided in the Business Plan including its use to
purchase or acquire the securities of any person, pay dividends or return capital to its
shareholders; |
||
| (g) | guarantee the indebtedness of any Person other than its Subsidiaries; |
||
| (h) | enter into any transaction (whether by way of reconstruction, reorganization, consolidation,
amalgamation, winding-up, merger, transfer, sale, lease or otherwise) whereby all or any
substantial part of its undertaking or Assets would become the property of any other Person; |
||
| (i) | enter into any partnership, joint venture or similar agreement or arrangement; |
||
| (j) | permit, dispose of or allow to lapse any intellectual property rights necessary to enable
the Corporation and the Subsidiaries to conduct operations (including, without limitation,
those associated with the Material Assets) or breach any representations, warranties and
covenants associated with such intellectual property rights as set forth in the Subscription
Agreement (it being understood that certain non-material intellectual property rights will
be permitted to lapse); |
||
| (k) | except in the ordinary course of business and subject to the UOB Termination Agreements,
create, incur, assume, suffer to exist, permit or grant a security interest, lien or
encumbrance on its assets; |
||
| (l) | amend its constating documents; |
||
| (m) | allow any of their respective outstanding securities to be pledged or transferred; |
||
| (n) | purchase or acquire any fixed assets with a value of greater than $20,000; |
||
| (o) | hire or employ staff with an annual salary greater than $100,000 or hire or employ staff
such that the total number exceeds by more than two persons the total headcount for the
applicable time period as set forth in the Business Plan, it being understood that the
foregoing is intended to cover new employees rather than the promotion or salary increases
of existing employees; |
||
| (p) | enter into any contract or agreement concerning the Material Assets or in an amount that
is greater than $20,000, other than in the latter case, those relating to the normal
operations of the business; or |
| (q) | any of the Corporation, WEX Medical Limited or Nanning Maple Leaf
Pharmaceuticals Co. Ltd. exceed by more than 10% in any quarter or on an annual
basis its expense budget as set out in the Business Plan. |
- 8 -
3.3 Financings
Notwithstanding any provisions herein, the negative covenants contained in sections 3.2(b) and (c)
do not apply to financings during the Permitted Periods so long as:
| (a) | the financings are subject to the right of first refusal, as applicable, in
favour of the Holder as set out in Section 6(ii)(ix) of the Subscription Agreement; |
||
| (b) | the proceeds of any debt financings are subordinated to the indebtedness of
the Corporation to the Holder; |
||
| (c) | the proceeds of such financings during the last three months immediately
prior to the Maturity Date will be utilized in the ordinary course of the
Corporation’s business for operating expenses, consistent with the Business Plan and
the amount shall not exceed more than a reasonable amount required for 24 months of
operating expenses; and |
||
| (d) | the proceeds of such financings during the last six months immediately prior
to the Extended Maturity Date will be utilized first to repay any indebtedness of the
Corporation to the Holder with the balance to be utilized in the ordinary course of
the Corporation’s business for operating expenses, consistent with the Business Plan. |
ARTICLE 4
Default
Default
4.1 Events of Default
Each of the following events constitutes a Default:
| (a) | the failure of the Corporation to pay the principal amount due under this
Debenture on the due date thereof or to pay any other amounts due under this
Debenture within three Business Days of the due date thereof; |
||
| (b) | if the Corporation fails to keep, observe or perform any of the covenants set
forth in sections 3.2(d), 3.2(h), 3.2(i), 3.2(m), 3.2(p) or 3.2(q); |
||
| (c) | if any of the representations and warranties in the Subscription Agreement
or the Debenture are not true as at the time such representation or warranty was
made; |
||
| (d) | save for the failure to pay amounts due under this Debenture or the
covenants referred to in section 4.1(b), if the Corporation fails to keep, observe
or perform any covenants, agreements, terms, conditions or provisions contained in
this Debenture or the Subscription Agreement and such default continues until the later
of the expiry of 30 days from the date of receipt of notice from the Holder to
remedy such default; |
- 9 -
| (e) | in the event of a Change of Control or a Capital Reorganization; |
||
| (f) | if the Board of Directors of the Corporation fail in any fiscal year to
approve a Business Plan for the forthcoming fiscal year; |
||
| (g) | in the event a cease trade order or Exchange trading suspension of the
Common Shares shall be in effect for five consecutive trading days (excluding a
suspension of all trading on the Exchange). |
||
| (h) | a Bankruptcy Event with respect to the Corporation occurs; |
||
| (i) | any garnishment order or other equivalent process is issued or levied
against the Corporation or a Subsidiary to recover payment of any amount exceeding
$100,000 owing by the Corporation; |
||
| (j) | any failure of the Corporation or a Subsidiary to pay indebtedness exceeding
$100,000 at the stated maturity thereof or as a result of which, the creditor may
declare the principal thereof to be due and payable prior to the stated maturity
thereof, or any event shall occur and shall continue after the applicable grace
period (if any) specified in any agreement or instrument relating to any such debt,
the effect of which is to permit the holder of such debt to declare the principal
amount thereof to be due and payable prior to its stated maturity; |
||
| (k) | all or any material part of the assets of the Corporation or any
Subsidiaries are executed, sequestered or distrained upon and such execution,
sequestration or
distraint: |
| (i) | relates to claims in the aggregate in excess of $100,000; and |
||
| (ii) | the Corporation or such Subsidiary does not discharge the
same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof (by reason of pending appeal or otherwise), within
30 days from the date of entry thereof; and |
| (l) | final judgement for the payment of money in the aggregate in excess of
$100,000 in excess of applicable insurance shall be rendered by a court of competent
jurisdiction against the Corporation or any Subsidiary and the Borrower or such
Subsidiary does not discharge same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof (by reason of a pending appeal or
otherwise), within 30 days from the date of entry thereof; |
The occurrence of a Default shall be deemed to constitute a default by the Corporation of its
obligations under this Debenture.
- 10 -
4.2 Effect of Default
Upon the occurrence of a Default, the Principal Amount, any accrued and unpaid interest thereon
and any other monies owing to the Holder under this Debenture will immediately become payable.
Upon the occurrence of a Default and at any time thereafter, the Holder may exercise all or any of
the rights and remedies available to the Holder, whether available under this Debenture or
available at law or in equity, including, without limitation, its rights pursuant to section 5.3.
4.3 Default Interest Rate
Following the occurrence and during the continuance of a Default, the Corporation shall pay
interest in an amount equal to the Default Interest Rate in lieu of the amounts set forth in
section 2.1 and all outstanding obligations under this Debenture, including unpaid interest,
shall continue to accrue interest at that rate from the date of Default and until such Default is
cured or waived.
4.4 Waiver
The Holder may waive any Default or any breach by the Corporation of any of the provisions of this
Debenture. No waiver, however, shall be deemed to extend to a subsequent breach or Default,
whether or not the same as or similar to the breach or Default waived, and no act or omission by
the Holder shall extend to, or be taken in any manner whatsoever to affect, any subsequent breach
or Default or the rights of the Holder arising therefrom. Any such waiver must be in writing and
signed by the Holder to be effective. No failure on the part of the Holder to exercise, and no
delay by the Holder in exercising, any right under this Debenture 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.
ARTICLE 5
Conversion of Debenture
Conversion of Debenture
5.1 Conversion Privilege and Conversion Price
Subject to and upon compliance with the provisions of this Article 5, on or after the Maturity
Date or after the occurrence of a Default or in the event of an Offer, this Debenture or any
portion of the Principal Amount outstanding as of the Conversion Date (as defined below) may, at
the option of the Holder, be converted into fully paid and non-assessable Common Shares at the
Conversion Price in effect on the Conversion Date.
5.2 Extended Maturity Date
In the event the Corporation delivers on or before the Maturity Date a certificate executed by
the Corporation’s Chief Executive Officer and Chief Financial Officer certifying that the
Corporation will be unable to repay the Principal Amount on the Maturity Date, then subject to
the provisions contained in section 5.1 and 5.3 and provided there has not occurred a Default,
the Principal Amount will be payable on the Extended Maturity Date. For greater certainty, the
Holder’s right to convert the Principal Amount on or after the Maturity Date or after the
occurrence of a Default or in the event of an Offer shall continue in full force and effect
regardless of the delivery of the certificate described in the previous sentence.
- 11 -
5.3 Conversion Procedure
In order to exercise the conversion right granted pursuant to section 5.1, the Holder must deliver
to the Corporation at its principal office in Vancouver, British Columbia (or the registered
office of the Corporation if it no longer has its principal office in Vancouver, British Columbia)
a written notice signed by the Holder (a “Conversion Notice”) stating that the Holder elects to
convert this Debenture, or a stated portion of the Principal Amount thereof to Common Shares. Such
Conversion Notice will be deemed to constitute a contract between the Holder and the Corporation
whereby:
| (a) | the Holder subscribes for the number of Common Shares that it will be
entitled to receive on such conversion; |
||
| (b) | the Holder releases the Corporation from all liability thereon or from all
liability with respect to that portion of the Principal Amount thereof to be
converted, as the case may be; and |
||
| (c) | the Corporation agrees that the delivery of such Conversion Notice
constitutes full payment of the subscription price for the Common Shares issuable
upon such conversion. |
In the case of a conversion pursuant to section 5.1, the date of receipt by the Corporation of a
Conversion Notice is herein referred to as the “Conversion Date”.
As promptly as practicable after the Conversion Date, the Corporation will issue or cause to be
issued and deliver or cause to be delivered to the Holder a certificate in the name of the Holder
for the number of Common Shares deliverable upon the conversion of such Debenture (or specified
portion of the Principal Amount thereof to be converted) and provision will be made for payment
in money in respect of any fraction of a Common Share as provided in section 5.5. Such conversion
will be deemed to have been effected immediately prior to the close of business on the Conversion
Date and at such time the rights of the Holder, either as holder of this Debenture or as holder
of that portion of the Principal Amount of this Debenture to be converted, as the case may be,
will cease and the Holder will be deemed to have become on such date the holder of record of the
Common Shares; provided, however, that no such conversion on any date when the transfer registers
for Common Shares of the Corporation are closed will be effective to constitute the Holder to be
entitled to receive the Common Shares upon such conversion as the holder of record of such Common
Shares on such date, but such conversion will be effective to constitute the Holder to be
entitled to receive such Common Shares as the holder of record thereof for all purposes on the
next succeeding Business Day on which such transfer registers are open.
- 12 -
The Corporation will pay to the Holder, by way of the issuance of Common Shares issued concurrently
with the certificates for the Common Shares issuable on conversion pursuant to section 5.1, the
amount of any interest accrued up to the Conversion Date on the Debenture or that portion of the
Principal Amount to be converted, as the case may be.
5.4 Effect of Conversion
The issuance of Common Shares to the Holder on conversion of this Debenture will constitute full
repayment of the Principal Amount. The Holder hereby agrees to surrender this Debenture in
exchange for the share certificate issued by the Corporation to the Holder in respect of such
conversion.
5.5 No Fractional Shares
Notwithstanding anything herein contained, the Corporation will not be required to issue
fractional Common Shares in payment of interest or upon the conversion of the Debenture in whole
or in part. If any fractional interest in a Common Share would, except for the provisions of this
section 5.5, be deliverable in payment of interest or upon the conversion of this Debenture, the
Corporation will adjust such fractional interest by paying to the Holder an amount equal to the
fractional interest.
5.6 Adjustment of Cap Prices
The Cap Prices (and the number of Common Shares issuable upon exercise of the conversion rights
and the obligations set forth hereunder) are subject to adjustment from time to time in the events
and in the manner provided as follows:
| (a) | If and whenever at any time after the date hereof and prior to the repayment
of the Principal Amount and all accrued interest and/or conversion thereof into
Common Shares (the “Expiry Date”), the Corporation: |
| (i) | issues to all or substantially all the holders of Common
Shares by way of a stock dividend or otherwise Common Shares or securities
exchangeable for or convertible into Common Shares other than a dividend paid
in the ordinary course, or |
||
| (ii) | subdivides its outstanding Common Shares into a greater
number of shares, or |
||
| (iii) | consolidates or combines its outstanding Common Shares into a
smaller number of shares, |
- 13 -
(any of such events being called a “Common Share Reorganization”), then the Cap
Prices will be adjusted effective immediately after the effective date or record
date for the happening of a Common Share Reorganization, as the case may be, at
which the holders of Common Shares are determined for the purpose of the Common
Share Reorganization, by multiplying the Cap Prices in effect immediately prior to such effective date or record date by a fraction, the numerator of
which is the number of Common Shares outstanding on such effective date or record date
before giving effect to such Common Share Reorganization and the denominator of which is
the number of common shares outstanding immediately after giving effect to such Common
Share Reorganization (including, in the case where securities exchangeable for or
convertible into common shares are distributed, the number of Common Shares that would have
been outstanding had all such securities been exchanged for or converted into Common Shares
on such effective date or record date). |
|||
| (b) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation, fixes a record date for the issue of rights, options or warrants to the holders
of all or substantially all of its outstanding Common Shares under which such holders are
entitled to subscribe for or purchase Common Shares or securities exchangeable for or
convertible into Common Shares, where: |
| (i) | the right to subscribe for or purchase Common Shares, or the right to exchange
securities for or convert securities into Common Shares expires not more than 45 days
after the date of such issue (the period from the record date to the date of expiry
being in this section 5.6 called the “Rights Period”), and |
||
| (ii) | the cost per Common Share during the Rights Period (inclusive of any cost or
acquisition of securities exchangeable for or convertible into Common Shares in
addition to any direct cost of Common Shares) (in this section 5.6 called the “Per
Share Cost”) is less than 95% of the Current Market Price of the Common Shares on the
record date, |
||
(any of such events being called a “Rights Offering”), then the Cap Price will be
adjusted effective immediately after the end of the Rights Period to a price
determined by multiplying the Cap Prices in effect immediately prior to the end of
the Rights Period by a fraction: |
| (A) | the numerator of which is the aggregate of: |
| (1) | the number of Common Shares outstanding as of
the record date for the Rights Offering, and |
||
| (2) | a number determined by dividing the product of
the Per Share Cost and: |
| (I) | where the event giving rise
to the application of this subparagraph (2) was the issue of
rights, options or warrants to the holders of Common Shares
under which such holders are entitled to subscribe for or
purchase additional Common Shares, the number of
Common Shares so subscribed for or purchased during the
Rights Period, or |
- 14 -
| (II) | where the event giving rise
to the application of this subparagraph (2) was the issue of
rights, options or warrants to the holders of Common Shares
under which such holders are entitled to subscribe for or
purchase securities exchangeable for or convertible into
Common Shares, the number of Common Shares for which those
securities could have been exchanged or into which they could
have been converted during the Rights Period; |
by the Current Market Price of the Common Shares as of the record
date for the Rights Offering; and |
| (B) | the denominator of which is: |
| (1) | in the case described above subparagraph
(A)(2)(I), the number of Common Shares outstanding, or |
||
| (2) | in the case described above subparagraph
(A)(2)(II), the number of Common Shares that would be outstanding if
all the Common Shares described in subparagraph (A)(2)(II) had been
issued, |
as at the end of the Rights Period. |
Any Common Shares owned by or held for the account of the Corporation or any
subsidiary (as defined in the Securities Act (British Columbia)) of the
Corporation will be deemed not to be outstanding for the purpose of any such
computation. |
| (c) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation fixes a record date for the issue or the distribution to the holders of all or
substantially all its Common Shares: |
| (i) | shares of the Corporation of any class other than Common Shares; |
||
| (ii) | rights, options or warrants to acquire shares or securities exchangeable for
or convertible into shares or property or other assets of the Corporation (other than
rights, options or warrants to purchase Common Shares exercisable within 45 days of
the record date at a price per Common Share equal to or greater than 95% of the then
Current Market Price); |
||
| (iii) | evidences of indebtedness, or |
||
| (iv) | any property or other assets; |
- 15 -
and if such issuance or distribution does not constitute a Common Share
Reorganization or a Rights Offering or dividend paid in the ordinary course
(any of such non-excluded events being called a “Special Distribution”),
the Cap Prices will be adjusted effective immediately after such record
date to a price determined by multiplying the Cap Price, in effect on such
record date by a fraction: |
| (A) | the numerator of which is: |
| (1) | the product of the number of
Common Shares outstanding on such record date and the Current
Market Price of the Common Shares on such record date, less |
||
| (2) | the amount by which the
aggregate fair market value (as determined by action by the
directors of the Corporation) to the holders of the Common
Shares of such securities or property or other assets so
issued or distributed in the Special Distribution exceeds the
fair market value (as determined by action of the directors of
the Corporation) of the consideration, if any, received
therefor by the Corporation, and |
| (B) | the denominator of which is the number of
Common Shares outstanding on such record date multiplied by the Current Market Price of the Common Shares on such record date. |
Any Common Shares owned by or held for the account of the Corporation or any subsidiary (as
defined in the Securities Act (British Columbia)) of the Corporation will be deemed not to be
outstanding for the purpose of any such computation.
No adjustment in a Cap Price is required to be made unless such adjustment would result in a
change of at least one percent in the prevailing Cap Price, provided, however, that any
adjustments which, except for the provisions of this sentence, would otherwise have been required
to be made, will be carried forward and take into account in any subsequent adjustment.
If the Corporation sets a record date to determine the holders of the Common Shares for the
purpose of entitling them to receive any dividend or distribution or sets a record date to take
any other action and, thereafter and before the distribution to such shareholders of any such
dividend or distribution or the taking of any other action, decides not to implement its plan to
pay or deliver such dividend or distribution or take such other act, then no adjustment in the
Cap Prices will be required by reason of the setting of such record date.
In the absence of a resolution of the directors of the Corporation fixing a record date for a
Special Distribution or Rights Offering, the Corporation will be deemed to have fixed as the
record date therefor the date on which the Special Distribution or Rights Offering is effected.
- 16 -
5.7 Adjustments for Capital Reorganization
If and whenever at any time after the date hereof and prior to the Expiry Date, there is a
reclassification of the Common Shares outstanding at any time or change of the Common Shares into
other shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation, reverse take-over or merger of the Corporation with or into any other
corporation or other entity (other than a consolidation, amalgamation or merger which does not
result in any reclassification of the outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets of the Corporation as an entirety or
substantially as an entirety to another corporation or other entity (any of such events being
called a “Capital Reorganization”), and notice to convert is given after the effective date of such
Capital Reorganization, the Holder will be entitled to receive, and must accept for the same
aggregate consideration in lieu of the number of Common Shares to which it was theretofore entitled
upon such subscription, the aggregate number of shares, other securities or other property which it
would have been entitled to receive as a result of such Capital Reorganization if, on the effective
date thereof, it had been the registered holder of the number of Common Shares to which such holder
was theretofore if conversion had occurred on that date. Appropriate adjustments will be made as a
result of any such Capital Reorganization in the application of the provisions set forth in this
section 5.7 with respect to the rights and interests thereafter of holders of Debentures to the end
that the provisions set forth in this section 5.7 will thereafter correspondingly be made
applicable as nearly as may reasonably be in relation to any shares thereafter deliverable upon
conversion. Any such adjustment must be made by and set forth in an agreement supplemental hereto.
As a condition precedent to taking any action that would constitute a Capital Reorganization, the
Corporation will take all action necessary, in the opinion of counsel, in order that the provisions
of this section be effected.
5.8 Disputes
If at any time a dispute arises with respect to adjustments provided for in sections 5.6 and 5.8,
such dispute will be conclusively determined by the auditors of the Corporation or if they are
unable or unwilling to act, by such other firm of independent chartered accountants as may be
selected by action by the directors of the Corporation and the Holder and any such determination
will be binding upon the Corporation and the Holder and the Corporation will provide such auditors
or accountants with access to all necessary records of the Corporation.
- 17 -
ARTICLE 6
General
6.1 Notices
Any notice, demand, consent, approval or other communication to be made or given under or in
connection with this Debenture (a “Notice”) shall be in writing and may be made or given by
personal delivery or by facsimile addressed to the respective parties as follows:
To the Corporation:
WEX Pharmaceuticals Inc.
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
To the Holder:
[C.K.
Life Sciences Int’l. Inc.]
Attention: <*>
Facsimile: <*>
Attention: <*>
Facsimile: <*>
or to such other address as such party may from time to time notify the others in accordance with
this section 6.1. Any Notice made or given by personal delivery shall be conclusively deemed to
have been given at the time of actual delivery or, if made or given by facsimile, at the opening of
business on the first Business Day following the transmittal thereof. Any notice given by the
Corporation shall bind the Corporation.
6.2 Time of the Essence
Time is and shall remain of the essence of each provision of this Debenture. |
6.3 Governing Law
This Debenture shall be governed by, and interpreted and enforced in accordance with, the laws in
force in the Province of British Columbia and the laws of Canada applicable therein without regard
for principles of conflicts of law. The Corporation irrevocably attorns to the jurisdiction of the
courts in the Province of British Columbia with respect to matters arising out of this Debenture.
6.4 Entire Agreement
There are no representations, warranties, conditions, covenants, other Agreements or
acknowledgments, whether direct or collateral, express or implied, that form part of or affect
this Debenture or the subject matter hereof, other than as expressed herein and other than as may
be expressed in the Subscription Agreement or any other written Agreement entered into between
the Corporation and the Holder contemporaneously herewith. The execution of this Debenture has
not been induced by, nor does the Corporation rely upon or regard as material, any
representations, warranties, conditions, covenants, other Agreements or acknowledgments not
expressly made in this Debenture or in the Subscription Agreement or in any other written
Agreements to be delivered pursuant thereto or contemporaneously herewith.
- 18 -
6.5 Severability
If any provision of this Debenture is determined to be invalid or unenforceable by a court of
competent jurisdiction from which no further appeal lies or is taken, that provision shall be
deemed to be severed herefrom and the remaining provisions of this Debenture shall not be affected
thereby and shall remain valid and enforceable.
6.6 Currency
All dollar amounts referred to herein are in Canadian dollars.
6.7 Amendment
This Debenture may only be amended, supplemented or otherwise modified by an Agreement signed by
the Corporation and the Holder.
6.8 Binding Effect
This Debenture shall enure to the benefit of the Holder and their respective successors and
assigns and any subsequent holder of this Debenture and shall be binding on the Corporation, its
legal representatives (including receivers, managers, receivers and managers and trustees) and its
successors.
6.9 Language
The parties to this Debenture have expressly required that this Debenture and all documents and
notices relating hereto be drafted in English. Les parties aux présentes ont expressément exigé
que la présente convention et tous les documents et avis qui y sont afférents soient rédigés en
anglais.
6.10 Debenture Lost or Stolen
If this Debenture is mutilated, lost, stolen or destroyed, the Corporation shall, upon being
furnished with evidence satisfactory to it of such mutilation, loss, theft or destruction, issue
and deliver a new Debenture of like date and tenor as the one mutilated, lost, stolen or
destroyed, in exchange for, in place of and upon cancellation of the mutilated Debenture, or in
lieu of or in substitution for the lost, stolen or destroyed Debenture.
6.11 Maximum Payments
Nothing continued herein shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges herewith exceed the maximum permitted
by such law, any payments in excess of such maximum shall be credited against amounts owed by the
Corporation to the Holder and thus refunded to the Corporation.
- 19 -
6.12 Further Assurances
At the Corporation’s cost and expense, upon request of the Holder, duly execute and deliver or
cause to be duly executed and delivered to the Holder such further instruments and do and cause
to be done such further acts as may be necessary or proper in the reasonable opinion of the Holder
to carry out more effectually the provisions and purposes of this Debenture.
(The remainder of this page has intentionally been left blank.)
- 20 -
In Witness Whereof, the Corporation has caused this Debenture to be duly signed and
sealed as a deed and specialty obligation as of (notwithstanding any different execution date
set out in any registrations forms attached hereto) the date set out at the commencement of this
Debenture.
Signed, Sealed and Delivered by the
Corporation, by its indicated signatory, in the presence of: |
) | WEX Pharmaceuticals Inc. by its authorized signatory: |
||||
| ) ) |
||||||
| ) | ||||||
Witness |
) | |||||
| ) | ||||||
Address |
) | (C/S) | ||||
| ) | ||||||
| ) |
- 21 -
Schedule “A”
Definitions
“Advance” means the Initial Advance or a Subsequent Advance.
“Agreement” means any agreement, oral or written, any simple contract or specialty, and any
indenture, instrument, xxxx of exchange or undertaking, including any lease.
“Applicable Laws” means (a) any domestic or foreign statute, law (including common and civil law),
treaty, code, ordinance, rule, regulation, restriction or by-law(zoning or otherwise); (b) any
judgement, order, writ, injunction, decision, ruling, decree or award; (c) any regulatory policy,
practice, guideline or directive; or (d) any franchise, licence, qualification, authorization,
consent, exemption, waiver, right, permit or other approval of any Governmental Authority, binding
on or affecting the Person referred to in the context in which the term is used or binding on or
affecting the property of such Person, in each case whether or not having the force of law other
than U.S. securities laws.
“Bankruptcy Event” means, with respect to any Person, that such Person does not pay or perform its
obligations generally as they become due or admits its inability to pay or perform its debts
generally, that such Person commits an act of bankruptcy within the meaning of the Bankruptcy and
Insolvency Act (Canada), any Bankruptcy Proceeding is instituted by or against that Person
(excluding any Bankruptcy Proceeding being contested by that Person in good faith by appropriate
proceedings so long as enforcement remains stayed, none of the relief sought is granted (either on
an interim or permanent basis) and such Bankruptcy Proceeding is dismissed within 30 days of its
commencement), or that Person takes corporate action to authorize any of the actions set forth
above in this definition.
“Bankruptcy Proceeding” means, with respect to any Person, any proceeding contemplated by any
application, petition, assignment, filing of notice or other means, whether voluntary or
involuntary and whether or not under the Bankruptcy and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other
like, equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or other like or
similar relief in respect of any or all of the obligations of that Person, seeking the winding up,
liquidation or dissolution of that Person or all or any part of its Business Assets, seeking any
Award declaring, finding or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation of law, in the
bankruptcy of that Person.
“Business Day” means a day on which banks are generally open for commercial lending and foreign
exchange business in Xxxxxxxxx xxx Xxxxxxx, Xxxxxx, which is not a Saturday or a Sunday.
“Business Plan” means, for any fiscal year, (a) forecast of expenditures, for the current fiscal
year and each of the next two following fiscal years prepared on a consolidated basis supported
by appropriate explanations, notes and information and commentary on key assumptions, and (b)
budget including the details of any capital expenditure in excess of $20,000.00 (including the
nature and type of such capital expenditure) to be made by the Corporation or its Subsidiaries
during such fiscal year all as approved by the Corporation’s Board of Directors and the Holder,
which approval will not be unreasonably withheld. The current approved Business Plan for 2007 and
2008 is set out in Schedule “C” to the Subscription Agreement.
“Canadian Dollars”, “CAD” and
“$” each means dollars which are the lawful currency of Canada.
“Capital Reorganization” has the meaning ascribed to it in section 5.7.
“Cap Prices” means collectively the Minimum Price and the Maximum Price.
“Change of Control” means an offer is made to purchase outstanding voting shares of the
Corporation and is accepted by a sufficient number of holders of such voting shares to constitute
the offeror a shareholder of the Corporation being entitled to exercise more than 50% of the
voting rights attached to the voting shares (provided that prior to the offer, the offeror was not
entitled to exercise more than 50% of the voting rights attached to the outstanding voting
shares).
“Common Share” means, subject to the provisions of Article 5, common shares without par value in
the capital of the Corporation as such common shares exist at the close of business on the date of
any determination or common shares resulting from a subdivision or consolidation thereof, or from
successive subdivisions or consolidations, in any case without other change or reclassification.
“Common Share Reorganization” has the meaning ascribed to it in section 5.6.
“Compliance Certificate” means a certificate concerning compliance by the Corporation with its
representations, warranties and covenants as set forth in the Subscription Agreement and the
Debenture, substantially in the form of a certificate attached hereto as Schedule “B”.
“Conversion Date” has the meaning ascribed to it in section 5.3.
“Conversion Notice” has the meaning ascribed to it in section 5.3.
“Conversion Price” means the Current Market Price of the Common Shares less 30%, subject to a
minimum of the Minimum Price and a maximum of the Maximum Price.
“Corporation” means WEX Pharmaceuticals Inc.
“Current Market Price” means an amount equal to the volume weighted average trading price of the
Common Shares, calculated by dividing the total value by the total volume of the Common Shares
traded on the Exchange for the last five trading days on which a trade in the Common Shares took
place prior to the relevant notice date or the Extended Maturity Date, or for each trading day
from the prior six month period prior to the Maturity Date in the event of conversion on the
Maturity Date, or if the Common Shares are not listed on the Exchange on the date the
determination is to be made, on such stock exchange on which the Common Shares are listed as may
be selected for such purpose by the directors or, if the Common Shares are not listed on any stock exchange, a price determined by the directors and approved by an independent,
qualified investment dealer who is a member of the Exchange and who is jointly selected by the
Corporation and the Holder for that purpose.
- 2 -
“Debenture” means this convertible debenture and all schedules and other attachments attached
hereto, and all references to “hereto”, “herein”, “hereof, “hereby” and “hereunder”, and to
similar expressions, refer to this Debenture and not to any particular section or portion of it.
References to “Article”, “section”, “paragraph” or “Schedule” refer to the applicable article,
section, paragraph or schedule of this Debenture, as the case may be. References to the
“commencement of this Debenture” refer to the page of this Debenture, which contains the beginning
of Article 1.
“Default” means any of the events set out in section 4.1.
“Default Interest Rate” means the rate of LIBOR plus eight percent per annum.
“Disclosure Schedule” has the meaning set forth in the Subscription Agreement.
“Exchange” means the Toronto Stock Exchange.
“Expiry Date” has the meaning set forth in section 5.6(a).
“Extended Maturity Date” means the date that is two years after the Maturity Date.
“GAAP” means generally accepted accounting principles from time to time approved by the Canadian
Institute of Chartered Accountants, or any successor institute, including those set out in the
Handbook of the Canadian Institute of Chartered Accountants.
“Governmental Body” means any international tribunal, agency, body, commission or other authority,
any government, executive, parliament, legislature or local authority, or any governmental body,
ministry, department or agency or regulatory authority, court, tribunal, commission or board of or
within Canada or any foreign jurisdiction, or any political subdivision of any thereof or any
authority having jurisdiction therein other than the United States Securities and Exchange
Commission.
“Grid” means the grid set forth in Schedule “C”.
“Holder” means the Holder as defined above and shall also include any assignee of or successor to
the rights of the Holder and any purchaser of this Debenture from the Holder or from any current holder hereof.
“including” means including without limitation and shall not be construed to limit any word or
statement which it follows to the specific or similar items or matters immediately following it,
and “include” and “includes” shall be construed in like manner.
“Initial Advance” means the Advance by the Holder to the Corporation on the Issue Date in the
principal amount of $2,000,000.
- 3 -
“Interest Price” means the Interest Share Market Price of the Common Shares less 30%, subject to a
minimum of the Minimum Price and a maximum of the Minimum Price and the Maximum Price.
“Interest Share Market Price” means an amount equal to the volume weighted average trading price
of the Common Shares, calculated by dividing the total value by the total volume of the Common
Shares traded on the Exchange for each trading day on which a trade in the Common Shares took
place for the six month period prior to the relevant interest payment date or if the Common Shares
are not listed on the Exchange on the date the determination is to be made, on such stock exchange
on which the Common Shares are listed as may be selected for such purpose by the directors or, if
the Common Shares are not listed on any stock exchange, a price determined by the directors and
approved by an independent, qualified investment dealer who is a member of the Exchange and who is
jointly selected by the Corporation and the Holder for that purpose.
“Issue Date” has the meaning set forth on the first page of this Debenture.
“LIBOR” means, for any particular day, the rate of interest per annum, based on a 360-day year
(rounded up to the nearest 1/16%), for deposits in Canadian dollars for a 30 day interest period
which is quoted on the British Bankers Association LIBOR Rates Telerates Screen as of 11 a.m.
(London time) on the second Business Day before the particular day.
“losses and expenses” means losses, costs, expenses, damages, penalties, causes of action,
actions, judgments, suits, proceedings, claims, claims over, claims for contribution and
indemnity, demands and liabilities, including any applicable court costs and legal fees and
disbursements on a solicitor and client scale, and “loss and expense” shall be construed in like
manner.
“Maturity Date” means the date that is two years after the Issue Date.
“Material Assets” means all intellectual property relevant to the Tectin product; all equipment
necessary for the production of the Tectin product and all related clinical trial data and
research results/records.
“Maximum
Price” means $1.75, as may be adjusted pursuant to the terms hereof.
“Minimum Price” means $0.05, as may be adjusted pursuant to the terms hereof.
“Notice” has the meaning ascribed to it in section 6.1.
“obligations” means indebtedness, obligations, responsibilities, duties and liabilities (actual
or contingent, direct or indirect, matured or not, now existing or arising hereafter), whether
arising by contract or statute, at law, in equity or otherwise, and “obligation” and “obligated”
shall be construed in like manner.
“Offer” means an offer to purchase more than 50% of the outstanding voting shares of the
Corporation.
- 4 -
“Per Share Cost” has the meaning ascribed to it in section 5.6(b)(ii).
“Permitted
Period” means the last three months immediately prior to the Maturity Date and the last six months immediately prior to the Extended Maturity Date.
“Person” means an individual, corporation, estate, partnership, trust, joint venture, other legal
entity, unincorporated association or Governmental Body.
“Plan” means the stock option plan of the Corporation, as amended from time to time.
“Principal Amount” has the meaning set forth in section 2.1.
“Principal Subsidiaries” means IWT Bio Inc., Nanning Maple Leaf Pharmaceutical Co., Ltd., Wex
Medical Corporation and Wex Medical Limited and any other Subsidiaries, that are not inactive or
become not inactive.
“rights” means rights, powers, authorities, discretions, privileges, immunities and remedies
(actual or contingent, direct or indirect, matured or not, now existing or hereafter arising),
whether arising by contract or statute, at law, in equity or otherwise, and “right” shall be
construed in like manner.
“Rights Offering” has the meaning ascribed to it in section 5.6(b)(ii).
“Rights Period” has the meaning ascribed to it in section 5.6(b)(i).
“Special Distribution” has the meaning ascribed to it in section 5.6(c)(iv).
“Subsidiary” has the meaning ascribed to such term in the Canadian Business Corporations Act;
“Subscription
Agreement” means the Subscription Agreement dated for
reference <*month, day>,
2007 among the Corporation and the Holder pursuant to which the Holder has agreed to subscribe
for Common Shares in the capital of the Corporation, all as more particularly described therein.
“Subsequent Advance” means an Advance made by the Holder to the Corporation pursuant to section
2.3.
- 5 -
“successor” of a body corporate shall be construed so as to include:
| 1. | any amalgamated or other corporation of which such body corporate or any of its successors is
one of the amalgamating or merging corporations; |
| 2. | any corporation resulting from any court approved arrangement of which such body corporate or
any of its successors is party; |
| 3. | any corporation resulting from the continuance of such body corporate or any successor of it
under the laws of another jurisdiction of incorporation; |
any successor (determined as aforesaid or in any similar or comparable procedure under the laws of
any other jurisdiction) of any corporation referred to in clauses 1, 2 or 3.
“UOB Termination Agreement” means the termination agreement among the Corporation, WexHK and each
of UOB Venture (Shenzen) Limited, UOB Capital Investments PTE Ltd. and UOB Venture Technology
Investments Ltd. (collectively the “UOB Investors”), dated June 1, 2007.
- 6 -
Schedule “B”
Certificate of Compliance
| To: | [C.K. Life Sciences Int’l Inc.] (the “Holder”) |
| Re: | Convertible Debenture (the
“Debenture”) dated ___________, 2007
between WEX Pharmaceuticals (the “Corporation”) and the Holder |
The undersigned officer of the Corporation, in such capacity and not in any personal capacity
whatsoever, hereby certifies:
I am the duly appointed Chief Financial Officer of the Corporation, and as such I have knowledge
of the business and affairs of the Corporation.
I am providing this certificate in connection with the Debenture and am familiar with and have
examined the Debenture.
The representations and warranties by the Corporation of the Subscription Agreement are true and
correct on the date hereof save for the following updates to the Disclosure Schedule thereto:
<*>
To the best of my knowledge, information and belief, and after due inquiry the Corporation is in
compliance with all requirements of the Business Plan and all of the provisions of the Debenture
that, if not complied with, would, with the giving of notice, lapse of time or otherwise,
constitute a Default.
Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the
Debenture.
Dated
the day of
, 20 .
Name: |
||||
Title: |
||||
Schedule “C”
Grid Schedule
| Date of Advance | ||||||||||||
| or repayment of | Outstanding | |||||||||||
| Principal | Amount of | Amount of | Principal | Interest | Outstanding | |||||||
| Amount | Advance | Repayment | Amount | Price | Interest | Signature | ||||||
SCHEDULE“B”
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE
To be completed by each proposed private placement purchaser of
listed securities or securities which are convertible into listed securities.
listed securities or securities which are convertible into listed securities.
QUESTIONNAIRE
| 1. | DETAILS OF PURCHASER |
| (a) | Name of Subscriber (the “Purchaser”): |
||
| (b) | Address: |
||
| (c) | Names and addresses of persons having a greater than ten percent
beneficial interest in the Purchaser: |
||
| 2. | RELATIONSHIP TO ISSUER |
| (a) | Is the Purchaser (or any person named in response to 1(c) above) an insider of
the Corporation (before giving effect to this private placement)? If so, state the
capacity in which the purchaser (or person named in response to 1(c)) qualifies as an
insider. An insider includes: |
| (i) | a director and officer of the Corporation, of an insider of
the Corporation or a subsidiary of the Corporation; |
||
| (ii) | any person or company that beneficially owns, directly or
indirectly, voting securities of the Corporation or who exercises control or
direction over voting securities of the Corporation, or a combination of both,
carrying more than ten percent of the voting rights attached to all voting
securities of the Corporation; and |
| (iii) | an associate or affiliate of an insider (as defined in the
Toronto Stock Exchange Company Manual). |
| (b) | If the answer to (a) is “no”, are the Purchaser and the Corporation
controlled by the same person or company? If so, give details. |
||
| 3. | DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER |
| (a) | Does the Purchaser own, directly or indirectly, or exercise control or
direction over, common shares of the Corporation, securities convertible into common
shares of the Corporation or other securities of the Corporation? [check appropriate
box] |
o Yes o No |
| (b) | If the response to question 3(a) above is yes, complete the following for
each Subscriber and beneficial purchaser that owns securities of the Corporation:
[check appropriate box] [if insufficient space please attached a schedule] |
o
[name] owns directly or indirectly,
or exercises control or direction over, [number] common shares of
the Corporation. |
|||
o
[name] owns directly or indirectly,
or exercises control or direction over [number] convertible securities
(including warrants and options) entitling
[name] to acquire an additional [number] common shares of the
Corporation. |
|||
o
[name] owns directly or indirectly,
or exercises control or direction over [number] securities (other than
as listed above) of the Corporation. |
| (c) | Will the Purchaser be an insider (as described above) immediately after
the closing of its purchase of the Securities [check appropriate box] |
o Yes o No |
- 2 -
The foregoing representations and warranties are true and accurate as of the date of this
certificate and will be true and accurate as of the Closing Date of the offering of the
Securities as set forth in the attached Subscription Agreement. If any such representation or
warranty shall not be true and accurate prior to Closing Date, the undersigned shall give immediate written
notice of such fact to the Corporation.
Dated:
|
Signed: | |||
| Witness (If Subscriber is an Individual) | Print Name of Subscriber | |||
| Print Name of Witness | If Subscriber is a
Corporation, Print Name and Title of Authorized Signing Officer |
|||
- 3 -
SCHEDULE “C”
USE OF PROCEEDS
The Corporation shall use the Subscription Price and the Debenture Proceeds as set forth in the
attached.
SCHEDULE “D”
DISCLOSURE SCHEDULE
DISCLOSURE SCHEDULE
The section references contained in this Disclosure Schedule correspond to the section references
in this Subscription Agreement. Unless otherwise defined herein, each word and phrase used in this
Disclosure Schedule shall have the respective defined meaning assigned to it in this Subscription
Agreement.
6(a) Subsidiaries
| Jurisdiction of | ||||
| Incorporation/ | Ownership | |||
| Name of Subsidiary | Formation | (direct and indirect) | ||
Acro Pharm Corp. (“Acro”)
|
Barbados | See Note Below | ||
IWT Bio Inc. (“IWT”)
|
Canada | 100% | ||
International WEX Technologies Corp. (“WEX
Delaware”)
|
Delaware | See Note Below | ||
Nanning Maple Leaf Pharmaceutical Co., Ltd.
(“NMLP”)
|
The Peoples Republic of China | 97% — See Note Below | ||
WEX Medical Corporation (“WEX BC”)
|
British Columbia | 100% | ||
Wex Medical Limited (“WexHK”)
|
Hong Kong | 100% |
Joint Ventures, partnerships or similar arrangements
The Corporation entered into a term sheet with Boryung Pharmaceuticals Co., Ltd. on November 12,
2004 with respect to the granting of a license to develop, use and sell Tetrodotoxin in the
Republic or Korea. The Corporation and Boryung Pharmaceuticals Co., Ltd. are in the process of
negotiating a definitive agreement.
The Corporation and Children’s Medical Centre Corporation entered into a term sheet dated July 24,
2006 with respect to the licensing by the Corporation of U.S. patent 6,326,020 B1 and related
intellectual property.
- 4 -
Debentures
Debentures among the Corporation, WexHK and each of UOB Venture (Shenzen) Limited, UOB Capital
Investments PTE Ltd. and UOB Venture Technology Investments Ltd. (collectively the “UOB Investors”)
dated June 14, 2004 (the “Debentures”).
Amended Debentures among the Corporation, WexHK and each of the UOB Investors dated December 22,
2005 (the “Amended Debentures”).
Stock Options
The Corporation has a stock option plan which permits the granting of options to eligible
participants. Pursuant to plan, as amended on June 27, 2006, a maximum of 9,300,000 common
shares are reserved for issuance. As at March 31, 2007, there were 3,967,612 options granted and
outstanding. In relation to the preparation of the March 31, 2007 audited financial statements of
the Corporation, the Corporation is reviewing stock options granted to former employees and it is
anticipated that a number of the stock options granted will be cancelled.
- 5 -
Shares Issued to Tianjin Fairwood Furniture Mfg. Co. Ltd.
The Corporation is seeking an order to rescind the transfer of 2,598,425 common shares in the
capital of the Corporation issued to Tianjin Fairwood Furniture Mfg. Co. Ltd. on the basis that
Tianjin Fairwood Furniture Mfg. Co. Ltd. did not pay any consideration to the Corporation for the
shares.
Shareholder Rights Plan Agreement
There is a shareholder rights plan between the Corporation and CIBC Mellon Trust Company dated July
5, 2005.
6(m) Agreements; Action
Manufacturing and Option Agreement between the Corporation and Sabex 2002 Inc. dated January 4,
2004. The term of this agreement has expired, however the parties are continuing to operate under
the terms of this agreement. The Corporation is reluctant to seek a formal renewal as the terms
will likely be less favourable.
Collaboration Termination Agreement between the Corporation and Laboratorios Del Xx. Xxxxxx, S.A.
dated May 10, 2007.
The Corporation entered into a term sheet with Boryung Pharmaceuticals Co., Ltd. on November 12,
2004 with respect to the granting of a license to develop, use and sell Tetrodotoxin in the
Republic or Korea. The Corporation and Boryung Pharmaceuticals Co., Ltd. are in the process of
negotiating a definitive agreement.
Term Sheet for a License Agreement between Children’s Medical Center Corporation and the
Corporation dated July 24, 2006.
Subscription Agreements among the Corporation, WexHK and each of UOB Investors dated May
18, 2004.
Debentures
among the Corporation, WexHK and each of the UOB Investors dated June 14, 2004.
Amended Subscription Agreements among the Corporation, WexHK and each of the UOB Investors dated
December 22, 2005.
- 6 -
Amended Debentures among the Corporation, WexHK and each of the UOB Investors dated December
22, 2005.
Letter dated November 24, 2006 (the “Letter Agreement”), from each of the UOB Investors
evidencing their agreement not issue a formal default notice with respect to the failure by the
WexHK to make the scheduled repayments under the Amended Debenture, provided that the Corporation
agree to pay twenty percent (20%) of the net proceeds raised from any future financings to the
UOB Investors.
Termination Agreements among the Corporation, WexHK and the UOB Investors dated June 18, 2007
(the “Termination Agreements”).
Exceptions to Agreement Terms
In December 2005, the Corporation finalized negotiations with the UOB Investors and, under the
Amended Debentures, agreed to repay the debentures in a series of instalment payments ending
December 31, 2007.
The Corporation did not make its scheduled instalment payment of $427,520 (US$382,500) on
September 30, 2006. A partial payment was made on October 5, 2006 in the amount of $106,880
(US$95,625) and the remaining agreed amount was revised to $402,372 (US$360,000) from $320,640
(US$286,875) which was paid on November 13, 2006. In the interim, the UOB Investors advised the
Corporation that, because the full September 30, 2006 payment was not made on time, the
Corporation was in default of its obligations under the terms of the Amended Debentures which, in
turn, would make the full amount immediately due and payable. The UOB Investors subsequently
agreed to rescind the default notice subject to payment of the agreed amount.
The Corporation had approached the UOB Investors at the time of the September 30, 2006
instalment becoming due to enter into negotiations to restructure the Amended Debenture terms.
As a consequence of that, the Corporation made only a partial payment of the instalment due on
September 30, 2006 and, following agreement in principle being reached on the restructuring,
subsequently made the balance of the payment, together with an additional amount of $81,732.
- 7 -
On December 1, 2006, the Corporation announced that it concluded negotiations with the UOB
Investors for more flexible repayment terms designed to relieve the Corporation’s current
financial situation. In place of the fixed instalments required, the Corporation has agreed to
pay an amount equal to 20% of the net proceeds received from all future funding events, such as share
subscription proceeds, licensing fees or milestone payments. This arrangement will continue
unless the Corporation fails to make the payments as required or until such time as the UOB
Investors, acting in good faith, determines that the Corporation’s financial position has
strengthened sufficiently to enable it to resume fixed instalment payments, at which time, the
parties shall return to the status pursuant to the Debentures and Amended Debentures and the UOB
Investors will be entitled to exercise all their legal rights.
Pursuant to the Termination Agreements, the Subscription Agreements, the Debentures, the Amended
Subscription Agreements, the Amended Debentures and the Letter Agreement will be terminated if
certain conditions set forth in the Termination Agreements are met.
Collaboration
Termination Agreement between the Corporation and Laboratorios Del Xx. Xxxxxx, S.A.
dated May 10, 2007.
Termination Agreements among the Corporation, WexHK and the UOB Investors dated June 18, 2007.
- 8 -
Licenses and options
The Corporation has granted licenses pursuant to the following agreements:
| • | ||
| • | ||
| • | The Corporation entered into a term sheet with Boryung Pharmaceuticals Co., Ltd. on
November 12, 2004 with respect to the granting of a license to develop, use and sell
Tetrodotoxin in the Republic or Korea. The Corporation and Boryung Pharmaceuticals Co.,
Ltd. are in the process of negotiating a definitive agreement. |
Pursuant to a Manufacturing and Option Agreement between the Corporation and Sabex 2002 Inc. dated
January 4, 2004 the corporation has granted an option in respect to the licensing of Intellectual
Property owned by the Corporation.
The Corporation licenses intellectual property pursuant to a Term Sheet for a License Agreement
between Children’s Medical Center Corporation and the Corporation dated July 24, 2006. The
Corporation expects to license Wex Ref. 900US, however no definitive license agreement has been
executed.
- 9 -
6(r) Environmental Matters
Environmental Permits
NMLP was incorporated in 1994, at that time the local environmental supervision authority in
Nanning did not require the companies incorporated within their jurisdiction to provide any
Environment Appraisal Report.
NMLP and Administrative Committee of Nanning High and New Technology Industry Development Area have
entered into an Agreement regarding the disposal of the waste out of the research and operation
dated as of January 1, 2006, valid until December 31, 2007.
6(s) Compliance with Other Instruments
In December 2005, the Corporation finalized negotiations with the UOB Investors and, under the
Amended Debentures, agreed to repay the debentures in a series of instalment payments ending
December 31, 2007.
The Corporation did not make its scheduled instalment payment of $427,520 (US$382,500) on
September 30, 2006. A partial payment was made on October 5, 2006 in the amount of $106,880
(US$95,625) and the remaining agreed amount was revised to $402,372 (US$360,000) from $320,640
(US$286,875) which was paid on November 13, 2006. In the interim, the UOB Investors advised the
Corporation that, because the full September 30, 2006 payment was not made on time, the
Corporation was in default of its obligations under the terms of the Amended Debentures which, in
turn, would make the full amount immediately due and payable. The UOB Investors subsequently
agreed to rescind the default notice subject to payment of the agreed amount.
The Corporation had approached the UOB Investors at the time of the September 30, 2006 instalment
becoming due to enter into negotiations to restructure the Amended Debenture terms. As a
consequence of that, the Corporation made only a partial payment of the instalment due on
September 30, 2006 and, following agreement in principle being reached on the restructuring,
subsequently made the balance of the payment, together with an additional amount of $81,732.
- 10 -
On December 1, 2006, the Corporation announced that it concluded negotiations with the UOB
Investors for more flexible repayment terms designed to relieve the Corporation’s current financial
situation. In place of the fixed instalments required, the Corporation has agreed to pay an amount
equal to 20% of the net proceeds received from all future funding events, such as share
subscription proceeds, licensing fees or milestone payments. This arrangement will continue unless
the Corporation fails to make the payments as required or until such time as the UOB Investors,
acting in good faith, determines that the Corporation’s financial position has strengthened
sufficiently to enable it to resume fixed instalment payments, at which time, the parties shall
return to the status pursuant to the Debentures and Amended Debentures and the UOB Investors will
be entitled to exercise all their legal rights.
Pursuant to the Termination Agreements, the Subscription Agreements, the Debentures, the Amended
Subscription Agreements, the Amended Debentures and the Letter Agreement will be terminated if
certain conditions set forth in the Termination Agreements are met.
- 11 -
6(v) Compliance with Laws
The Corporation has been subject to United States securities reporting requirements since 1997. The
Corporation has not complied with its reporting obligations in the
United States. The Corporation
is currently in discussions with the United States Securities and Exchange Commission regarding its
non-compliance.
- 12 -
6(x) Full Disclosure
In addition to the matters set out elsewhere in this Subscription Agreement including this
Disclosure Schedule, the following is a list of material facts (as defined in the Securities Act
(Ontario) and hereinafter a “material fact”) known to the Corporation which materially adversely
affects or is reasonably likely to materially adversely affect the business, properties, assets or
financial condition of the Corporation and its Subsidiaries taken as a whole:
NIL
6(bb) Insurance
The
only insurance that the Corporation has in place is D&O Insurance (see Section 6(o) above),
general commercial office insurance and clinical trials insurance as disclosed in the Disclosure
Record. Any renewal of or future insurance will be limited to that permitted in the Business Plan
(as that term is defined in the Convertible Debenture).
- 13 -
SCHEDULE “E”
Canadian Opinion
1. The Corporation is a corporation incorporated and existing under the laws of Canada and has sent
to the Director under the Canada Business Corporations Act all required annual returns.
2. The Corporation is registered as an extra-provincial company under the British Columbia Business
Corporations Act being the only registration of general application to corporations required to
permit it to be qualified to carry on business in the Province of British Columbia.
3. The Corporation has the corporate power and capacity to carry on its business as described in
its annual information form dated <*> and to own, lease and
operate its property and assets.
4. All necessary corporate action has been taken by the Corporation to authorize the execution and
delivery of the Subscription Agreement and Convertible Debenture (collectively the “Transaction
Agreements”) and the performance of the obligations of the Corporation thereunder and the
Transaction Agreements have been duly executed and delivered by the Corporation and each of the
Transaction Agreements constitutes a legal, valid and binding obligation of the Corporation
enforceable against the Corporation in accordance with its terms.
5. The execution and delivery by the Corporation of the Transaction Agreements and the performance
of its obligations contemplated thereunder do not and will not result in the breach of, and do not
create a state of facts which, after notice or lapse of time or both, will result in a breach of
conditions or provisions of the Corporation’s constating documents.
6. As at <*>, the authorized capital of the Corporation consists of an unlimited number of
Common Shares, of which <*> Common Shares are issued and outstanding.
7. All necessary corporate action has been taken by the Corporation to reserve and authorize for
issuance of up to <*> Common Shares pursuant to the Subscription Agreement (the “Offered
Shares”), up to <*> Common Shares to be issued as payment of interest under and in
accordance with the Convertible Debenture (the “Interest Shares”), and up to <*> Common
Shares to be issued upon the conversion of the Convertible Debenture (the “Debenture Shares”).
8. The Offered Shares have been validly issued as fully paid and non-assessable shares in the
capital of the Corporation and the Convertible Debenture has been validly issued by the
Corporation.
9. Upon the issuance of Interest Shares in accordance with the interest payment provision of the
Convertible Debenture, the Interest Shares will be validly issued as fully paid and nonassessable
shares in the capital of the Corporation.
10. Upon the due conversion of the Convertible Debenture in accordance with the conversion
provisions thereof, the Debenture Shares will be validly issued as fully paid and non-assessable
shares in the capital of the Corporation.
11. The distribution of the Offered Shares and Convertible Debenture in the Provinces of
British Columbia and Quebec by the Corporation to the Subscriber is exempt from the
prospectus and dealer registration requirements of the securities laws of the Provinces of British
Columbia and Quebec and no prospectus is required and, except as have been obtained or
completed, no other documents are required to be filed, proceedings taken, or approvals, permits,
consents, orders and authorizations obtained under such securities laws to permit the distribution
to the Subscriber of the Offered Shares and Convertible Debenture. We note that the
Corporation is required to file a Form 45-106F1 with the British Columbia Securities
Commission (the “BCSC”) and the Autorité des Marchés Financiers (Québec) (the “AMF”)
within ten days of the trade together with payment of the prescribed fees in respect thereof and
the filing of a fee checklist. [NTD — assumes the subscriber is an accredited investor]
12. The first trade by the Subscriber of the Offered Shares in the Provinces of British
Columbia, Ontario and Quebec (collectively the “Designated Provinces”), other than a trade
which is otherwise exempt under the securities laws of the Designated Provinces, is a
distribution requiring compliance with the prospectus requirements of such securities laws
unless:
(a) the Corporation is and has been a “reporting issuer” (as such term is defined under applicable
securities laws) in a jurisdiction of Canada for the four months immediately preceding the trade;
(b) at least four months have elapsed from the “distribution date” (as such term is defined in
National Instrument 45-102 — Resale of Securities (“NI 45-102”);
(c) each certificate representing the Offered Shares carries a legend stating:
“Unless permitted under applicable securities legislation, the holder of these securities must not
trade the securities before [Insert 4 months and 1 day from the Distribution Date].”
(d) the trade is not a “control distribution” (as such term is defined in NI 45-102);
(e) no unusual effort is made to prepare the market or to create a demand for the Offered Shares
that are the subject of the trade;
(f) no extraordinary commission or consideration is paid to a person or company in respect of the
trade; and
(g) if the selling security holder is an “insider” or “officer” of the Corporation, the selling
security holder has no reasonable grounds to believe that the Corporation is in default of
“securities legislation” (as each such term is defined in applicable securities laws).
We note, however, that such first trade in the Designated Provinces must be made by or through
registrants duly and properly registered in a category permitting them to trade such securities
under the securities laws of the Designated Provinces who have complied with such securities laws
or in circumstances in which there is an exemption from the registration requirements of such
securities laws.
- 2 -
13. The distribution in the Provinces of British Columbia and Quebec of the Debenture Shares upon
the due conversion of the Convertible Debenture in accordance with the terms thereof, by the
Corporation to the Subscriber will be exempt from the prospectus and dealer registration
requirements of the securities laws of the Provinces of British Columbia and Quebec and no
prospectus will be required nor are other documents required to be filed, proceeding taken or
approval, permit, consents and authorization obtained under such securities laws to permit the
distribution of such Debenture Shares to the Subscriber.
14. The distribution in the Provinces of British Columbia and Quebec of the Interest Shares in
accordance with the interest payment provision of the Convertible Debenture by the Corporation to
the Subscriber will be exempt from the prospectus and dealer registration requirements of the
securities laws of the Provinces of British Columbia and Quebec and no prospectus will be required
nor are other documents required to be filed, proceeding taken or approval, permit, consents and
authorization obtained under such securities laws to permit the distribution of such Interest
Shares to the Subscriber.
15. The first trade by the Subscriber of the Debenture Shares and Interest Shares (collectively
the “Debenture Securities”) in the Designated Provinces, other than a trade which is otherwise
exempt under securities laws of the Designated Provinces, is a distribution requiring compliance
with the prospectus requirements of such securities laws unless:
(a) the Corporation is and has been a “reporting issuer” (as such term is defined under applicable
securities laws) in a jurisdiction of Canada for the four months immediately preceding the trade;
(b) at least four months have elapsed from the “distribution date” (as such term is defined in
NI 45-102);
(c) each certificate representing Debenture Securities, if issued before <*>, carries a
legend stating:
“Unless permitted under applicable securities legislation, the holder of these securities must not
trade the securities before [Insert 4 months and 1 day from the Distribution Date].”
(d) the trade is not a “control distribution” (as such term is defined in NI 45-102);
(e) no unusual effort is made to prepare the market or to create a demand for the Debenture
Securities that are the subject of the trade;
(f) no extraordinary commission or consideration is paid to a person or company in respect of the
trade; and
(g) if the selling security holder is an “insider” or “officer” of the Corporation, the selling
security holder has no reasonable grounds to believe that the Corporation is in default of
“securities legislation” (as each such term is defined in applicable securities laws).
We note, however, that such first trade in the Designated Provinces must be made by or through
registrants duly and properly registered in a category permitting them to trade such securities
under the securities laws of the Designated Provinces who have complied with such securities laws
or in circumstances in which there is an exemption from the registration requirements of such
securities laws.
- 3 -
16. The first trade by the Subscriber in the Offered Shares or Debenture Securities (collectively,
the “Securities”) in the Designated Provinces that is a “control distribution”, other than a trade
which is otherwise exempt under the securities laws of the Designated Provinces, is a distribution
requiring compliance with the prospectus requirements, unless
(a) the Corporation is and has been a reporting issuer in a jurisdiction of Canada for the four
months immediately preceding the trade;
(b) the Subscriber has held the Securities for at least four months;
(c) no unusual effort is made to prepare the market or to create a demand for the Security that is
the subject of the trade;
(d) no extraordinary commission or consideration is paid to a person or company in respect of the
trade;
(e) the Subscriber has no reasonable grounds to believe that the Corporation is in default of
securities legislation; and
(f) the Subscriber:
(i) signs a Form 45-102F1 no earlier than one business day before the form is filed;
(ii) files a Form 45-102F1 on SEDAR at least seven days before the first trade of the securities
that is part of the distribution;
(iii) files, within three days after the completion of any trade, an insider report prepared in
accordance with either Form
55-102F2 or Form 55-102F6 under the National Instrument 55-102 System
for Electronic Disclosure by Insiders (SEDI); and
(iv) the first trade in the Securities occurs within thirty days from the date the signed Form
45-102F1 was filed in respect of such Securities.
We note, however, that such first trade in the Designated Provinces must be made by or through
registrants duly and properly registered in a category permitting them to trade such securities
under the securities laws of the Designated Provinces who have complied with such securities laws
or in circumstances in which there is an exemption from the registration requirements of such
securities laws.
17. The Corporation is a reporting issuer as defined under the securities laws of the Province of
British Columbia.
18. The Securities have been conditionally listed for trading on the TSX, subject to the standard
listing conditions.
- 4 -
19. The CIBC Mellon Trust Company at its principal offices in the City of Vancouver has been duly
appointed the transfer agent and registrar for the Common Shares of the Corporation.
The foregoing opinions will be given by Canadian Counsel to the Corporation and will be limited to
the laws of the Province of British Columbia and the federal laws applicable therein except for the
opinions in paragraph 11, 13 and 14 which will be limited to the laws of the Provinces of British
Columbia and Quebec and the federal laws applicable therein and except for paragraphs 12, 15, 16
and 17 which are limited to the laws of the Designated Provinces and the federal laws applicable
therein and shall be subject to the usual qualifications and assumptions. Counsel to the
Corporation may rely, as to matters of fact on certificates and other documents of officers of the
Corporation, the auditors, the registrar and transfer agent of the Corporation and certificates and
other documents of public officials and the TSX. In particular, such counsel shall be entitled to
rely, as to the opinion expressed in paragraphs 1 and 2 above, upon certificates of status (or the
equivalents thereof) and on such other corporate and public records as such counsel shall
reasonably deem necessary. Such counsel shall also be entitled to rely, as to the opinion expressed
in paragraph 18 above on TSX correspondence, in paragraph 17 above on TSX correspondence and orders
of the BCSC and AMF, and in paragraph 6 above insofar as it relates to the Corporation’s issued
capital, upon a certificate of the Corporation’s registrar and transfer agent.
- 5 -
SCHEDULE “F”
Scope of Opinion
| 1. | Interest of Nanning Maple Leaf Pharmaceutical Co., Ltd. (“Subsidiary”), owned by WEX
Pharmaceuticals Inc. |
|
| 1.1 | Incorporation and History |
|
| 1.1.1 | Opinions on the legality and validity of establishment and existence of the Subsidiary,
including without limitations to whether the company has duly obtained all the required
certificates and government approvals for conducting its business; |
|
| 1.1.2 | Opinions on the legality and validity of the relevant changes to the Subsidiary=; and |
|
| 1.1.3 | Opinions on the current ownership of the Subsidiary. |
|
| 1.2 | Legality of Business |
|
| 1.2.1 | Current business scope and term of operation of the Subsidiary; and |
|
| 1.2.2 | Opinions on the completeness and validity of all licenses, permits and certificates and the
legality of business operation of the Subsidiary. |
|
| 1.3 | Production Facilities |
|
| 1.3.1 | Opinions on the ownership and mortgage in relation to the major production facilities being
used by the Subsidiary; and |
|
| 1.3.2 | Opinions on the procedures for the establishment of the major production facilities being used and to be used by the Subsidiary. |
|
| 1.4 | Real Property |
|
| 1.4.1 | Opinions on the legality and validity of the leasehold in relation to the real property
leased by the Subsidiary. |
|
| 1.5 | Intellectual Property |
|
| 1.5.1 | Opinions on the legality and validity of the intellectual property used or granted by the
Subsidiary. |
|
| 1.6 | Loans and Guarantees |
|
| 1.6.1 | Opinions on the legality and validity of the loans made to and security interests provided
by or for the Subsidiary. |
|
| 1.7 | Taxes |
|
| 1.7.1 | Taxes and rates applicable to the Subsidiary; |
| 1.7.2 | Favorable tax policies and tax exemptions enjoyed by the Subsidiary; and |
|
| 1.7.3 | Opinions on the legality and validity of favorable tax policies and tax exemptions enjoyed
by the Subsidiary. |
|
| 1.8 | Material Contracts |
|
| 1.8.1 | Opinions on the performance by the Subsidiary in relation to the material contracts. |
|
| 1.9 | Related Party Transactions |
|
| 1.9.1 | Opinions on the legality and validity of the related party transactions. |
|
| 1.10 | Labor Relationship |
|
| 1.10.1 | Opinions on the legality of the labor relationship in relation to the Subsidiary. |
|
| 1.11 | Environmental |
|
| 1.11.1 | Opinions on the Subsidiary’ compliance with environmental protection regulations. |
|
| 1.12 | Litigation and Arbitration |
|
| 1.12.1 | Status of action, suit, proceedings or investigations pending or currently threatened
against the Subsidiary, if any; and |
|
| 1.12.2 | Possible influence of such action, suit, proceedings or investigations on the transaction,
the assets and business of the Subsidiary, if any. |
- 2 -
AMENDING AGREEMENT
THIS AMENDING AGREEMENT is made the 14th day of August, 2007
BETWEEN:
(hereinafter referred to as the “Corporation”)
AND:
CK LIFE SCIENCES INT’L., INC.
(hereinafter referred to as the “Subscriber”)
WHEREAS the Corporation and the Subscriber entered into an agreement (the “Subscription
Agreement”) made the 15th day of July, 2007;
AND WHEREAS the Corporation and the Subscriber wish to amend certain provisions of the
Subscription Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the
agreements herein contained, it is mutually declared, covenanted and agreed by and between the
parties as follows:
| 1. | The Subscription Agreement is hereby amended by replacing “320,000,000” with
“312,000,000” in Section 6(c), Section 10(a)(i) and Section 10(a)(viii)”. |
| 2. | The Subscription Agreement is hereby amended by replacing “September 10, 2007” in
Section 6(hh) with “September 28, 2007”, by changing the Subscriber’s right to appoint
directors in prescribed circumstances to a right to elect directors in the same prescribed
circumstances and by clarifying that the Subscribers right to appoint officers in
prescribed circumstances is a right to designate such officers in the same prescribed
circumstances who will then be appointed by the board of directors of the Corporation, so
that Section 6(hh) will read as follows: |
| “(hh) | Management. The Corporation covenants and agrees that so long as
(1) the Convertible Debenture or any portion thereof (including accrued interest)
remains outstanding or (2) the Subscriber beneficially owns or controls, directly or indirectly, 10%
or more of the outstanding common shares of the Corporation: |
| (i) | the Subscriber will have the right to elect the number of directors (the “Designees”) as is
determined by the following formula: |
| total number of common shares issued and held by the Subscriber on the date of election | X
|
number of sitting directors | ||
| total number of common shares issued and outstanding in the capital of the Corporation on the date of election |
rounded up to the nearest whole number (less, for greater certainty, the number of
directors appointed or nominated for or elected by the Subscriber who are currently
sitting) to a maximum of one half of the number of sitting directors; |
|||
| (ii) | the Corporation and its Board of Directors will not appoint or dismiss the Chairman, the
Vice-Chairman if applicable, or the Chairman of the Audit Committee without the prior
approval of the Subscriber; |
||
| (iii) | the Corporation acknowledges and agrees that one of the Subscriber’s representatives on
the Board of Directors is to fill the position of Chairman of the Board of Directors; |
||
| (iv) | subject to applicable law, the Subscriber shall be entitled to designate the Chief
Executive Officer, the Chief Financial Officer and the Chief Scientific Officer of the
Corporation (collectively, the “Designated Officers”) and the Chairman of NMLP and the
Board of Directors of the Corporation shall appoint the Designated Officers as so
designated by the Subscriber from time to time (and for greater certainty shall terminate
an incumbent Designated Officer if directed to do so by the Subscriber). |
As of the execution of this Subscription Agreement by the parties hereto, two nominees (the
“Nominees”) of the Subscriber shall be appointed to the Board of Directors of the Corporation,
which shall thereby be increased from seven to nine on an interim basis, until the next annual
meeting of shareholders of the Corporation, which the Corporation agrees to call and hold as
soon as possible, and in any event no later than September 28, 2007 (the “2007 Annual Meeting”)
and the Corporation will cause the Nominees to be named in the Corporation’s information
circular and proxy materials as proposed nominees for election as directors of the Corporation
at such meeting and the Board of Directors shall request that the shareholders fix the number of
directors at seven and shall nominate the Nominees. The Subscriber agrees that if Closing does
not occur, the Nominees will resign from the Board of Directors of the Corporation and the
Subscriber shall provide executed resignations from the Nominees upon the signing of this
Subscription Agreement reflecting such agreement.
- 2 -
The Corporation’s obligations set forth in this Section 6(hh) with respect
to the Nominees, Designees and the Designated Officers are subject to (i) the
Subscriber’s Nominees, Designees and Designated Officers meeting the requirements
of all applicable securities and corporate legislation, regulations and policies
for officers and directors, including those relating to residency requirements and
proper consents to act in such capacity are provided to the Corporation prior to
the time of the election or designation; (ii) that if the rights set out above
arise out of rights attached to a preference share issued by the Corporation that
the Subscriber holds such preference share in the capital of the Corporation and
(iii) the Subscriber providing the Corporation notice of the names and other
information required by applicable securities and corporate law of the Nominees
within 5 business days of being requested in writing to do so by the Corporation,
which request shall not be less than 40 days in advance of the 2007 Annual Meeting
at which Nominees are to be elected. The Subscriber acknowledges that members of
the Corporation’s Audit Committee must be “independent” and “financially literate”
within the meaning of Multilateral Instrument 52-110 — Audit Committees.
The Subscriber acknowledges that the Corporation shall be required to amend its
constating documents to provide the Subscriber with the right to elect the directors
and designate the officers as set out above and that shareholder approval will be
required. As set out in Section 10(a), there will be a condition of Closing in
favour of the Subscriber that the constating documents of the Corporation be amended
as necessary in order to provide for the rights relating to the election of
directors and the designation and appointment of officers as provided for in Section
6(hh).”
| 3. | The Subscription Agreement is hereby amended by changing the Subscriber’s right to
appoint directors in prescribed circumstances to a right to elect directors in the same
prescribed circumstances and by clarifying that the Subscribers right to appoint officers
in prescribed circumstances is a right to designate such officers in the same prescribed
circumstances who will then be appointed by the board of directors of the Corporation, so
that Section 10(a)(ii) will read as follows: |
| “(ii) | the constating documents of the Corporation shall have been amended in a form
satisfactory to the Subscriber, acting reasonably, as necessary to grant the
Subscriber the rights relating to the election of directors and the designation and
appointment of officers set out in Section 6(hh);” |
| 4. | The Subscription Agreement is hereby amended by deleting the word “and” at the end of
Section 6(ii)(x), replacing the period at the end of Section 6(xi) with “; and” and adding a new Section 6(ii)(xii) which reads as follows: |
| 5. | “(xii) | the Corporation will list on the TSX prior to their issuance all common shares to
be issued in payment of interest on the Convertible Debenture”. |
- 3 -
| 6. | The Subscription Agreement is hereby amended by changing the Subscriber’s right to
appoint directors in prescribed circumstances to a right to elect directors in the same
prescribed circumstances and by clarifying that the Subscribers right to appoint officers
in prescribed circumstances is a right to designate such officers in the same prescribed
circumstances who will then be appointed by the board of directors of the Corporation, so
that Section 10(a)(xiv) will read as follows: |
| “(xiv) | all necessary regulatory and shareholder approvals with respect to the sale of the
Securities and the amendment of the constating documents of the Corporation to provide
for the rights relating to the election of directors and the designation and
appointment of officers described in Section 6(hh) above, shall have been obtained;” |
| 7. | The Subscription Agreement is hereby amended by changing the Subscriber’s right to
appoint directors in prescribed circumstances to a right to elect directors in the same
prescribed circumstances and by clarifying that the Subscribers right to appoint officers
in prescribed circumstances is a right to designate such officers in the same prescribed
circumstances who will then be appointed by the board of directors of the Corporation, so
that Section 10(b)(ii) will read as follows: |
| “(ii) | all necessary regulatory, stock exchange and shareholder approvals with
respect to the sale of the Securities and the amendment of the constating documents of
the Corporation to provide for the rights relating to the election of directors and
the designation and appointment of officers described in Section 6(hh) above, shall
have been obtained;” |
| 8. | The Subscription Agreement is hereby amended by replacing the word “Subscriber” with
the word “Corporation” in the first line of the second paragraph of Section 7 so that the
first sentence of this paragraph will read as follows: |
|
“Further, the Corporation acknowledges and agrees that such representations, warranties and
covenants of the Corporation were made with the intent that they be relied upon by the
Subscriber and the Corporation hereby agrees to indemnify the Subscriber against all
losses, claims, costs, expenses and damages or liabilities which the Subscriber may suffer
or incur, caused or arising from reliance thereon.” |
||
| 9. | The Subscription Agreement is hereby amended by replacing “August 30, 2007” in
Section 11 with “September 18, 2007”. |
|
| 10. | The Subscription Agreement is hereby amended by adding a new paragraph to the end of
Section 23 which reads as follows: |
|
“Any reference to common shares of the Corporation in this Subscription Agreement shall be
to the common shares without par value in the capital of the Corporation as the same may be
redesignated from time to time.” |
- 4 -
| 11. | The Subscription Agreement is hereby amended by replacing the Convertible Debenture
set out in Schedule A to the Subscription Agreement with the revised form of Convertible
Debenture attached hereto as Schedule A. |
|
| 12. | The Subscription Agreement, as amended hereby, shall continue in full force and effect,
unamended. |
|
| 13. | All capitalized terms not herein defined shall have the meanings ascribed thereto in the
Subscription Agreement. |
IN WITNESS WHEREOF the parties have executed this Amending Agreement on the date first above
written.
| WEX PHARMACEUTICALS INC. |
||||
| By: | “Edge Wang” | |||
| Edge Wang | ||||
| President and Chief Executive Officer | ||||
| CK LIFE SCIENCES INT’L., INC. |
||||
| By: | “Xxxxx Mo” | |||
- 5 -
Schedule A
Form of Convertible Debenture
(See Attached)
- 6 -
Unless permitted under securities legislation, the holder of these securities shall not
trade the securities before <*>, 2007.
Convertible Debenture
Wex Pharmaceuticals Inc.
incorporated under the laws of Canada
This Debenture is issued as of and dated for reference the <*> day of <*>,
2007 (the “Issue Date”) by Wex Pharmaceuticals Inc. (the “Corporation”), whose chief
executive office is located at 0000-000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0,
to and in favour of [C.K. Life Sciences Int’l., Inc.] [NTD: Identity of Holder to be
confirmed prior to Closing.] (the “Holder”), a company registered in the [British Virgin Islands
and having an office at 2 Dai Fu Street, Tai Po Industrial Park, Hong Kong.]
For
valuable consideration (the receipt and sufficiency of which are hereby conclusively
acknowledged), the Corporation covenants, agrees, acknowledges, represents and warrants to and in
favour of the Holder as follows:
ARTICLE 1
Interpretation
Interpretation
1.1 Definitions
Each word and phrase defined in Schedule “A” is used in this Debenture (whether with or without
initial capitals) with the respective defined meaning assigned to it in Schedule “A”.
| 1.2 | Statutes |
A reference in this Debenture to a statute refers to that statute as it may be amended from time
to time, and to any restated or successor legislation of comparable effect.
| 1.3 | Agreements |
Each reference in this Debenture to any Agreement (including this Debenture, the Subscription
Agreement and any other defined term that is an Agreement) shall be construed so as to mean such
Agreement (including any attached schedules, appendices and exhibits) as amended, supplemented,
and otherwise modified from time to time and each amendment and restatement, novation and
replacement of it from time to time.
| 1.4 | Successors |
Each reference in this Debenture to any body corporate (including any party hereto) shall be
construed so as to include such body corporate and its successors, both immediate and derivative,
to the extent the context so admits.
| 1.5 | Subdivisions and Headings |
The division of this Debenture into Articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the construction or
interpretation of this Debenture.
| 1.6 | Number and Gender |
In this Debenture, words (including defined terms) in the singular include the plural and
vice-versa (the necessary changes being made to fit the context) and words in one gender include
all genders.
ARTICLE 2
Promise to Pay
Promise to Pay
| 2.1 | Promise to Pay |
For value received, the Corporation hereby promises to pay to or to the order of the Holder, on the
Maturity Date, or on such earlier date as the principal moneys may become payable in accordance
with the terms hereof, a principal sum (the “Principal Amount”) equal to the sum of the Initial
Advance and all Subsequent Advances which aggregate principal amount shall not exceed Fifteen
Million Six Hundred Thousand Canadian Dollars (Cdn.$15,600,000) at the office of the Holder
described at the commencement of this Debenture, or at such other place as the Holder may designate
from time to time by notice to the Corporation, and shall pay interest thereon accrued from the
date of advance until the Principal Amount is repaid, subject to sections 4.4 and 6.1, at the rate
of LIBOR, plus four percent per annum. The interest rate will be established, in advance,
initially, on the Issue Date, and thereafter, semi-annually on each Payment Date. Interest will
accrue daily, both before and after maturity, default or judgment, together with interest on
overdue interest at the Default Interest Rate. Interest shall be calculated and paid (but not
compounded) on September 30, 2007 and thereafter semi-annually on March 31st and
September 30th of each year (each such date being a “Payment Date”), or otherwise upon Default by
way of the issuance of Common Shares at the Interest Price in effect at the date of the interest
payment. The Common Shares will be issued to the Holder within three business days of the earlier
of the date specified in a written notice delivered by the Holder to the Corporation, the Maturity
Date or in the event a certificate is delivered to the Holder pursuant to section 5.2, the Extended
Maturity Date and a Default (unless waived by the Holder with respect to a Default). For greater
certainty the first interest payment will be for the period commencing on the date hereof and
ending on September 30, 2007. The foregoing payments are to be made in accordance with the terms of
this Debenture.
| 2.2 | Initial Advance |
The Initial Advance will be made by the Holder to the Corporation on the Issue Date.
- 2 -
| 2.3 | Subsequent Advances |
The Holder shall make Subsequent Advances to the Corporation on the seventh day following the end
of each financial quarter specified below in the respective amount specified below:
| Quarter End | Amount of Subsequent Advance | |||
December 31, 2007 |
$ | 1,500,000 | ||
March 31, 2008 |
$ | 2,000,000 | ||
June 30, 2008 |
$ | 2,000,000 | ||
September 30, 2008 |
$ | 2,000,000 | ||
December 31, 2008 |
$ | 2,000,000 | ||
March 31, 2009 |
$ | 4,100,000 | ||
provided that:
| (a) | the Corporation delivers to the Holder a written request specifying the amount
of the Subsequent Advance at least 20 days before the date of the Subsequent
Advance as well as a Compliance Certificate which provides, inter alia, that the
Corporation is in compliance with the Business Plan; |
||
| (b) | the representations, warranties and covenants of the Holder set forth herein
and in the Subscription Agreement are true and correct on and as of such date, all as
though made on and as of such date (other than changes identified in the
Compliance Certificate which do not constitute a Default hereunder); |
||
| (c) | no event or condition has occurred and is continuing or would result from such
Subsequent Advance which would constitute a Default; |
||
| (d) | such Subsequent Advance will not violate any Applicable Law then in effect; and |
||
| (e) | in the event of a rights offering or other financing by the Corporation, the
Holder reserves the right to adjust the amount of Subsequent Advances (including
reduction thereof) and/or the times of payment set out above. If a change of
Subsequent Advances is necessary, the Holder and the Corporation shall by
mutual agreement determine the amount and timing of Subsequent Advances and
any resulting change to the Business Plan or the Use of Proceeds in Schedule “C”
to the Subscription Agreement. |
In the event that any of these conditions are not satisfied, the Holder shall have no obligation to
make a Subsequent Advance.
- 3 -
| 2.4 | Grid |
The Corporation hereby appoints the Holder as its duly authorized agent to record on the Grid:
| (a) | any and all Advances made by the Holder to the Corporation; and |
||
| (b) | all payments made by the Corporation on account of the Principal Amount
outstanding from time to time under this Debenture, and to adjust the balance of
the Principal Amount owing under this Debenture by the Corporation to the
Holder from time to time to reflect payments made by the Corporation. The
Principal Amount outstanding from time to time under this Debenture as
evidenced on the Grid shall, absent manifest error, constitute presumptive
evidence thereof; provided that notwithstanding the state of the Grid, the failure
of the Holder to record any amounts owing hereunder on the Grid shall not affect
the obligation of the Corporation to pay to the Holder the amounts due and
payable by the Corporation hereunder. |
ARTICLE 3
Covenants
Covenants
| 3.1 | Positive Covenants |
The Corporation agrees with the Holder, until the date the Principal Amount and any accrued and
unpaid interest thereon have been paid, the Corporation will:
| (a) | at all times preserve and maintain its corporate existence and that of its
Principal Subsidiaries; |
||
| (b) | duly and punctually pay the principal amount and any accrued and unpaid
interest thereon and all other monies required to be paid to the Holder pursuant to this
Debenture in the manner set forth herein; |
||
| (c) | duly observe and perform each and every one of its covenants and agreements set
forth in this Debenture and the Subscription Agreement; |
||
| (d) | ensure that all Common Shares that shall be issued in payment of interest or
upon the full or partial conversion of this Debenture, shall be fully-paid and non
assessable; |
||
| (e) | fulfill all the obligations of securities legislation, rules, regulations and
policies in those Canadian jurisdictions in which it is a reporting issuer; |
||
| (f) | maintain its status as a reporting issuer not in default in those Canadian jurisdictions in which it is currently a reporting issuer; |
||
| (g) | fulfill all its contractual obligations with the Exchange and all other
Canadian regulatory bodies; |
- 4 -
| (h) | ensure that all Common Shares outstanding and issued from time to time
(including, without limitation, up to 312,000,000 Common Shares (subject to adjustment as
herein provided) to be issued on the full or partial conversion of this Debenture and all of
the Common Shares to be issued in payment of interest under this Debenture) continue to be or
are listed and posted for trading on the Exchange; |
||
| (i) | maintain, repair, and use its assets (including, without limitation, the Material Assets)
and conduct its business in a prudent, proper and efficient manner consistent with good
business practices and in accordance with the Business Plan so as to preserve and protect its
assets and the earnings, incomes and profits of the Corporation; |
||
| (j) | keep proper records and books of account in accordance with GAAP; |
||
| (k) | pay all taxes when due, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves under GAAP have been established; |
||
| (l) | at all times maintain insurance by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the businesses and
markets in which the Corporation and Subsidiaries are engaged, including, but not limited to,
directors’ and officers’ insurance coverage, all as more particularly provided in the
Subscription Agreement; |
||
| (m) | duly comply with all requirements of any Governmental Body and all Applicable Laws
applicable to the Corporation and the Subsidiaries; |
||
| (n) | will forthwith upon becoming aware of the occurrence of a Default, provide the Holder with
immediate notice thereof; |
||
| (o) | provided the Corporation receives the Initial Advance and other than with respect to (i)
below has received any Subsequent Advance that has become payable from time to time in
accordance with section 2.3, the Corporation will pay on demand any and all reasonable costs,
charges and expenses, including any legal costs incurred by the Holder on the basis as between
a solicitor and his own client, of and incidental to: |
| (i) | the negotiation and preparation of this Debenture, the Subscription
Agreement and associated matters in accordance with and subject to the Subscription
Agreement; |
||
| (ii) | any matter the Corporation asks the Holder to consider in connection with
this Debenture after the grant of this Debenture; |
||
| (iii) | the Holder’s performance of any covenant in this Debenture; |
- 5 -
| (iv) | any default by the Corporation; and |
||
| (v) | any steps or proceedings taken under this Debenture or otherwise by reason
of non-payment or procuring payment of the monies payable under the Debenture, and
|
||
all such costs, charges and expenses will bear interest at the rate aforesaid from the date
of the Holder incurring or being charged the same; |
|||
| (p) | pay all reasonable expenses of any nominees of the Holder appointed or elected to the board
of directors of the Corporation reasonably incurred in attending at meetings of the board of
directors or any committees thereof; |
|
| (q) | in the event the Holder elects at any time not to have a nominee on the board of directors of
the Corporation, give notice to the Holder of all meetings of the board of directors of the
Corporation to permit a representative of the Holder to attend any Board meetings of the
Corporation as an observer. The reasonable expenses of the observer will be paid in the same
manner as the expenses of the Holder’s nominees on the board of directors of the Corporation; |
|
| (r) | if so requested by the Holder, take all necessary steps to indemnify the Holder’s nominee
director in accordance with the applicable law and the constating documents of the
Corporation; |
|
| (s) | send to the Holder by both e-mail and regular mail: |
| (i) | quarterly unaudited consolidated financial statements of the Corporation and
related management discussion and analysis to the Holder within 45 days after the end
of each fiscal quarter; |
||
| (ii) | annual audited consolidated financial statements of the Corporation within
90 days of the end of each fiscal year; |
||
| (iii) | copies of all reports, financial statements and any other documents sent to
the Corporation’s shareholders; |
||
| (iv) | a copy of the Business Plan within 15 days of approval by the board of
directors of the Corporation; |
||
| (v) | monthly management accounts, which include profit and loss, balance sheet
and cash flow variance analysis in the same format as Schedule “C” to the
Subscription Agreement, and management comments on adherence to or deviation from the
Business Plan within 20 days of the end of each month; and |
- 6 -
| (vi) | a Compliance Certificate within 45 days in respect of the first, second
and third financial quarters and within 90 days in respect of the fourth
financial quarter. |
| (t) | provide any other financial information relating to the Corporation and the
Subsidiaries reasonably requested by the Holder; |
|
| (u) | promptly inform the Holder of the full particulars if a material change
(actual, anticipated or threatened) or any change in a material fact occurs in the
affairs of the Corporation or any of the Principal Subsidiaries; |
|
| (v) | ensure that the Corporation and each of its Principal Subsidiaries will keep
in good standing all requisite licences, approvals, consents, agreements and
authorizations necessary to enable the Corporation and its Principal Subsidiaries to
conduct operations, (it being understood that certain non-material licenses,
approvals, consents, agreements and authorizations will be permitted to lapse); |
|
| (w) | promptly provide the Holder with written notice of any material litigation; |
|
| (x) | use the Principal Amount only for the purposes specified in the Business Plan;
and |
|
| (y) | at: |
| (i) | any reasonable time or times and upon reasonable prior notice,
permit the Holder to visit the properties of any of the Corporation or the
Subsidiaries, and to discuss the affairs, finances and accounts of the
Corporation or the Subsidiaries with executive management including the
officers appointed as (or performing the functions of) the chief executive
officer and chief financial officer thereof; and |
||
| (ii) | at least quarterly, permit the Holder to meet with the
Corporation’s chief financial officer for the purpose of reviewing the affairs,
finances and accounts of the Corporation or the Subsidiaries. |
| 3.2 | Negative Covenants |
Subject to section 3.3, without the prior written consent of the Holder or unless permitted
pursuant to the Business Plan, the Corporation shall not and shall not permit any Subsidiary, to:
| (a) | change the nature of its business or do any act or thing that would materially
adversely affect its business, property, prospects or financial condition; |
||
| (b) | except in relation to the Plan or this Debenture, issue any securities or any
options, warrants or securities convertible into shares or re-price any existing
options; |
- 7 -
| (c) | except in the ordinary course of business for amounts not exceeding $500,000 and
subject to the UOB Termination Agreements, borrow, create, incur, assume or
suffer to exist any indebtedness; |
||
| (d) | sell, lease, assign, transfer, license or otherwise dispose of all or substantially all
of its assets or any of its Material Assets; |
||
| (e) | redeem or repurchase shares, pay or declare dividends (or any other return of
capital); |
||
| (f) | utilize the Principal Amount save as provided in the Business Plan including its
use to purchase or acquire the securities of any person, pay dividends or return
capital to its shareholders; |
||
| (g) | guarantee the indebtedness of any Person other than its Subsidiaries; |
||
| (h) | enter into any transaction (whether by way of reconstruction, reorganization, consolidation,
amalgamation, winding-up, merger, transfer, sale, lease or otherwise) whereby all or any
substantial part of its undertaking or assets would become the property of any other Person; |
||
| (i) | enter into any partnership, joint venture or similar agreement or arrangement; |
||
| (j) | permit, dispose of or allow to lapse any intellectual property rights necessary to enable
the Corporation and the Subsidiaries to conduct operations (including, without limitation,
those associated with the Material Assets) or breach any representations, warranties and
covenants associated with such intellectual property rights as set forth in the Subscription
Agreement (it being understood that certain non-material intellectual property rights will be
permitted to lapse); |
||
| (k) | except in the ordinary course of business and subject to the UOB Termination Agreements,
create, incur, assume, suffer to exist, permit or grant a security interest, lien or
encumbrance on its assets; |
||
| (l) | amend its constating documents; |
||
| (m) | allow any of their respective outstanding securities to be pledged or transferred; |
||
| (n) | purchase or acquire any fixed assets with a value of greater than $20,000; |
||
| (o) | hire or employ staff with an annual salary greater than $100,000 or hire or employ staff
such that the total number exceeds by more than two persons the total headcount for the
applicable time period as set forth in the Business Plan, it being understood that the
foregoing is intended to cover new employees rather than the promotion or salary increases of
existing employees; |
- 8 -
| (p) | enter into any contract or agreement concerning the Material Assets or in an
amount that is greater than $20,000, other than in the latter case, those relating to
the normal operations of the business; or |
||
| (q) | any of the Corporation, WEX Medical Limited or Nanning Maple Leaf
Pharmaceuticals Co. Ltd. exceed by more than 10% in any quarter or on an annual basis
its expense budget as set out in the Business Plan. |
| 3.3 | Financings |
Notwithstanding any provisions herein, the negative covenants contained in sections 3.2(b) and (c)
do not apply to financings during the Permitted Periods so long as:
| (a) | the financings are subject to the right of first refusal, as applicable, in
favour of the Holder as set out in Section 6(ii)(ix) of the Subscription Agreement; |
||
| (b) | the proceeds of any debt financings are subordinated to the indebtedness of the
Corporation to the Holder; |
||
| (c) | the proceeds of such financings during the last three months immediately prior
to the Maturity Date will be utilized in the ordinary course of the Corporation’s
business for operating expenses, consistent with the Business Plan and the amount
shall not exceed more than a reasonable amount required for 24 months of
operating expenses; and |
||
| (d) | the proceeds of such financings during the last six months immediately prior to
the Extended Maturity Date will be utilized first to repay any indebtedness of the
Corporation to the Holder with the balance to be utilized in the ordinary course of
the Corporation’s business for operating expenses, consistent with the Business
Plan. |
ARTICLE 4
Default
Default
| 4.1 | Events of Default |
Each of the following events constitutes a Default:
| (a) | the failure of the Corporation to pay the principal amount due under this
Debenture on the due date thereof or to pay any other amounts due under this
Debenture within three Business Days of the due date thereof; |
||
| (b) | if the Corporation fails to keep, observe or perform any of the covenants set
forth in sections 3.2(d), 3.2(h), 3.2(i), 3.2(m), 3.2(p) or 3.2(q); |
||
| (c) | if any of the representations and warranties in the Subscription Agreement or
the Debenture are not true as at the time such representation or warranty was made; |
- 9 -
| (d) | save for the failure to pay amounts due under this Debenture or the covenants
referred to in section 4.l(b), if the Corporation fails to keep, observe or perform
any covenants, agreements, terms, conditions or provisions contained in this
Debenture or the Subscription Agreement and such default continues until the
later of the expiry of 30 days from the date of receipt of notice from the Holder to
remedy such default; |
||
| (e) | in the event of a Change of Control or a Capital Reorganization; |
||
| (f) | if the Board of Directors of the Corporation fail in any fiscal year to approve a
Business Plan for the forthcoming fiscal year; |
||
| (g) | in the event a cease trade order or Exchange trading suspension of the Common
Shares shall be in effect for five consecutive trading days (excluding a suspension of all trading on the Exchange). |
||
| (h) | a Bankruptcy Event with respect to the Corporation occurs; |
||
| (i) | any garnishment order or other equivalent process is issued or levied against the
Corporation or a Subsidiary to recover payment of any amount exceeding $100,000 owing by the
Corporation; |
||
| (j) | any failure of the Corporation or a Subsidiary to pay indebtedness exceeding $100,000 at the
stated maturity thereof or as a result of which, the creditor may declare the principal
thereof to be due and payable prior to the stated maturity thereof, or any event shall occur
and shall continue after the applicable grace period (if any) specified in any agreement or
instrument relating to any such debt, the effect of which is to permit the holder of such
debt to declare the principal amount thereof to be due and payable prior to its stated
maturity; |
||
| (k) | all or any material part of the assets of the Corporation or any Subsidiaries are executed,
sequestered or distrained upon and such execution, sequestration or distraint: |
| (i) | relates to claims in the aggregate in excess of $100,000; and |
||
| (ii) | the Corporation or such Subsidiary does not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution thereof (by
reason of pending appeal or otherwise), within 30 days from the date of entry thereof;
and |
| (l) | final judgement for the payment of money in the aggregate in excess of $100,000 in excess of
applicable insurance shall be rendered by a court of competent jurisdiction against the
Corporation or any Subsidiary and the Corporation or such Subsidiary does not discharge same
or provide for its discharge in accordance with its terms, or procure a stay of execution
thereof (by reason of a pending appeal or otherwise), within 30 days from the date of entry
thereof; |
- 10 -
The occurrence of a Default shall be deemed to constitute a default by the Corporation of
its obligations under this Debenture.
| 4.2 | Effect of Default |
Upon the occurrence of a Default, the Principal Amount, any accrued and unpaid interest thereon
and any other monies owing to the Holder under this Debenture will immediately become payable.
Upon the occurrence of a Default and at any time thereafter, the Holder may exercise all or any of
the rights and remedies available to the Holder, whether available under this Debenture or
available at law or in equity, including, without limitation, its rights pursuant to section 5.3.
| 4.3 | Default Interest Rate |
Following the occurrence and during the continuance of a Default, the Corporation shall pay
interest in an amount calculated on the basis of the Default Interest Rate and all outstanding
obligations under this Debenture, including unpaid interest, shall continue to accrue interest at
that rate from the date of Default and until such Default is cured or waived.
| 4.4 | Waiver |
The Holder may waive any Default or any breach by the Corporation of any of the provisions of this
Debenture. No waiver, however, shall be deemed to extend to a subsequent breach or Default, whether
or not the same as or similar to the breach or Default waived, and no act or omission by the Holder
shall extend to, or be taken in any manner whatsoever to affect, any subsequent breach or Default
or the rights of the Holder arising therefrom. Any such waiver must be in writing and signed by the
Holder to be effective. No failure on the part of the Holder to exercise, and no delay by the
Holder in exercising, any right under this Debenture 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.
ARTICLE 5
Conversion of Debenture
Conversion of Debenture
| 5.1 | Conversion Privilege and Conversion Price |
Subject to and upon compliance with the provisions of this Article 5, on or after the Maturity
Date or after the occurrence of a Default or in the event of an Offer, this Debenture or any
portion of the Principal Amount outstanding as of the Conversion Date (as defined below) may, at
the option of the Holder, be converted into fully paid and non-assessable Common Shares at the
Conversion Price in effect on the Conversion Date.
- 11 -
| 5.2 | Extended Maturity Date |
In the event the Corporation delivers on or before the Maturity Date a certificate executed by the
Corporation’s Chief Executive Officer and Chief Financial Officer certifying that the
Corporation will be unable to repay the Principal Amount on the Maturity Date, then subject
to the provisions contained in section 5.1 and 5.3 and provided there has not occurred a Default,
the Principal Amount will be payable on the Extended Maturity Date. For greater certainty, the
Holder’s right to convert the Principal Amount on or after the Maturity Date or after the
occurrence of a Default or in the event of an Offer shall continue in full force and effect
regardless of the delivery of the certificate described in the previous sentence.
| 5.3 | Conversion Procedure |
In order to exercise the conversion right granted pursuant to section 5.1, the Holder must deliver
to the Corporation at its principal office in Vancouver, British Columbia (or the registered office
of the Corporation if it no longer has its principal office in Vancouver, British Columbia) a
written notice signed by the Holder (a “Conversion Notice”) stating that the Holder elects to
convert this Debenture, or a stated portion of the Principal Amount thereof to Common Shares. Such
Conversion Notice will be deemed to constitute a contract between the Holder and the Corporation
whereby:
| (a) | the Holder subscribes for the number of Common Shares that it will be entitled
to receive on such conversion; |
||
| (b) | the Holder releases the Corporation from all liability thereon or from all
liability with respect to that portion of the Principal Amount thereof to be converted, as
the case may be; and |
||
| (c) | the Corporation agrees that the delivery of such Conversion Notice constitutes
full payment of the subscription price for the Common Shares issuable upon such
conversion. |
In the case of a conversion pursuant to section 5.1, the date of receipt by the Corporation of a
Conversion Notice is herein referred to as the “Conversion Date”.
As promptly as practicable after the Conversion Date, the Corporation will issue or cause to be
issued and deliver or cause to be delivered to the Holder a certificate in the name of the Holder
for the number of Common Shares deliverable upon the conversion of such Debenture (or specified
portion of the Principal Amount thereof to be converted) and provision will be made for payment in
money in respect of any fraction of a Common Share as provided in section 5.5. Such conversion will
be deemed to have been effected immediately prior to the close of business on the Conversion Date
and at such time the rights of the Holder, either as holder of this Debenture or as holder of that
portion of the Principal Amount of this Debenture to be converted, as the case may be, will cease
and the Holder will be deemed to have become on such date the holder of record of the Common
Shares; provided, however, that no such conversion on any date when the transfer registers for
Common Shares of the Corporation are closed will be effective to constitute the Holder to be
entitled to receive the Common Shares upon such conversion as the holder of record of such Common
Shares on such date, but such conversion will be effective to constitute the Holder to be entitled
to receive such Common Shares as the holder of record thereof for all purposes on the next succeeding Business Day on which such transfer
registers are open.
- 12 -
The Corporation will pay to the Holder, by way of the issuance of Common Shares issued
concurrently with the certificates for the Common Shares issuable on conversion pursuant to
section 5.1, the amount of any interest accrued up to the Conversion Date on the Debenture or that
portion of the Principal Amount to be converted, as the case may be.
5.4 Effect of Conversion
The issuance of Common Shares to the Holder on conversion of this Debenture will constitute full
repayment of the Principal Amount. The Holder hereby agrees to surrender this Debenture in
exchange for the share certificate issued by the Corporation to the Holder in respect of such
conversion.
5.5 No Fractional Shares
Notwithstanding anything herein contained, the Corporation will not be required to issue
fractional Common Shares in payment of interest or upon the conversion of the Debenture in whole
or in part. If any fractional interest in a Common Share would, except for the provisions of this
section 5.5, be deliverable in payment of interest or upon the conversion of this Debenture, the
Corporation will adjust such fractional interest by paying to the Holder an amount equal to the
fractional interest.
5.6 Adjustment of Cap Prices
The Cap Prices (and the number of Common Shares issuable upon exercise of the conversion rights
and the obligations set forth hereunder) are subject to adjustment from time to time in the events
and in the manner provided as follows:
| (a) | If and whenever at any time after the date hereof and prior to the repayment
of the Principal Amount and all accrued interest and/or conversion thereof into Common
Shares (the “Expiry Date”), the Corporation: |
| (i) | issues to all or substantially all the holders of Common
Shares by way of a stock dividend or otherwise Common Shares or securities
exchangeable for or convertible into Common Shares other than a dividend paid
in the ordinary course, or |
||
| (ii) | subdivides its outstanding Common Shares into a greater number
of shares, or |
||
| (iii) | consolidates or combines its outstanding Common Shares into a
smaller number of shares, |
- 13 -
(any of such events being called a “Common Share Reorganization”), then the Cap
Prices will be adjusted effective immediately after the effective date or record
date for the happening of a Common Share Reorganization, as the case may be, at which the
holders of Common Shares are determined for the purpose of the Common Share
Reorganization, by multiplying the Cap Prices in effect immediately prior to such
effective date or record date by a fraction, the numerator of which is the number of
Common Shares outstanding on such effective date or record date before giving effect to
such Common Share Reorganization and the denominator of which is the number of common
shares outstanding immediately after giving effect to such Common Share Reorganization
(including, in the case where securities exchangeable for or convertible into common
shares are distributed, the number of Common Shares that would have been outstanding had
all such securities been exchanged for or converted into Common Shares on such effective
date or record date). |
| (b) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation, fixes a record date for the issue of rights, options or warrants to the holders
of all or substantially all of its outstanding Common Shares under which such holders are
entitled to subscribe for or purchase Common Shares or securities exchangeable for or
convertible into Common Shares, where: |
| (i) | the right to subscribe for or purchase Common Shares, or the right to
exchange securities for or convert securities into Common Shares expires not more
than 45 days after the date of such issue (the period from the record date to the
date of expiry being in this section 5.6 called the “Rights Period”), and |
| (ii) | the cost per Common Share during the Rights Period (inclusive of any cost or
acquisition of securities exchangeable for or convertible into Common Shares in
addition to any direct cost of Common Shares) (in this section 5.6 called the “Per
Share Cost”) is less than 95% of the Current Market Price of the Common Shares on the
record date, |
||
(any of such events being called a “Rights Offering”), then the Cap Price will be
adjusted effective immediately after the end of the Rights Period to a price
determined by multiplying the Cap Prices in effect immediately prior to the end of
the Rights Period by a fraction: |
| (A) | the numerator of which is the aggregate of: |
| (1) | the number of Common Shares outstanding as
of the record date for the Rights Offering, and |
| (2) | a number determined by dividing the
product of the Per Share Cost and: |
| (I) | where the event giving rise to the application of this
subparagraph (2) was the issue of rights, options or
warrants to the holders of Common Shares under which such
holders are entitled to subscribe for or purchase
additional Common Shares, the number of Common Shares so
subscribed for or purchased during the Rights Period, or |
- 14 -
| (II) | where the event giving
rise to the application of this subparagraph (2) was the
issue of rights, options or warrants to the holders of
Common Shares under which such holders are entitled to
subscribe for or purchase securities exchangeable for or
convertible into Common Shares, the number of Common Shares
for which those securities could have been exchanged or into
which they could have been converted during the Rights
Period; |
by the Current Market Price of the Common Shares as of the record
date for the Rights Offering; and |
| (B) | the denominator of which is: |
| (1) | in the case described above subparagraph
(A)(2)(I), the number of Common Shares outstanding, or |
| (2) | in the case described above subparagraph
(A)(2)(II), the number of Common Shares that would be outstanding if
all the Common Shares described in subparagraph (A)(2)(II) had been
issued, |
as at the end of the Rights Period. |
Any Common Shares owned by or held for the account of the Corporation or any
subsidiary (as defined in the Securities Act (British Columbia)) of the
Corporation will be deemed not to be outstanding for the purpose of any such
computation. |
| (c) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation fixes a record date for the issue or the distribution to the holders of all or
substantially all its Common Shares: |
| (i) | shares of the Corporation of any class other than Common Shares; |
| (ii) | rights, options or warrants to acquire shares or securities exchangeable for
or convertible into shares or property or other assets of the Corporation (other than
rights, options or warrants to purchase Common Shares exercisable within 45 days of
the record date at a price per Common Share equal to or greater than 95% of the then
Current Market Price); |
- 15 -
| (iii) | evidences of indebtedness, or |
| (iv) | any property or other assets; |
and if such issuance or distribution does not constitute a Common Share
Reorganization or a Rights Offering or dividend paid in the ordinary course
(any of such non-excluded events being called a “Special Distribution”),
the Cap Prices will be adjusted effective immediately after such record
date to a price determined by multiplying the Cap Price, in effect on such
record date by a fraction: |
| (A) | the numerator of which is: |
| (1) | the product of the number of
Common Shares outstanding on such record date and the Current
Market Price of the Common Shares on such record date, less |
| (2) | the amount by which the
aggregate fair market value (as determined by action by the
directors of the Corporation) to the holders of the Common
Shares of such securities or property or other assets so issued
or distributed in the Special Distribution exceeds the fair
market value (as determined by action of the directors of the
Corporation) of the consideration, if any, received
therefor by the Corporation, and |
| (B) | the denominator of which is the number of
Common Shares outstanding on such record date multiplied by the
Current Market Price of the Common Shares on such record date. |
Any Common Shares owned by or held for the account of the Corporation or any subsidiary (as
defined in the Securities Act (British Columbia)) of the Corporation will be deemed not to be
outstanding for the purpose of any such computation.
No adjustment in a Cap Price is required to be made unless such adjustment would result in a
change of at least one percent in the prevailing Cap Price, provided, however, that any
adjustments which, except for the provisions of this sentence, would otherwise have been required
to be made, will be carried forward and take into account in any subsequent adjustment.
If the Corporation sets a record date to determine the holders of the Common Shares for the
purpose of entitling them to receive any dividend or distribution or sets a record date to take
any other action and, thereafter and before the distribution to such shareholders of any such
dividend or distribution or the taking of any other action, decides not to implement its plan to
pay or deliver such dividend or distribution or take such other act, then no adjustment in the Cap
Prices will be required by reason of the setting of such record date.
- 16 -
In the absence of a resolution of the directors of the Corporation fixing a record date for a
Special Distribution or Rights Offering, the Corporation will be deemed to have fixed as the
record date therefor the date on which the Special Distribution or Rights Offering is effected.
5.7 Adjustments for Capital Reorganization
If and whenever at any time after the date hereof and prior to the Expiry Date, there is a
reclassification of the Common Shares outstanding at any time or change of the Common Shares into
other shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation, reverse take-over or merger of the Corporation with or into any other
corporation or other entity (other than a consolidation, amalgamation or merger which does not
result in any reclassification of the outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets of the Corporation as an entirety
or substantially as an entirety to another corporation or other entity (any of such events being
called a “Capital Reorganization”), and notice to convert is given after the effective date of
such Capital Reorganization, the Holder will be entitled to receive, and must accept for the same
aggregate consideration in lieu of the number of Common Shares to which it was theretofore
entitled upon such subscription, the aggregate number of shares, other securities or other
property which it would have been entitled to receive as a result of such Capital Reorganization
if, on the effective date thereof, it had been the registered holder of the number of Common
Shares to which such holder was theretofore if conversion had occurred on that date. Appropriate
adjustments will be made as a result of any such Capital Reorganization in the application of the
provisions set forth in this section 5.7 with respect to the rights and interests thereafter of
holders of Debentures to the end that the provisions set forth in this section 5.7 will thereafter
correspondingly be made applicable as nearly as may reasonably be in relation to any shares
thereafter deliverable upon conversion. Any such adjustment must be made by and set forth in an
agreement supplemental hereto. As a condition precedent to taking any action that would constitute
a Capital Reorganization, the Corporation will take all action necessary, in the opinion of
counsel, in order that the provisions of this section be effected.
5.8 Disputes
If at any time a dispute arises with respect to adjustments provided for in sections 5.6 and 5.7
such dispute will be conclusively determined by the auditors of the Corporation or if they are
unable or unwilling to act, by such other firm of independent chartered accountants as may be
selected by action by the directors of the Corporation and the Holder and any such determination
will be binding upon the Corporation and the Holder and the Corporation will provide such auditors
or accountants with access to all necessary records of the Corporation.
- 17 -
ARTICLE 6
General
General
6.1 Notices
Any notice, demand, consent, approval or other communication to be made or given under or in
connection with this Debenture (a “Notice”) shall be in writing and may be made or given by
personal delivery or by facsimile addressed to the respective parties as follows:
To the Corporation:
WEX Pharmaceuticals Inc.
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
To the Holder:
[C.K. Life Sciences Int’l., Inc.]
Attention: <*>
Facsimile: <*>
Attention: <*>
Facsimile: <*>
or to such other address as such party may from time to time notify the others in accordance with
this section 6.1. Any Notice made or given by personal delivery shall be conclusively deemed to
have been given at the time of actual delivery or, if made or given by facsimile, at the opening
of business on the first Business Day following the transmittal thereof. Any notice given by the
Corporation shall bind the Corporation.
6.2 Time of the Essence
Time is and shall remain of the essence of each provision of this Debenture.
6.3 Governing Law
This Debenture shall be governed by, and interpreted and enforced in accordance with, the laws in
force in the Province of British Columbia and the laws of Canada applicable therein without regard
for principles of conflicts of law. The Corporation irrevocably attorns to the jurisdiction of the
courts in the Province of British Columbia with respect to matters arising out of this Debenture.
6.4 Entire Agreement
There are no representations, warranties, conditions, covenants, other Agreements or
acknowledgments, whether direct or collateral, express or implied, that form part of or affect
this Debenture or the subject matter hereof, other than as expressed herein and other than as may
be expressed in the Subscription Agreement or any other written Agreement entered into between
the Corporation and the Holder contemporaneously herewith. The execution of this Debenture has not
been induced by, nor does the Corporation rely upon or regard as material, any representations,
warranties, conditions, covenants, other Agreements or acknowledgments not expressly made in this
Debenture or in the Subscription Agreement or in any other written Agreements to be delivered
pursuant thereto or contemporaneously herewith.
- 18 -
6.5 Severability
If any provision of this Debenture is determined to be invalid or unenforceable by a court of
competent jurisdiction from which no further appeal lies or is taken, that provision shall be
deemed to be severed herefrom and the remaining provisions of this Debenture shall not be affected
thereby and shall remain valid and enforceable.
6.6 Currency
All dollar amounts referred to herein are in Canadian dollars.
6.7 Amendment
This Debenture may only be amended, supplemented or otherwise modified by an Agreement signed by
the Corporation and the Holder.
6.8 Binding Effect
This Debenture shall enure to the benefit of the Holder and their respective successors and
assigns and any subsequent holder of this Debenture and shall be binding on the Corporation, its
legal representatives (including receivers, managers, receivers and managers and trustees) and its
successors.
6.9 Language
The parties to this Debenture have expressly required that this Debenture and all documents and
notices relating hereto be drafted in English. Les parties aux
présentes ont expressément exigé
que la présente convention et tous les documents et avis qui y sont afférents soient rédigés en
anglais.
6.10 Debenture Lost or Stolen
If this Debenture is mutilated, lost, stolen or destroyed, the Corporation shall, upon being
furnished with evidence satisfactory to it of such mutilation, loss, theft or destruction, issue
and deliver a new Debenture of like date and tenor as the one mutilated, lost, stolen or
destroyed, in exchange for, in place of and upon cancellation of the mutilated Debenture, or in
lieu of or in substitution for the lost, stolen or destroyed Debenture.
- 19 -
6.11 Maximum Payments
Nothing continued herein shall be deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges herewith exceed the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts owed by the
Corporation to the Holder and thus refunded to the Corporation.
6.12 Further Assurances
At the Corporation’s cost and expense, upon request of the Holder, the Corporation shall duly
execute and deliver or cause to be duly executed and delivered to the Holder such further
instruments and do and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Holder to carry out more effectually the provisions and purposes of this
Debenture.
In Witness Whereof, the Corporation has caused this Debenture to be duly signed and
sealed as a deed and specialty obligation as of (notwithstanding any different execution date set
out in any registrations forms attached hereto) the date set out at the commencement of this
Debenture.
| WEX Pharmaceuticals Inc. | ||||
| by its authorized signatory: | ||||
| (C/S) | ||||
- 20 -
Schedule “A”
Definitions
“Advance” means the Initial Advance or a Subsequent Advance.
“Agreement” means any agreement, oral or written, any simple contract or specialty, and any
indenture, instrument, xxxx of exchange or undertaking, including any lease.
“Applicable Laws” means (a) any domestic or foreign statute, law (including common and civil law),
treaty, code, ordinance, rule, regulation, restriction or by-law(zoning or otherwise); (b) any
judgement, order, writ, injunction, decision, ruling, decree or award; (c) any regulatory policy,
practice, guideline or directive; or (d) any franchise, licence, qualification, authorization,
consent, exemption, waiver, right, permit or other approval of any Governmental Body, binding on
or affecting the Person referred to in the context in which the term is used or binding on or
affecting the property of such Person, in each case whether or not having the force of law other
than U.S. securities laws.
“Bankruptcy Event” means, with respect to any Person, that such Person does not pay or perform its
obligations generally as they become due or admits its inability to pay or perform its debts
generally, that such Person commits an act of bankruptcy within the meaning of the Bankruptcy and
Insolvency Act (Canada), any Bankruptcy Proceeding is instituted by or against that Person
(excluding any Bankruptcy Proceeding being contested by that Person in good faith by appropriate
proceedings so long as enforcement remains stayed, none of the relief sought is granted (either on
an interim or permanent basis) and such Bankruptcy Proceeding is dismissed within 30 days of its
commencement), or that Person takes corporate action to authorize any of the actions set forth
above in this definition.
“Bankruptcy Proceeding” means, with respect to any Person, any proceeding contemplated by any
application, petition, assignment, filing of notice or other means, whether voluntary or
involuntary and whether or not under the Bankruptcy and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other
like, equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or other like or
similar relief in respect of any or all of the obligations of that Person, seeking the winding up,
liquidation or dissolution of that Person or all or any part of its assets, seeking any award
declaring, finding or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation of law, in the
bankruptcy of that Person.
“Business Day” means a day on which banks are generally open for commercial lending and foreign
exchange business in Xxxxxxxxx xxx Xxxxxxx, Xxxxxx, which is not a Saturday or a Sunday.
“Business Plan” means, for any fiscal year, (a) forecast of expenditures, for the current fiscal
year and each of the next two following fiscal years prepared on a consolidated basis supported by
appropriate explanations, notes and information and commentary on key assumptions, and (b) budget
including the details of any capital expenditure in excess of $20,000.00 (including the
nature and type of such capital expenditure) to be made by the Corporation or its Subsidiaries
during such fiscal year all as approved by the Corporation’s Board of Directors and the Holder,
which approval will not be unreasonably withheld. The current approved Business Plan for 2007 and
2008 is set out in Schedule “C” to the Subscription Agreement.
“Canadian
Dollars”, “CAD” and “$” each means dollars which are the lawful currency of Canada.
“Capital Reorganization” has the meaning ascribed to it in section 5.7.
“Cap Prices” means collectively the Minimum Price and the Maximum Price.
“Change of Control” means an offer is made to purchase outstanding voting shares of the
Corporation and is accepted by a sufficient number of holders of such voting shares to constitute
the offeror a shareholder of the Corporation being entitled to exercise more than 50% of the
voting rights attached to the voting shares (provided that prior to
the offer, the offeror was not
entitled to exercise more than 50% of the voting rights attached to the outstanding voting
shares).
“Common Share” means, subject to the provisions of Article 5, common shares without par value in
the capital of the Corporation (as the same may be redesignated from time to time) as such common
shares exist at the close of business on the date of any determination or common shares resulting
from a subdivision or consolidation thereof, or from successive subdivisions or consolidations, in
any case without other change or reclassification.
“Common Share Reorganization” has the meaning ascribed to it in section 5.6.
“Compliance Certificate” means a certificate concerning compliance by the Corporation with its
representations, warranties and covenants as set forth in the Subscription Agreement and the
Debenture, substantially in the form of a certificate attached hereto as Schedule “B”.
“Conversion Date” has the meaning ascribed to it in section 5.3.
“Conversion Notice” has the meaning ascribed to it in section 5.3.
“Conversion Price” means the Current Market Price of the Common Shares less 30%, subject to a
minimum of the Minimum Price and a maximum of the Maximum Price.
“Corporation” means WEX Pharmaceuticals Inc.
“Current Market Price” means an amount equal to the volume weighted average trading price of the
Common Shares, calculated by dividing the total value by the total volume of the Common Shares
traded on the Exchange for the last five trading days on which a trade in the Common Shares took
place prior to the relevant notice date or the Extended Maturity Date, or for each trading day
from the prior six month period prior to the Maturity Date in the event of conversion on the
Maturity Date, or if the Common Shares are not listed on the Exchange on the date the
determination is to be made, on such stock exchange on which the Common Shares are listed as may
be selected for such purpose by the directors or, if the Common Shares are not
listed on any stock exchange, a price determined by the directors and approved by an independent,
qualified investment dealer who is a member of the Exchange and who is jointly selected by the
Corporation and the Holder for that purpose.
- 2 -
“Debenture” means this convertible debenture and all schedules and other attachments attached
hereto, and all references to “hereto”,
“herein”, “hereof”, “hereby” and “hereunder”, and to
similar expressions, refer to this Debenture and not to any particular section or portion of it.
References to “Article”, “section”, “paragraph” or “Schedule” refer to the applicable article,
section, paragraph or schedule of this Debenture, as the case may be. References to the
“commencement of this Debenture” refer to the page of this Debenture, which contains the beginning
of Article 1.
“Default” means any of the events set out in section 4.1.
“Default Interest Rate” means the rate of LIBOR plus eight percent per annum.
“Disclosure Schedule” has the meaning set forth in the Subscription Agreement.
“Exchange” means the Toronto Stock Exchange.
“Expiry Date” has the meaning set forth in section 5.6(a).
“Extended Maturity Date” means the date that is two years after the Maturity Date.
“GAAP” means generally accepted accounting principles from time to time approved by the Canadian
Institute of Chartered Accountants, or any successor institute, including those set out in the
Handbook of the Canadian Institute of Chartered Accountants.
“Governmental Body” means any international tribunal, agency, body, commission or other authority,
any government, executive, parliament, legislature or local authority, or any governmental body,
ministry, department or agency or regulatory authority, court, tribunal, commission or board of or
within Canada or any foreign jurisdiction, or any political subdivision of any thereof or any
authority having jurisdiction therein other than the United States Securities and Exchange
Commission.
“Grid” means the grid set forth in Schedule “C”.
“Holder” means the Holder as defined above and shall also include any assignee of or successor to
the rights of the Holder and any purchaser of this Debenture from the Holder or from any current
holder hereof.
“including” means including without limitation and shall not be construed to limit any word or
statement which it follows to the specific or similar items or matters immediately following it,
and “include” and “includes” shall be construed in like manner.
“Initial Advance” means the Advance by the Holder to the Corporation on the Issue Date in the
principal amount of $2,000,000.
- 3 -
“Interest Price” means the Interest Share Market Price of the Common Shares less 30%, subject to a
minimum of the Minimum Price and a maximum of the Minimum Price and the Maximum Price.
“Interest Share Market Price” means an amount equal to the volume weighted average trading price
of the Common Shares, calculated by dividing the total value by the total volume of the Common
Shares traded on the Exchange for each trading day on which a trade in the Common Shares took
place for the six month period prior to the relevant interest payment date or if the Common Shares
are not listed on the Exchange on the date the determination is to be made, on such stock exchange
on which the Common Shares are listed as may be selected for such purpose by the directors or, if
the Common Shares are not listed on any stock exchange, a price determined by the directors and
approved by an independent, qualified investment dealer who is a member of the Exchange and who is
jointly selected by the Corporation and the Holder for that purpose.
“Issue Date” has the meaning set forth on the first page of this Debenture.
“LIBOR” means, for the Issue Date and any Payment Date, the rate of interest per annum, based on a
360-day year (rounded up to the nearest 1/16%), for deposits in Canadian dollars for a 6 month
interest period which is quoted on the British Bankers Association LIBOR Rates Telerates Screen as
of 11 a.m. (London time) on the second Business Day before the Issue Date or such Payment Date, as
the case may be.
“losses and expenses” means losses, costs, expenses, damages, penalties, causes of action,
actions, judgments, suits, proceedings, claims, claims over, claims for contribution and
indemnity, demands and liabilities, including any applicable court costs and legal fees and
disbursements on a solicitor and client scale, and “loss and expense” shall be construed in like
manner.
“Maturity Date” means the date that is two years after the Issue Date.
“Material Assets” means all intellectual property relevant to the Tectin product; all equipment
necessary for the production of the Tectin product and all related clinical trial data and
research results/records.
“Maximum Price” means $1.75, as may be adjusted pursuant to the terms hereof.
“Minimum Price” means $0.05, as may be adjusted pursuant to the terms hereof.
“Notice” has the meaning ascribed to it in section 6.1.
“obligations” means indebtedness, obligations, responsibilities, duties and liabilities (actual or
contingent, direct or indirect, matured or not, now existing or arising hereafter), whether
arising by contract or statute, at law, in equity or otherwise, and “obligation” and “obligated”
shall be construed in like manner.
- 4 -
“Offer” means an offer to purchase more than 50% of the outstanding voting shares of the
Corporation.
“Payment Date” has the meaning set forth in section 2.1.
“Per Share Cost” has the meaning ascribed to it in section 5.6(b)(ii).
“Permitted Period” means the last three months immediately prior to the Maturity Date and the last
six months immediately prior to the Extended Maturity Date.
“Person” means an individual, corporation, estate, partnership, trust, joint venture, other legal
entity, unincorporated association or Governmental Body.
“Plan” means the stock option plan of the Corporation, as amended from time to time.
“Principal Amount” has the meaning set forth in section 2.1.
“Principal Subsidiaries” means IWT Bio Inc., Nanning Maple Leaf Pharmaceutical Co., Ltd., WEX
Medical Corporation and WEX Medical Limited and any other Subsidiaries, that are not inactive or
become not inactive.
“rights” means rights, powers, authorities, discretions, privileges, immunities and remedies
(actual or contingent, direct or indirect, matured or not, now existing or hereafter arising),
whether arising by contract or statute, at law, in equity or otherwise, and “right” shall be
construed in like manner.
“Rights Offering” has the meaning ascribed to it in section 5.6(b)(ii).
“Rights Period” has the meaning ascribed to it in section 5.6(b)(i).
“Special Distribution” has the meaning ascribed to it in section 5.6(c)(iv).
“Subsidiary” has the meaning ascribed to such term in the Canadian Business Corporations Act;
“Subscription Agreement” means the Subscription Agreement dated for reference <*month, day>,
2007 among the Corporation and the Holder pursuant to which the Holder has agreed to subscribe for
Common Shares in the capital of the Corporation, all as more particularly described therein.
“Subsequent Advance” means an Advance made by the Holder to the Corporation pursuant to section
2.3.
“successor” of a body corporate shall be construed so as to include:
| 1. | any amalgamated or other corporation of which such body corporate or any of its successors
is one of the amalgamating or merging corporations; |
- 5 -
| 2. | any corporation resulting from any court approved arrangement of which such body
corporate or any of its successors is party; |
| 3. | any corporation resulting from the continuance of such body corporate or any successor of it
under the laws of another jurisdiction of incorporation; |
any successor (determined as aforesaid or in any similar or comparable procedure under the laws of
any other jurisdiction) of any corporation referred to in clauses 1, 2 or 3.
“UOB Termination Agreements” means the termination agreements among the Corporation, WEX Medical
Limited and each of UOB Venture (Shenzen) Limited, UOB Capital Investments PTE Ltd. and UOB
Venture Technology Investments Ltd. (collectively the “UOB Investors”), dated June 18, 2007.
- 6 -
Schedule “B”
Certificate of Compliance
| To: | [C.K. Life Sciences Int’l Inc.] (the “Holder”) |
| Re: | Convertible Debenture (the “Debenture”) dated , 2007
between WEX Pharmaceuticals Inc. (the “Corporation”) and the Holder |
The undersigned officer of the Corporation, in such capacity and not in any personal capacity
whatsoever, hereby certifies:
I am the duly appointed Chief Financial Officer of the Corporation, and as such I have knowledge
of the business and affairs of the Corporation.
I am providing this certificate in connection with the Debenture and am familiar with and have
examined the Debenture.
The representations and warranties by the Corporation of the Subscription Agreement are true and
correct on the date hereof save for the following updates to the Disclosure Schedule thereto:
<*>
To the best of my knowledge, information and belief, and after due inquiry the Corporation is in
compliance with all requirements of the Business Plan and all of the provisions of the Debenture
that, if not complied with, would, with the giving of notice, lapse of time or otherwise,
constitute a Default.
Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the
Debenture.
Dated the day of
, 20 .
Name:
|
|
|||
Title:
|
||||
Schedule
“C”
Grid Schedule
| Date of Advance | Outstanding | |||||||||||||||||||||||
| or repayment of | Amount of | Amount of | Principal | Interest | Outstanding | |||||||||||||||||||
| Principal Amount | Advance | Repayment | Amount | Price | Interest | Signature | ||||||||||||||||||
SECOND AMENDING AGREEMENT
THIS
AMENDING AGREEMENT is made the 15th day of October, 2007
BETWEEN:
WEX PHARMACEUTICALS INC.
(hereinafter referred to as the “Corporation”)
AND:
CK LIFE SCIENCES INT’L., INC.
(hereinafter referred to as the “Subscriber”)
WHEREAS the Corporation and the Subscriber entered into an agreement (the “Subscription
Agreement”) made the 15th day of July, 2007, as amended the 14th day of August, 2007;
AND WHEREAS the Corporation and the Subscriber wish to amend certain provisions of the
Subscription Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the
agreements herein contained, it is mutually declared, covenanted and agreed by and between the
parties as follows:
| 1. | The Subscription Agreement is hereby amended by replacing the Use of Proceeds set out
in Schedule C to the Subscription Agreement with the revised Use of Proceeds attached
hereto as Schedule A. |
|
| 2. | The Subscription Agreement, as amended hereby, shall continue in full force and effect,
unamended. |
|
| 3. | All capitalized terms not herein defined shall have the meanings ascribed thereto in the
Subscription Agreement. |
IN WITNESS WHEREOF the parties have executed this Amending Agreement on the date first above
written.
| WEX PHARMACEUTICALS INC. | ||||||
| By: | “Edge Wang” | |||||
| President and Chief Executive Officer | ||||||
| CK LIFE SCIENCES INT’L., INC. | ||||||
| By: | “Xxxx Xx” | |||||
- 2 -
Schedule A
Use of Proceeds
(See Attached)
- 3 -
Unless permitted under securities legislation, the holder of these securities shall not trade
the securities before February 17, 2008.
Convertible Debenture
Wex Pharmaceuticals Inc.
incorporated under the laws of Canada
This Debenture is issued as of and dated for reference the 17th day of
October, 2007 (the “Issue Date”) by Wex Pharmaceuticals Inc. (the “Corporation”), whose
chief executive office is located at 0000-000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
X0X 0X0, to and in favour of Pharmagesic (Holdings) Inc. (the “Holder”), a company incorporated
under the laws of Canada and having an office at 000
Xxxxxxx-Xxxxx Xxx, Xx Xxxxxxx, Xxxxxx, X0X
0X0
For
valuable consideration (the receipt and sufficiency of which are hereby conclusively
acknowledged), the Corporation covenants, agrees, acknowledges, represents and warrants to and in
favour of the Holder as follows:
ARTICLE 1
Interpretation
Interpretation
1.1 Definitions
Each word and phrase defined in Schedule “A” is used in this Debenture (whether with or without
initial capitals) with the respective defined meaning assigned to it in Schedule “A”.
1.2 Statutes
A reference in this Debenture to a statute refers to that statute as it may be amended from time
to time, and to any restated or successor legislation of comparable effect.
1.3 Agreements
Each reference in this Debenture to any Agreement (including this Debenture, the Subscription
Agreement and any other defined term that is an Agreement) shall be construed so as to mean such
Agreement (including any attached schedules, appendices and exhibits) as amended, supplemented,
and otherwise modified from time to time and each amendment and restatement, novation and
replacement of it from time to time.
1.4 Successors
Each reference in this Debenture to any body corporate (including any party hereto) shall be
construed so as to include such body corporate and its successors, both immediate and
derivative, to the extent the context so admits.
1.5 Subdivisions and Headings
The division of this Debenture into Articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the construction or
interpretation of this Debenture.
1.6 Number and Gender
In this Debenture, words (including defined terms) in the singular include the plural and
vice-versa (the necessary changes being made to fit the context) and words in one gender include
all genders.
ARTICLE 2
Promise to Pay
Promise to Pay
2.1 Promise to Pay
For value received, the Corporation hereby promises to pay to or to the order of the Holder,
on the Maturity Date, or on such earlier date as the principal moneys may become payable in
accordance with the terms hereof, a principal sum (the “Principal Amount”) equal to the sum of the
Initial Advance and all Subsequent Advances which aggregate principal amount shall not exceed
Fifteen Million Six Hundred Thousand Canadian Dollars (Cdn.$15,600,000) at the office of the Holder
described at the commencement of this Debenture, or at such other place as the Holder may designate
from time to time by notice to the Corporation, and shall pay interest thereon accrued from the
date of advance until the Principal Amount is repaid, subject to sections 4.4 and 6.1, at the rate
of LIBOR, plus four percent per annum. The interest rate will be established, in advance,
initially, on the Issue Date, and thereafter, semi-annually on each Payment Date. Interest will
accrue daily, both before and after maturity, default or judgment, together with interest on
overdue interest at the Default Interest Rate. Interest shall be calculated and paid (but not
compounded) on March 31, 2008 and thereafter semi-annually on September 30th and March
31st of each year (each such date being a “Payment Date”), or otherwise upon Default by
way of the issuance of Common Shares at the Interest Price in effect at the date of the interest
payment. The Common Shares will be issued to the Holder within three business days of the earlier
of the date specified in a written notice delivered by the Holder to the Corporation, the Maturity
Date or in the event a certificate is delivered to the Holder pursuant to section 5.2, the Extended
Maturity Date and a Default (unless waived by the Holder with respect to a Default). For greater
certainty the first interest payment will be for the period commencing on the date hereof and
ending on March 31, 2008. The foregoing payments are to be made in accordance with the terms of
this Debenture.
2.2 Initial Advance
The Initial Advance will be made by the Holder to the Corporation on the Issue Date.
- 2 -
2.3 Subsequent Advances
The Holder shall make Subsequent Advances to the Corporation on the seventh day following the end
of each financial quarter specified below in the respective amount specified below:
| Quarter End | Amount of Subsequent Advance | |||
December 31, 2007 |
$ | 1,500,000 | ||
March 31, 2008 |
$ | 2,000,000 | ||
June 30, 2008 |
$ | 2,000,000 | ||
September 30, 2008 |
$ | 2,000,000 | ||
December 31, 2008 |
$ | 2,000,000 | ||
March 31, 2009 |
$ | 4,100,000 | ||
provided that:
| (a) | the Corporation delivers to the Holder a written request specifying the
amount of the Subsequent Advance at least 20 days before the date of the Subsequent
Advance as well as a Compliance Certificate which provides, inter alia, that the
Corporation is in compliance with the Business Plan; |
||
| (b) | the representations, warranties and covenants of the Holder set forth herein
and in the Subscription Agreement are true and correct on and as of such date, all as
though made on and as of such date (other than changes identified in the Compliance
Certificate which do not constitute a Default hereunder); |
| (c) | no event or condition has occurred and is continuing or would result from
such Subsequent Advance which would constitute a Default; |
| (d) | such Subsequent Advance will not violate any Applicable Law then in effect; and |
| (e) | in the event of a rights offering or other financing by the Corporation, the
Holder reserves the right to adjust the amount of Subsequent Advances (including
reduction thereof) and/or the times of payment set out above. If a change of
Subsequent Advances is necessary, the Holder and the Corporation shall by mutual
agreement determine the amount and timing of Subsequent Advances and any resulting
change to the Business Plan or the Use of Proceeds in Schedule “C” to the Subscription
Agreement. |
In the event that any of these conditions are not satisfied, the Holder shall have no obligation to
make a Subsequent Advance.
- 3 -
2.4 Grid
The Corporation hereby appoints the Holder as its duly authorized agent to record on the Grid:
| (a) | any and all Advances made by the Holder to the Corporation; and |
||
| (b) | all payments made by the Corporation on account of the Principal Amount
outstanding from time to time under this Debenture, and to adjust the balance of the
Principal Amount owing under this Debenture by the Corporation to the Holder from time
to time to reflect payments made by the Corporation. The Principal Amount
outstanding from time to time under this Debenture as evidenced on the Grid shall,
absent manifest error, constitute presumptive evidence thereof; provided that
notwithstanding the state of the Grid, the failure of the Holder to record any amounts
owing hereunder on the Grid shall not affect the obligation of the Corporation to pay
to the Holder the amounts due and payable by the Corporation hereunder. |
ARTICLE 3
Covenants
Covenants
3.1 Positive Covenants
Subject to Section 6.12, the Corporation agrees with the Holder, until the date the Principal
Amount and any accrued and unpaid interest thereon have been paid, the Corporation will:
| (a) | at all times preserve and maintain its corporate existence and that of its
Principal Subsidiaries; |
| (b) | duly and punctually pay the principal amount and any accrued and unpaid interest
thereon and all other monies required to be paid to the Holder pursuant to this
Debenture in the manner set forth herein; |
| (c) | duly observe and perform each and every one of its covenants and agreements set
forth in this Debenture and the Subscription Agreement; |
| (d) | ensure that all Common Shares that shall be issued in payment of interest or upon
the full or partial conversion of this Debenture, shall be fully-paid and non
assessable; |
| (e) | fulfill all the obligations of securities legislation, rules, regulations and
policies in those Canadian jurisdictions in which it is a reporting issuer; |
| (f) | maintain its status as a reporting issuer not in default in those Canadian
jurisdictions in which it is currently a reporting issuer; |
| (g) | fulfill all its contractual obligations with the Exchange and all other Canadian
regulatory bodies; |
- 4 -
| (h) | ensure that all Common Shares outstanding and issued from time to time (including, without
limitation, up to 312,000,000 Common Shares (subject to adjustment as herein provided) to be
issued on the full or partial conversion of this Debenture and all of the Common Shares to be
issued in payment of interest under this Debenture) continue to be or are listed and posted
for trading on the Exchange; |
||
| (i) | maintain, repair, and use its assets (including, without limitation, the Material Assets)
and conduct its business in a prudent, proper and efficient manner consistent with good
business practices and in accordance with the Business Plan so as to preserve and protect
its assets and the earnings, incomes and profits of the Corporation; |
||
| (j) | keep proper records and books of account in accordance with GAAP; |
||
| (k) | pay all taxes when due, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves under GAAP have been established; |
||
| (l) | at all times maintain insurance by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the businesses and
markets in which the Corporation and Subsidiaries are engaged, including, but not limited
to, directors’ and officers’ insurance coverage, all as more particularly provided in the
Subscription Agreement; |
||
| (m) | duly comply with all requirements of any Governmental Body and all Applicable Laws
applicable to the Corporation and the Subsidiaries; |
||
| (n) | will forthwith upon becoming aware of the occurrence of a Default, provide the Holder with
immediate notice thereof; |
||
| (o) | provided the Corporation receives the Initial Advance and other than with respect to (i)
below has received any Subsequent Advance that has become payable from time to time in
accordance with section 2.3, the Corporation will pay on demand any and all reasonable
costs, charges and expenses, including any legal costs incurred by the Holder on the basis
as between a solicitor and his own client, of and incidental to: |
| (i) | the negotiation and preparation of this Debenture, the Subscription
Agreement and associated matters in accordance with and subject to the Subscription
Agreement; |
||
| (ii) | any matter the Corporation asks the Holder to consider in connection with
this Debenture after the grant of this Debenture; |
||
| (iii) | the Holder’s performance of any covenant in this Debenture; |
- 5 -
| (iv) | any default by the Corporation; and |
||
| (v) | any steps or proceedings taken under this Debenture or otherwise by reason
of non-payment or procuring payment of the monies payable under the Debenture, and |
all such costs, charges and expenses will bear interest at the rate aforesaid from the date
of the Holder incurring or being charged the same; |
|||
| (p) | pay all reasonable expenses of any nominees of the Holder appointed or elected to the board
of directors of the Corporation reasonably incurred in attending at meetings of the board of
directors or any committees thereof; |
||
| (q) | in the event the Holder elects at any time not to have a nominee on the board of directors
of the Corporation, give notice to the Holder of all meetings of the board of directors of
the Corporation to permit a representative of the Holder to attend any Board meetings of the
Corporation as an observer. The reasonable expenses of the observer will be paid in the same
manner as the expenses of the Holder’s nominees on the board of directors of the Corporation; |
||
| (r) | if so requested by the Holder, take all necessary steps to indemnify the Holder’s nominee
director in accordance with the applicable law and the constating documents of the
Corporation; |
||
| (s) | send to the Holder by both e-mail and regular mail: |
| (i) | quarterly unaudited consolidated financial statements of the Corporation
and related management discussion and analysis to the Holder within 45 days after
the end of each fiscal quarter; |
||
| (ii) | annual audited consolidated financial statements of the Corporation within 90
days of the end of each fiscal year; |
||
| (iii) | copies of all reports, financial statements and any other documents sent to
the Corporation’s shareholders; |
||
| (iv) | a copy of the Business Plan within 15 days of approval by the board of
directors of the Corporation; |
||
| (v) | monthly management accounts, which include profit and loss, balance sheet
and cash flow variance analysis in the same format as Schedule “C” to the
Subscription Agreement, and management comments on adherence to or deviation from
the Business Plan within 20 days of the end of each month; and |
- 6 -
| (vi) | a Compliance Certificate within 45 days in respect of the first, second
and third financial quarters and within 90 days in respect of the fourth
financial quarter. |
| (t) | provide any other financial information relating to the Corporation and the
Subsidiaries reasonably requested by the Holder; |
||
| (u) | promptly inform the Holder of the full particulars if a material change
(actual, anticipated or threatened) or any change in a material fact occurs in the
affairs of the Corporation or any of the Principal Subsidiaries; |
||
| (v) | ensure that the Corporation and each of its Principal Subsidiaries will keep
in good standing all requisite licences, approvals, consents, agreements and
authorizations necessary to enable the Corporation and its Principal Subsidiaries to
conduct operations, (it being understood that certain non-material licenses,
approvals, consents, agreements and authorizations will be permitted to lapse); |
||
| (w) | promptly provide the Holder with written notice of any material litigation; |
||
| (x) | use the Principal Amount only for the purposes specified in the Business
Plan; and |
||
| (y) | at: |
| (i) | any reasonable time or times and upon reasonable prior
notice, permit the Holder to visit the properties of any of the Corporation
or the Subsidiaries, and to discuss the affairs, finances and accounts of the
Corporation or the Subsidiaries with executive management including the
officers appointed as (or performing the functions of) the chief executive
officer and chief financial officer thereof; and |
||
| (ii) | at least quarterly, permit the Holder to meet with the
Corporation’s chief financial officer for the purpose of reviewing the
affairs, finances and accounts of the Corporation or the Subsidiaries. |
3.2
Negative Covenants
Subject to section 3.3 and 6.12, without the prior written consent of the Holder or unless
permitted pursuant to the Business Plan, the Corporation shall not and shall not permit any
Subsidiary, to:
| (a) | change the nature of its business or do any act or thing that would materially
adversely affect its business, property, prospects or financial condition; |
||
| (b) | except in relation to the Plan or this Debenture, issue any securities or any
options, warrants or securities convertible into shares or re-price any existing options; |
- 7 -
| (c) | except in the ordinary course of business for amounts not exceeding $500,000 and
subject to the UOB Termination Agreements, borrow, create, incur, assume or
suffer to exist any indebtedness; |
||
| (d) | sell, lease, assign, transfer, license or otherwise dispose of all or substantially all
of its assets or any of its Material Assets; |
||
| (e) | redeem or repurchase shares, pay or declare dividends (or any other return of capital); |
||
| (f) | utilize the Principal Amount save as provided in the Business Plan including its
use to purchase or acquire the securities of any person, pay dividends or return
capital to its shareholders; |
||
| (g) | guarantee the indebtedness of any Person other than its Subsidiaries; |
||
| (h) | enter into any transaction (whether by way of reconstruction, reorganization,
consolidation, amalgamation, winding-up, merger, transfer, sale, lease or otherwise) whereby
all or any substantial part of its undertaking or assets would become the property of any
other Person; |
||
| (i) | enter into any partnership, joint venture or similar agreement or arrangement; |
||
| (j) | permit, dispose of or allow to lapse any intellectual property rights necessary to enable
the Corporation and the Subsidiaries to conduct operations (including, without limitation,
those associated with the Material Assets) or breach any representations, warranties and
covenants associated with such intellectual property rights as set forth in the Subscription
Agreement (it being understood that certain non-material intellectual property rights will
be permitted to lapse); |
||
| (k) | except in the ordinary course of business and subject to the UOB Termination Agreements,
create, incur, assume, suffer to exist, permit or grant a security interest, lien or
encumbrance on its assets; |
||
| (l) | amend its constating documents; |
||
| (m) | allow any of their respective outstanding securities to be pledged or transferred; |
||
| (n) | purchase or acquire any fixed assets with a value of greater than $20,000; |
||
| (o) | hire or employ staff with an annual salary greater than $100,000 or hire or employ staff
such that the total number exceeds by more than two persons the total headcount for the
applicable time period as set forth in the Business Plan, it being understood that the
foregoing is intended to cover new employees rather than the promotion or salary increases
of existing employees; |
- 8 -
| (p) | enter into any contract or agreement concerning the Material Assets or in an
amount that is greater than $20,000, other than in the latter case, those relating
to the normal operations of the business; or |
||
| (q) | any of the Corporation, WEX Medical Limited or Nanning Maple Leaf
Pharmaceuticals Co. Ltd. exceed by more than 10% in any quarter or on an annual basis
its expense budget as set out in the Business Plan. |
3.3 Financings
Notwithstanding any provisions herein, the negative covenants contained in sections 3.2(b) and (c)
do not apply to financings during the Permitted Periods so long as:
| (a) | the financings are subject to the right of first refusal, as applicable, in
favour of the Holder as set out in Section 6(ii)(ix) of the Subscription Agreement; |
||
| (b) | the proceeds of any debt financings are subordinated to the indebtedness of
the Corporation to the Holder; |
||
| (c) | the proceeds of such financings during the last three months immediately
prior to the Maturity Date will be utilized in the ordinary course of the Corporation’s
business for operating expenses, consistent with the Business Plan and the amount
shall not exceed more than a reasonable amount required for 24 months of
operating expenses; and |
||
| (d) | the proceeds of such financings during the last six months immediately prior
to the Extended Maturity Date will be utilized first to repay any indebtedness of the
Corporation to the Holder with the balance to be utilized in the ordinary course of
the Corporation’s business for operating expenses, consistent with the Business
Plan. |
ARTICLE 4
Default
Default
4.1 Events of Default
Each of the following events constitutes a Default:
| (a) | the failure of the Corporation to pay the principal amount due under this
Debenture on the due date thereof or to pay any other amounts due under this
Debenture within three Business Days of the due date thereof; |
||
| (b) | if the Corporation fails to keep, observe or perform any of the covenants set
forth
in sections 3.2(d), 3.2(h), 3.2(i), 3.2(m), 3.2(p) or 3.2(q); |
||
| (c) | if any of the representations and warranties in the Subscription Agreement or
the
Debenture are not true as at the time such representation or warranty was made; |
- 9 -
| (d) | save for the failure to pay amounts due under this Debenture or the covenants
referred to in section 4.1(b), if the Corporation fails to keep, observe or perform
any covenants, agreements, terms, conditions or provisions contained in this
Debenture or the Subscription Agreement and such default continues until the
later of the expiry of 30 days from the date of receipt of notice from the Holder to
remedy such default; |
||
| (e) | in the event of a Change of Control or a Capital Reorganization; |
||
| (f) | if the Board of Directors of the Corporation fail in any fiscal year to approve a
Business Plan for the forthcoming fiscal year; |
||
| (g) | in the event a cease trade order or Exchange trading suspension of the Common
Shares shall be in effect for five consecutive trading days
(excluding a suspension of all trading on the Exchange). |
||
| (h) | a Bankruptcy Event with respect to the Corporation occurs; |
||
| (i) | any garnishment order or other equivalent process is issued or levied against the
Corporation or a Subsidiary to recover payment of any amount exceeding $100,000 owing by
the Corporation; |
||
| (j) | any failure of the Corporation or a Subsidiary to pay indebtedness exceeding $100,000 at
the stated maturity thereof or as a result of which, the creditor may declare the principal
thereof to be due and payable prior to the stated maturity thereof, or any event shall occur
and shall continue after the applicable grace period (if any) specified in any agreement or
instrument relating to any such debt, the effect of which is to permit the holder of such
debt to declare the principal amount thereof to be due and payable prior to its stated
maturity; |
||
| (k) | all or any material part of the assets of the Corporation or any Subsidiaries are executed,
sequestered or distrained upon and such execution, sequestration or distraint: |
| (i) | relates to claims in the aggregate in excess of $100,000; and |
||
| (ii) | the Corporation or such Subsidiary does not discharge the same or provide
for its discharge in accordance with its terms, or procure a stay of execution
thereof (by reason of pending appeal or otherwise), within 30 days from the date of
entry thereof; and |
| (l) | final judgement for the
payment of money in the aggregate in excess of $100,000 in excess
of applicable insurance shall be rendered by a court of competent jurisdiction against the
Corporation or any Subsidiary and the Corporation or such Subsidiary does not discharge
same or provide for its discharge in accordance with its terms, or procure a stay of
execution thereof (by reason of a pending appeal or otherwise), within 30 days from the
date of entry thereof; |
- 10 -
The occurrence of a Default shall be deemed to constitute a default by the Corporation of its
obligations under this Debenture.
4.2 Effect of Default
Upon the occurrence of a Default, the Principal Amount, any accrued and unpaid interest thereon
and any other monies owing to the Holder under this Debenture will immediately become payable.
Upon the occurrence of a Default and at any time thereafter, the Holder may exercise all or any
of the rights and remedies available to the Holder, whether available under this Debenture or
available at law or in equity, including, without limitation, its rights pursuant to section 5.3.
4.3 Default Interest Rate
Following the occurrence and during the continuance of a Default, the Corporation shall pay
interest in an amount calculated on the basis of the Default Interest Rate and all outstanding
obligations under this Debenture, including unpaid interest, shall continue to accrue interest at
that rate from the date of Default and until such Default is cured or waived.
4.4 Waiver
The Holder may waive any Default or any breach by the Corporation of any of the provisions of this
Debenture. No waiver, however, shall be deemed to extend to a subsequent breach or Default,
whether or not the same as or similar to the breach or Default waived, and no act or omission by
the Holder shall extend to, or be taken in any manner whatsoever to affect, any subsequent breach
or Default or the rights of the Holder arising therefrom. Any such waiver must be in writing and
signed by the Holder to be effective. No failure on the part of the Holder to exercise, and no
delay by the Holder in exercising, any right under this Debenture 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.
ARTICLE 5
Conversion of Debenture
Conversion of Debenture
5.1 Conversion Privilege and Conversion Price
Subject to and upon compliance with the provisions of this Article 5, on or after the Maturity
Date or after the occurrence of a Default or in the event of an Offer, this Debenture or any
portion of the Principal Amount outstanding as of the Conversion Date (as defined below) may, at
the option of the Holder, be converted into fully paid and non-assessable Common Shares at the
Conversion Price in effect on the Conversion Date.
- 11 -
5.2 Extended Maturity Date
In the event the Corporation delivers on or before the Maturity Date a certificate executed by
the Corporation’s Chief Executive Officer and Chief Financial Officer certifying that
the
Corporation will be unable to repay the Principal Amount on the Maturity Date, then subject to the
provisions contained in section 5.1 and 5.3 and provided there has not occurred a Default, the
Principal Amount will be payable on the Extended Maturity Date. For greater certainty, the
Holder’s right to convert the Principal Amount on or after the Maturity Date or after the
occurrence of a Default or in the event of an Offer shall continue in full force and effect
regardless of the delivery of the certificate described in the previous sentence.
5.3 Conversion Procedure
In order to exercise the conversion right granted pursuant to section 5.1, the Holder must
deliver to the Corporation at its principal office in Vancouver, British Columbia (or the
registered office of the Corporation if it no longer has its principal office in Vancouver,
British Columbia) a written notice signed by the Holder (a “Conversion Notice”) stating that the
Holder elects to convert this Debenture, or a stated portion of the Principal Amount thereof to
Common Shares. Such Conversion Notice will be deemed to constitute a contract between the Holder
and the Corporation whereby:
| (a) | the Holder subscribes for the number of Common Shares that it will be
entitled to receive on such conversion; |
||
| (b) | the Holder releases the Corporation from all liability thereon or from all
liability
with respect to that portion of the Principal Amount thereof to be
converted, as the case may be; and |
||
| (c) | the Corporation agrees that the delivery of such Conversion Notice
constitutes full
payment of the subscription price for the Common Shares issuable upon
such conversion. |
In the case of a conversion pursuant to section 5.1, the date of receipt by the Corporation of a
Conversion Notice is herein referred to as the “Conversion Date”.
As promptly as practicable after the Conversion Date, the Corporation will issue or cause to be
issued and deliver or cause to be delivered to the Holder a certificate in the name of the Holder
for the number of Common Shares deliverable upon the conversion of such Debenture (or specified
portion of the Principal Amount thereof to be converted) and provision will be made for payment in
money in respect of any fraction of a Common Share as provided in section 5.5. Such conversion will
be deemed to have been effected immediately prior to the close of business on the Conversion Date
and at such time the rights of the Holder, either as holder of this Debenture or as holder of that
portion of the Principal Amount of this Debenture to be converted, as the case may be, will cease
and the Holder will be deemed to have become on such date the holder of record of the Common
Shares; provided, however, that no such conversion on any date when the transfer registers for
Common Shares of the Corporation are closed will be effective to constitute the Holder to be
entitled to receive the Common Shares upon such conversion as the holder of record of such Common
Shares on such date, but such conversion will be effective to constitute the Holder to be entitled
to receive such Common Shares as the holder of record
thereof for all purposes on the next succeeding Business Day on which such transfer registers are
open.
- 12 -
The Corporation will pay to the Holder, by way of the issuance of Common Shares issued
concurrently with the certificates for the Common Shares issuable on conversion pursuant to
section 5.1, the amount of any interest accrued up to the Conversion Date on the Debenture or that
portion of the Principal Amount to be converted, as the case may be.
5.4 Effect of Conversion
The issuance of Common Shares to the Holder on conversion of this Debenture will constitute full
repayment of the Principal Amount. The Holder hereby agrees to surrender this Debenture in
exchange for the share certificate issued by the Corporation to the Holder in respect of such
conversion.
5.5 No Fractional Shares
Notwithstanding anything herein contained, the Corporation will not be required to issue
fractional Common Shares in payment of interest or upon the conversion of the Debenture in whole
or in part. If any fractional interest in a Common Share would, except for the provisions of this
section 5.5, be deliverable in payment of interest or upon the conversion of this Debenture, the
Corporation will adjust such fractional interest by paying to the Holder an amount equal to the
fractional interest.
5.6 Adjustment of Cap Prices
The Cap Prices (and the number of Common Shares issuable upon exercise of the conversion rights
and the obligations set forth hereunder) are subject to adjustment from time to time in the
events and in the manner provided as follows:
| (a) | If and whenever at any time after the date hereof and prior to the repayment
of the Principal Amount and all accrued interest and/or conversion thereof into
Common Shares (the “Expiry Date”), the Corporation: |
| (i) | issues to all or substantially all the holders of Common Shares
by way of a stock dividend or otherwise Common Shares or securities
exchangeable for or convertible into Common Shares other than a dividend paid
in the ordinary course, or |
||
| (ii) | subdivides its outstanding Common Shares into a greater number
of shares, or |
||
| (iii) | consolidates or combines its outstanding Common Shares into a
smaller number of shares, |
- 13 -
(any of such events being called a “Common Share Reorganization”), then the Cap
Prices will be adjusted effective immediately after the effective date or record
date for the happening of a Common Share Reorganization, as the case may be, at which the
holders of Common Shares are determined for the purpose of the Common Share Reorganization,
by multiplying the Cap Prices in effect immediately prior to such effective date or record
date by a fraction, the numerator of which is the number of Common Shares outstanding on
such effective date or record date before giving effect to such Common Share Reorganization
and the denominator of which is the number of common shares outstanding immediately after
giving effect to such Common Share Reorganization (including, in the case where securities
exchangeable for or convertible into common shares are distributed, the number of Common
Shares that would have been outstanding had all such securities been exchanged for or
converted into Common Shares on such effective date or record date). |
|||
| (b) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation, fixes a record date for the issue of rights, options or warrants to the holders
of all or substantially all of its outstanding Common Shares under which such holders are
entitled to subscribe for or purchase Common Shares or securities exchangeable for or
convertible into Common Shares, where: |
| (i) | the right to subscribe for or purchase Common Shares, or the right to
exchange securities for or convert securities into Common Shares expires not more
than 45 days after the date of such issue (the period from the record date to the
date of expiry being in this section 5.6 called the “Rights Period”), and |
||
| (ii) | the cost per Common Share during the Rights Period (inclusive of any cost or
acquisition of securities exchangeable for or convertible into Common Shares in
addition to any direct cost of Common Shares) (in this section 5.6 called the “Per
Share Cost”) is less than 95% of the Current Market Price of the Common Shares on the
record date, |
||
(any of such events being called a “Rights Offering”), then the Cap Price will be
adjusted effective immediately after the end of the Rights Period to a price
determined by multiplying the Cap Prices in effect immediately prior to the end of
the Rights Period by a fraction: |
| (A) | the numerator of which is the aggregate of: |
| (1) | the number of Common Shares outstanding as of
the record
date for the Rights Offering, and |
||
| (2) | a number determined by dividing the product of
the Per Share Cost and: |
| (I) | where the event giving
rise to the application of this subparagraph (2) was the issue
of rights, options or
warrants to the holders of Common Shares under which such
holders are entitled to subscribe for or purchase
additional Common Shares, the number of Common Shares so
subscribed for or purchased during the Rights Period, or |
- 14 -
| (II) | where the event giving
rise to the application of this subparagraph (2) was the
issue of rights, options or warrants to the holders of
Common Shares under which such holders are entitled to
subscribe for or purchase securities exchangeable for or
convertible into Common Shares, the number of Common Shares
for which those securities could have been exchanged or
into which they could have been converted during the Rights
Period; |
by the Current Market Price of the Common Shares as of the record
date for the Rights Offering; and |
| (B) | the denominator of which is: |
| (1) | in the case described above subparagraph
(A)(2)(I), the
number of Common Shares outstanding, or |
||
| (2) | in the case described above subparagraph
(A)(2)(II), the
number of Common Shares that would be outstanding if all
the Common Shares described in subparagraph (A)(2)(II)
had been issued, |
as at the end of the Rights Period. |
Any Common Shares owned by or held for the account of the Corporation or any
subsidiary (as defined in the Securities Act (British Columbia)) of the
Corporation will be deemed not to be outstanding for the purpose of any such
computation. |
| (c) | If and whenever at any time after the date hereof and prior to the Expiry Date, the
Corporation fixes a record date for the issue or the distribution to the holders of all or
substantially all its Common Shares: |
| (i) | shares of the Corporation of
any class other than Common Shares; |
||
| (ii) | rights, options or warrants to acquire shares or securities exchangeable for
or convertible into shares or property or other assets of the Corporation (other
than rights, options or warrants to purchase Common Shares exercisable within 45
days of the record date at a price per Common Share equal to or greater than 95% of
the then Current Market Price); |
- 15 -
| (iii) | evidences of indebtedness, or |
||
| (iv) | any property or other assets; |
||
and if such issuance or distribution does not constitute a Common Share
Reorganization or a Rights Offering or dividend paid in the ordinary course
(any of such non-excluded events being called a “Special Distribution”), the
Cap Prices will be adjusted effective immediately after such record date to
a price determined by multiplying the Cap Price, in effect on such record
date by a fraction: |
| (A) | the numerator of which is: |
| (1) | the product of the number of
Common Shares outstanding on such record date and the Current Market
Price of the Common Shares on such record date, less |
||
| (2) | the amount by which the
aggregate fair market value (as
determined by action by the directors of the Corporation) to
the holders of the Common Shares of such securities or
property or other assets so issued or distributed in the
Special Distribution exceeds the fair market value (as
determined by action of the directors of the Corporation) of
the consideration, if any, received therefor by
the
Corporation, and |
| (B) | the denominator of which is the number of
Common Shares outstanding on such record date multiplied by the
Current Market Price of the Common Shares on such record date. |
Any Common Shares owned by or held for the account of the Corporation or any subsidiary (as
defined in the Securities Act (British Columbia)) of the Corporation will be deemed not to be
outstanding for the purpose of any such computation.
No adjustment in a Cap Price is required to be made unless such adjustment would result in a
change of at least one percent in the prevailing Cap Price, provided, however, that any
adjustments which, except for the provisions of this sentence, would otherwise have been required
to be made, will be carried forward and take into account in any subsequent adjustment.
If the Corporation sets a record date to determine the holders of the Common Shares for the
purpose of entitling them to receive any dividend or distribution or sets a record date to take
any other action and, thereafter and before the distribution to such shareholders of any such
dividend or distribution or the taking of any other action, decides not to implement its plan to
pay or deliver such dividend or distribution or take such other act, then no adjustment in the
Cap Prices will be required by reason of the setting of such record date.
- 16 -
In the absence of a resolution of the directors of the Corporation fixing a record date for a
Special Distribution or Rights Offering, the Corporation will be deemed to have fixed as the
record date therefor the date on which the Special Distribution or Rights Offering is effected.
5.7 Adjustments for Capital Reorganization
If and whenever at any time after the date hereof and prior to the Expiry Date, there is a
reclassification of the Common Shares outstanding at any time or change of the Common Shares into
other shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation, reverse take-over or merger of the Corporation with or into any other
corporation or other entity (other than a consolidation, amalgamation or merger which does not
result in any reclassification of the outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets of the Corporation as an entirety or
substantially as an entirety to another corporation or other entity (any of such events being
called a “Capital Reorganization”), and notice to convert is given after the effective date of such
Capital Reorganization, the Holder will be entitled to receive, and must accept for the same
aggregate consideration in lieu of the number of Common Shares to which it was theretofore entitled
upon such subscription, the aggregate number of shares, other securities or other property which it
would have been entitled to receive as a result of such Capital Reorganization if, on the effective
date thereof, it had been the registered holder of the number of Common Shares to which such holder
was theretofore if conversion had occurred on that date. Appropriate adjustments will be made as a
result of any such Capital Reorganization in the application of the provisions set forth in this
section 5.7 with respect to the rights and interests thereafter of holders of Debentures to the end
that the provisions set forth in this section 5.7 will thereafter correspondingly be made
applicable as nearly as may reasonably be in relation to any shares thereafter deliverable upon
conversion. Any such adjustment must be made by and set forth in an agreement supplemental
hereto. As a condition precedent to taking any action that would constitute a Capital
Reorganization, the Corporation will take all action necessary, in the opinion of counsel, in order
that the provisions of this section be effected.
5.8 Disputes
If at any time a dispute arises with respect to adjustments provided for in sections 5.6 and 5.7
such dispute will be conclusively determined by the auditors of the Corporation or if they are
unable or unwilling to act, by such other firm of independent chartered accountants as may be
selected by action by the directors of the Corporation and the Holder and any such determination
will be binding upon the Corporation and the Holder and the Corporation will provide such
auditors or accountants with access to all necessary records of the Corporation.
- 17 -
ARTICLE 6
General
General
6.1 Notices
Any notice, demand, consent, approval or other communication to be made or given under or in
connection with this Debenture (a “Notice”) shall be in writing and may be made or given by
personal delivery or by facsimile addressed to the respective parties as follows:
To the Corporation:
WEX Pharmaceuticals Inc.
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Dr. Edge Wang
Facsimile: (000) 000-0000
To the Holder:
Pharmagesic (Holdings) Inc.
000 Xxxxxxx-Xxxxx Xxx,
Xx Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxx
Facsimile: 000-000-0000
000 Xxxxxxx-Xxxxx Xxx,
Xx Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxx
Facsimile: 000-000-0000
or to such other address as such party may from time to time notify the others in accordance with
this section 6.1. Any Notice made or given by personal delivery shall be conclusively deemed to
have been given at the time of actual delivery or, if made or given by facsimile, at the opening
of business on the first Business Day following the transmittal thereof. Any notice given by the
Corporation shall bind the Corporation.
6.2 Time of the Essence
Time is and shall remain of the essence of each provision of this Debenture.
6.3 Governing Law
This Debenture shall be governed by, and interpreted and enforced in accordance with, the laws
in force in the Province of British Columbia and the laws of Canada applicable therein without
regard for principles of conflicts of law. The Corporation irrevocably attorns to the
jurisdiction of the courts in the Province of British Columbia with respect to matters arising
out of this Debenture.
- 18 -
6.4 Entire Agreement
There are no representations, warranties, conditions, covenants, other Agreements or
acknowledgments, whether direct or collateral, express or implied, that form part of or affect
this
Debenture or the subject matter hereof, other than as expressed herein and other than as may be
expressed in the Subscription Agreement or any other written Agreement entered into between the
Corporation and the Holder contemporaneously herewith. The execution of this Debenture has not
been induced by, nor does the Corporation rely upon or regard as material, any representations,
warranties, conditions, covenants, other Agreements or acknowledgments not expressly made in this
Debenture or in the Subscription Agreement or in any other written Agreements to be delivered
pursuant thereto or contemporaneously herewith.
6.5 Severability
If any provision of this Debenture is determined to be invalid or unenforceable by a court of
competent jurisdiction from which no further appeal lies or is taken, that provision shall be
deemed to be severed herefrom and the remaining provisions of this Debenture shall not be
affected thereby and shall remain valid and enforceable.
6.6 Currency
All dollar amounts referred to herein are in Canadian dollars.
6.7 Amendment
This Debenture may only be amended, supplemented or otherwise modified by an Agreement signed by
the Corporation and the Holder.
6.8 Binding Effect
This Debenture shall enure to the benefit of the Holder and their respective successors and
assigns and any subsequent holder of this Debenture and shall be binding on the Corporation, its
legal representatives (including receivers, managers, receivers and managers and trustees) and
its successors.
6.9 Language
The parties to this Debenture have expressly required that this Debenture and all documents and
notices relating hereto be drafted in English. Les parties aux
présentes ont expressément exigé
que la présente convention et tous les documents et avis qui
y sont afférents soient rédigés en anglais.
6.10 Debenture Lost or Stolen
If this Debenture is mutilated, lost, stolen or destroyed, the Corporation shall, upon being
furnished with evidence satisfactory to it of such mutilation, loss, theft or destruction, issue
and deliver a new Debenture of like date and tenor as the one mutilated, lost, stolen or
destroyed, in exchange for, in place of and upon cancellation of the mutilated Debenture, or in
lieu of or in substitution for the lost, stolen or destroyed Debenture.
- 19 -
6.11 Maximum Payments
Nothing continued herein shall be deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges herewith exceed the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts owed by the
Corporation to the Holder and thus refunded to the Corporation.
6.12 No Breach
Notwithstanding any of the provisions of this Debenture, the Holder hereby acknowledges and
agrees that none of the following will result in a breach of the terms of this Debenture:
| (a) | The carrying out of a Registration by the Corporation pursuant to the
Registration
Rights Agreement in which the Holder distributes Registerable Shares, including
the sale by the Corporation of securities and the payment of Registration
Expenses by the Corporation in relation to such Registration; |
||
| (b) | The payments by the Corporation of the amounts required to be paid by the
Corporation pursuant to the Settlement Agreements; |
||
| (c) | The repayment by the Corporation of funds due under the Bridge Loan Facility;
and |
||
| (d) | The payment by the Corporation of fees and disbursements to both the
Corporation’s legal counsel and the Holder’s legal counsel in relation to the
Transactions. |
6.13 Further Assurances
At the Corporation’s cost and expense, upon request of the Holder, the Corporation shall duly
execute and deliver or cause to be duly executed and delivered to the Holder such further
instruments and do and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Holder to carry out more effectually the provisions and purposes of
this Debenture.
- 20 -
In Witness Whereof, the Corporation has caused this Debenture to be duly signed and
sealed as a deed and specialty obligation as of (notwithstanding any different execution date set
out in any registrations forms attached hereto) the date set out at the commencement of this
Debenture.
| WEX Pharmaceuticals Inc. | ||||
| by its authorized signatory: | ||||
| “Edge Wang”
|
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| (C/S) | ||||
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Schedule “A”
Definitions
“Advance” means the Initial Advance or a
Subsequent Advance.
“Agreement” means any agreement, oral or written, any simple contract or specialty, and any
indenture, instrument, xxxx of exchange or undertaking, including any lease.
“Applicable Laws” means (a) any domestic or foreign statute, law (including common and civil
law), treaty, code, ordinance, rule, regulation, restriction or by-law(zoning or otherwise); (b)
any judgement, order, writ, injunction, decision, ruling, decree or award; (c) any regulatory
policy, practice, guideline or directive; or (d) any franchise, licence, qualification,
authorization, consent, exemption, waiver, right, permit or other approval of any Governmental
Body, binding on or affecting the Person referred to in the context in which the term is used or
binding on or affecting the property of such Person, in each case whether or not having the force
of law other than U.S. securities laws.
“Bankruptcy Event” means, with respect to any Person, that such Person does not pay or perform its
obligations generally as they become due or admits its inability to pay or perform its debts
generally, that such Person commits an act of bankruptcy within the meaning of the Bankruptcy and
Insolvency Act (Canada), any Bankruptcy Proceeding is instituted by or against that Person
(excluding any Bankruptcy Proceeding being contested by that Person in good faith by appropriate
proceedings so long as enforcement remains stayed, none of the relief sought is granted (either on
an interim or permanent basis) and such Bankruptcy Proceeding is dismissed within 30 days of its
commencement), or that Person takes corporate action to authorize any of the actions set forth
above in this definition.
“Bankruptcy Proceeding” means, with respect to any Person, any proceeding contemplated by any
application, petition, assignment, filing of notice or other means, whether voluntary or
involuntary and whether or not under the Bankruptcy and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other
like, equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or other like or
similar relief in respect of any or all of the obligations of that Person, seeking the winding
up, liquidation or dissolution of that Person or all or any part of its assets, seeking any award
declaring, finding or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation of law, in the
bankruptcy of that Person.
“Bridge Loan Facility” means the loan facility evidenced by a letter loan agreement among the
Corporation, CK Life Sciences (North America) Inc. and IWT Bio Inc. dated July 15, 2007, as
amended October 1, 2007, pursuant to which CK Life Sciences (North America) Inc. has lent monies
to the Corporation.
“Business Day” means a day on which banks are generally open for commercial lending and foreign
exchange business in Xxxxxxxxx xxx Xxxxxxx, Xxxxxx, which is not a Saturday or a Sunday.
“Business Plan” means, for any fiscal year, (a) forecast of expenditures, for the current fiscal
year and each of the next two following fiscal years prepared on a consolidated basis supported by
appropriate explanations, notes and information and commentary on key assumptions, and (b) budget
including the details of any capital expenditure in excess of $20,000.00 (including the nature and
type of such capital expenditure) to be made by the Corporation or its Subsidiaries during such
fiscal year all as approved by the Corporation’s Board of Directors and the Holder, which approval
will not be unreasonably withheld. The current approved Business Plan for 2007 and 2008 is set out
in Schedule “C” to the Subscription Agreement.
“Canadian
Dollars”, “CAD” and “$” each means dollars which are the lawful currency of Canada.
“Capital Reorganization” has the meaning ascribed to it in section 5.7.
“Cap Prices” means collectively the Minimum Price and the Maximum Price.
“Change of Control” means an offer is made to purchase outstanding voting shares of the
Corporation and is accepted by a sufficient number of holders of such voting shares to constitute
the offeror a shareholder of the Corporation being entitled to exercise more than 50% of the
voting rights attached to the voting shares (provided that prior to
the offer, the offeror was not
entitled to exercise more than 50% of the voting rights attached to the outstanding voting
shares).
“Common Share” means, subject to the provisions of Article 5, common shares without par value in
the capital of the Corporation that have been re-designated as restricted voting shares effective
prior to the date hereof (as the same may be redesignated from time to time) as such common shares
exist at the close of business on the date of any determination or common shares resulting from a
subdivision or consolidation thereof, or from successive subdivisions or consolidations, in any
case without other change or reclassification.
“Common Share Reorganization” has the meaning ascribed to it in section 5.6.
“Compliance Certificate” means a certificate concerning compliance by the Corporation with its
representations, warranties and covenants as set forth in the Subscription Agreement and the
Debenture, substantially in the form of a certificate attached hereto as Schedule “B”.
“Conversion Date” has the meaning ascribed to it in section 5.3.
“Conversion Notice” has the meaning ascribed to it in section 5.3.
“Conversion Price” means the Current Market Price of the Common Shares less 30%, subject to a
minimum of the Minimum Price and a maximum of the Maximum Price.
“Corporation” means WEX Pharmaceuticals Inc.
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“Current Market Price” means an amount equal to the volume weighted average trading price of the
Common Shares, calculated by dividing the total value by the total volume of the Common Shares
traded on the Exchange for the last five trading days on which a trade in the
Common Shares took place prior to the relevant notice date or the Extended Maturity Date, or for
each trading day from the prior six month period prior to the Maturity Date in the event of
conversion on the Maturity Date, or if the Common Shares are not listed on the Exchange on the
date the determination is to be made, on such stock exchange on which the Common Shares are listed
as may be selected for such purpose by the directors or, if the Common Shares are not listed on
any stock exchange, a price determined by the directors and approved by an independent, qualified
investment dealer who is a member of the Exchange and who is jointly selected by the Corporation
and the Holder for that purpose.
“Debenture” means this convertible debenture and all schedules and other attachments attached
hereto, and all references to “hereto”,
“herein”, “hereof”, “hereby” and “hereunder”, and to
similar expressions, refer to this Debenture and not to any particular section or portion of it.
References to “Article”, “section”, “paragraph” or “Schedule” refer to the applicable article,
section, paragraph or schedule of this Debenture, as the case may be. References to the
“commencement of this Debenture” refer to the page of this Debenture, which contains the
beginning of Article 1.
“Default” means any of the events set out in section 4.1.
“Default Interest Rate” means the rate of LIBOR plus eight percent per annum.
“Disclosure Schedule” has the meaning set forth in the Subscription Agreement.
“Exchange” means the Toronto Stock Exchange.
“Expiry Date” has the meaning set forth in section 5.6(a).
“Extended Maturity Date” means the date that is two years after the Maturity Date.
“GAAP” means generally accepted accounting principles from time to time approved by the Canadian
Institute of Chartered Accountants, or any successor institute, including those set out in the
Handbook of the Canadian Institute of Chartered Accountants.
“Governmental Body” means any international tribunal, agency, body, commission or other
authority, any government, executive, parliament, legislature or local authority, or any
governmental body, ministry, department or agency or regulatory authority, court, tribunal,
commission or board of or within Canada or any foreign jurisdiction, or any political
subdivision of any thereof or any authority having jurisdiction therein other than the United
States Securities and Exchange Commission.
“Grid” means the grid set forth in Schedule “C”.
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“Holder” means the Holder as defined above and shall also include any assignee of or successor
to the rights of the Holder and any purchaser of this Debenture from the Holder or from any
current holder hereof.
“including” means including without limitation and shall not be construed to limit any word or
statement which it follows to the specific or similar items or matters immediately following it,
and “include” and “includes” shall be construed in like manner.
“Initial Advance” means the Advance by the Holder to the Corporation on the Issue Date in the
principal amount of $2,000,000.
“Interest Price” means the Interest Share Market Price of the Common Shares less 30%, subject to
a minimum of the Minimum Price and a maximum of the Minimum Price and the Maximum Price.
“Interest Share Market Price” means an amount equal to the volume weighted average trading price
of the Common Shares, calculated by dividing the total value by the total volume of the Common
Shares traded on the Exchange for each trading day on which a trade in the Common Shares took
place for the six month period prior to the relevant interest payment date or if the Common
Shares are not listed on the Exchange on the date the determination is to be made, on such stock
exchange on which the Common Shares are listed as may be selected for such purpose by the
directors or, if the Common Shares are not listed on any stock exchange, a price determined by
the directors and approved by an independent, qualified investment dealer who is a member of the
Exchange and who is jointly selected by the Corporation and the Holder for that purpose.
“Issue Date” has the meaning set forth on the first page of this Debenture.
“LIBOR” means, for the Issue Date and any Payment Date, the rate of interest per annum, based on
a 360-day year (rounded up to the nearest 1/16%), for deposits in Canadian dollars for a 6 month
interest period which is quoted on the British Bankers Association LIBOR Rates Telerates Screen
as of 11 a.m. (London time) on the second Business Day before the Issue Date or such Payment
Date, as the case may be.
“losses and expenses” means losses, costs, expenses, damages, penalties, causes of action,
actions, judgments, suits, proceedings, claims, claims over, claims for contribution and
indemnity, demands and liabilities, including any applicable court costs and legal fees and
disbursements on a solicitor and client scale, and “loss and expense” shall be construed in like
manner.
“Maturity Date” means the date that is two years after the Issue Date.
“Material Assets” means all intellectual property relevant to the Tectin product; all equipment
necessary for the production of the Tectin product and all related clinical trial data and
research results/records.
“Maximum Price” means $1.75, as may be adjusted pursuant to the terms hereof.
“Minimum
Price” means $0.05, as may be adjusted pursuant to the terms hereof.
“Notice” has the meaning ascribed to it in section 6.1.
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“obligations” means indebtedness, obligations, responsibilities, duties and liabilities (actual or
contingent, direct or indirect, matured or not, now existing or arising hereafter), whether
arising by contract or statute, at law, in equity or otherwise, and
“obligation” and “obligated”
shall be construed in like manner.
“Offer” means an offer to purchase more than 50% of the outstanding voting shares of the
Corporation.
“Payment Date” has the meaning set forth in section 2.1.
“Per Share Cost” has the meaning ascribed to it in section 5.6(b)(ii).
“Permitted Period” means the last three months immediately prior to the Maturity Date and the
last six months immediately prior to the Extended Maturity Date.
“Person” means an individual, corporation, estate, partnership, trust, joint venture, other legal
entity, unincorporated association or Governmental Body.
“Plan” means the stock option plan of the Corporation, as amended from time to time.
“Principal Amount” has the meaning set forth in section 2.1.
“Principal Subsidiaries” means IWT Bio Inc., Nanning Maple Leaf Pharmaceutical Co., Ltd., WEX
Medical Corporation and WEX Medical Limited and any other Subsidiaries, that are not inactive or
become not inactive.
“Registration” has the meaning ascribed in the Registration Rights Agreement.
“Registration Expenses” has the meaning ascribed in the Registration Rights Agreement.
“Registerable Shares” has the meaning ascribed in the Registration Rights Agreement.
“Registration Rights Agreement” means the agreement dated of even date hereof between the
Corporation and the Holder pursuant to which the Corporation agrees to complete a Registration in
prescribed circumstances.
“rights” means rights, powers, authorities, discretions, privileges, immunities and remedies
(actual or contingent, direct or indirect, matured or not, now existing or hereafter arising),
whether arising by contract or statute, at law, in equity or
otherwise, and “right” shall be
construed in like manner.
“Rights Offering” has the meaning ascribed to it in section 5.6(b)(ii).
“Rights Period” has the meaning ascribed to it in section 5.6(b)(i).
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“Settlement Agreements” means each of the agreements among the Corporation and some or all of
the following parties: Wex Medical Limited, Xxxxx Xxxx, Xxxxx Xxxx, Tianjin Fairwood
Furniture MFG. Co. Ltd., Edge Wang, Xxxxxxx Xxxx, Guangxi Science, Technology and Economy
Development Centre, Yang Xxxx Xxxx and the Holder pursuant to which the Corporation or its
affiliates is required to make payments in relation to the settlement of claims, the purchase of
shares or the payment of consulting fees.
“Special Distribution” has the meaning ascribed to it in section 5.6(c)(iv).
“Subsidiary” has the meaning ascribed to such term in the Canadian Business Corporations Act;
“Subscription Agreement” means the Subscription Agreement dated for reference July 15, 2007 as
amended August 14, 2007 among the Corporation and the Holder pursuant to which the Holder has
agreed to subscribe for Common Shares in the capital of the Corporation, all as more particularly
described therein.
“Subsequent Advance” means an Advance made by the Holder to the Corporation pursuant to section
2.3.
“successor” of a body corporate shall be construed so as to include:
| 1. | any amalgamated or other corporation of which such body corporate or any of its
successors is one of the amalgamating or merging corporations; |
|
| 2. | any corporation resulting from any court approved arrangement of which such body
corporate or any of its successors is party; |
|
| 3. | any corporation resulting from the continuance of such body corporate or any successor
of it under the laws of another jurisdiction of incorporation; |
any successor (determined as aforesaid or in any similar or comparable procedure under the laws
of any other jurisdiction) of any corporation referred to in clauses 1, 2 or 3.
“Transactions” means the transactions completed in relation to this Debenture, the Subscription
Agreement, the Bridge Loan Facility, the Registration Rights Agreement and the Settlement
Agreements.
“UOB Termination Agreements” means the termination agreements among the Corporation, WEX Medical
Limited and each of UOB Venture (Shenzen) Limited, UOB Capital Investments PTE Ltd. and UOB
Venture Technology Investments Ltd. (collectively the “UOB
Investors”), dated June 18, 2007.
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Schedule “B”
Certificate
of Compliance
To:
|
Pharmagesic (Holdings) Inc. (the “Holder”) | |
Re:
|
Convertible Debenture (the “Debenture”) dated , 2007 between WEX Pharmaceuticals Inc. (the “Corporation”) and the Holder |
The undersigned officer of the Corporation, in such capacity and not in any personal capacity
whatsoever, hereby certifies:
I am the duly appointed Chief Financial Officer of the Corporation, and as such I have knowledge
of the business and affairs of the Corporation.
I am providing this certificate in connection with the Debenture and am familiar with and have
examined the Debenture.
The representations and warranties by the Corporation of the Subscription Agreement are true and
correct on the date hereof save for the following updates to the Disclosure Schedule thereto:
<*>
To the best of my knowledge, information and belief, and after due inquiry the Corporation is in
compliance with all requirements of the Business Plan and all of the provisions of the Debenture
that, if not complied with, would, with the giving of notice, lapse of time or otherwise,
constitute a Default.
Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the
Debenture.
Dated the day of , 20
.
Name:
|
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Title:
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Schedule “C”
Grid Schedule
Grid Schedule
| Date of Advance | Outstanding | |||||||||||
| or repayment of | Amount of | Amount of | Principal | Interest | Outstanding | |||||||
| Principal Amount | Advance | Repayment | Amount | Price | Interest | Signature |
