CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED.
EXHIBIT 3.2
CONVERTIBLE SECURED DEBENTURE
I S S U E D B Y:
VIVENTIA BIOTECH INC.
I S S U E D T O:
ADH INVESTMENTS (1999) INC.
NOVEMBER 3, 2004
TABLE OF CONTENTS
ARTICLE 1. INTERPRETATION.........................................................................................1
1.1. Definitions.....................................................................................1
1.2. Interpretation..................................................................................8
1.3. Schedules.......................................................................................8
1.4. Proper Law and Attornment.......................................................................8
1.5. Non-Business Days...............................................................................9
1.6. Application of Payments.........................................................................9
ARTICLE 2. DEBENTURE..............................................................................................9
2.1. Indebtedness....................................................................................9
ARTICLE 3. INTEREST...............................................................................................9
3.1. Interest........................................................................................9
ARTICLE 4. CONVERSION.............................................................................................9
4.1. Optional Conversion.............................................................................9
ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS.......................................................................11
5.1. Definitions....................................................................................11
5.2. Adjustment in Rights...........................................................................13
5.3. Adjustment in Conversion Price.................................................................14
5.4. Rules for Adjustment in Rights and Exercise Price..............................................16
5.5. Notice of Adjustment in Exercise Price and Rights..............................................18
5.6. Corporation to Reserve Shares..................................................................18
5.7. Applicable Securities Legislation..............................................................18
ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................................19
6.1. Corporation's Representations and Warranties...................................................19
ii
6.2. Holder Representations and Warranties..........................................................23
6.3. Holder's Acknowledgments.......................................................................24
6.4. Corporation's Positive Covenants...............................................................24
6.5. Corporation's Negative Covenants...............................................................27
ARTICLE 7. EVENTS OF DEFAULT.....................................................................................29
7.1. Events of Default..............................................................................29
7.2. Rights Upon Default............................................................................30
7.3. Charges and Expenses...........................................................................31
7.4. Further Assurances.............................................................................31
7.5. Performance by the Secured Party...............................................................31
7.6. Dealings by the Holder.........................................................................31
7.7. No Set-Off.....................................................................................31
ARTICLE 8. SECURITY..............................................................................................32
8.1. Security.......................................................................................32
ARTICLE 9. GENERAL PROVISIONS....................................................................................32
9.1. Notices........................................................................................32
9.2. Amendments.....................................................................................33
9.3. Time of the Essence............................................................................33
9.4. Severability...................................................................................34
9.5. Counterparts...................................................................................34
9.6. Further Assurances.............................................................................34
9.7. Entire Agreement...............................................................................34
9.8. Transferability................................................................................34
9.9. Parties In Interest............................................................................35
iii
SCHEDULE A........Common Share Purchase Warrants
SCHEDULE B........Conversion Notice
SCHEDULE C........Security Interest
SCHEDULE D........Material Contracts
THIS INDENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005.
CONVERTIBLE SECURED DEBENTURE
THIS DEBENTURE issued as of the 3rd day of November, 2004.
ISSUED BY:
VIVENTIA BIOTECH INC., a corporation governed by the
laws of the Province of Ontario (hereinafter, the
"Corporation")
ISSUED TO:
ADH INVESTMENTS (1999) INC., a corporation governed
by the laws of the Province of Ontario (hereinafter
the "Holder")
WHEREAS the Holder has agreed to purchase and the Corporation has
agreed to sell a convertible secured debenture on the terms and conditions set
out herein in the principal amount of $5,000,000;
NOW THEREFORE this Debenture witnesses that in consideration of $1.00
and other good and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged), the Corporation agrees as follows:
ARTICLE 1.
INTERPRETATION
1.1. DEFINITIONS
For the purposes of this Debenture, unless otherwise defined herein,
the following terms shall have the following meanings ascribed to them:
(a) "BOARD" means the board of directors of the Corporation;
(b) "BUSINESS DAY" means a day other than a Saturday, Sunday or
any other day that is a statutory or civic holiday in the
Province of Ontario;
-2-
(c) "CAPITAL LEASE" means a capital lease or a lease, which should
be treated as a capital lease, in each case under generally
accepted accounting principles;
(d) "CHANGE OF CONTROL EVENT" means an event or series of related
events whereby the Dan Family ceases to Control the
Corporation;
(e) "COLLATERAL" has the meaning ascribed thereto in Section 1(a)
of Schedule "C";
(f) "COMMON SHARES" means the common shares in the capital of the
Corporation, provided that if a change referred to in Sections
5.2 or 5.3 occurs in respect of or affecting the Common
Shares, then thereafter "Common Shares" means the shares or
other securities or property purchasable or receivable on the
conversion of this Debenture as a result of any such change;
(g) "COMMON SHARE PURCHASE WARRANTS" means the common share
purchase warrants issued upon the conversion of this Debenture
evidenced by a certificate in the form attached hereto as
Schedule "A";
(h) "CONTRACTS" means agreements, franchises, leases, easements,
servitudes, privileges and other rights acquired from persons;
(i) "CONTROL" has the meaning given thereto in the Business
Corporations Act (Ontario) on the date hereof;
(j) "CONVERSION DATE" means 10:00 a.m. (Toronto time) on the
effective date of conversion as provided in Section 4.1;
(k) "CONVERSION NOTICE" has the meaning ascribed thereto in
Section 4.1(a);
(l) "CONVERSION PRICE" means $1.50, subject to adjustment as
provided in Article 5;
(m) "CURRENT MARKET PRICE" has the meaning ascribed thereto in
Section 5.1;
(n) "DAN FAMILY" means Leslie Dan, Andrea Dan-Hytman and their
respective associates and affiliates, as defined in the
Securities Act (Ontario);
(o) "DEBENTURE" means this interest bearing convertible secured
debenture of the Corporation in the principal amount of
$5,000,000;
(p) "DEFAULT" means an event, which, with the giving of notice,
lapse of time or otherwise would constitute an Event of
Default;
(q) "DEFICIENCY" means, at any time, the difference, if any
between:
(i) the aggregate of:
(A) the amount of the Obligations at that time;
and
(B) the Reasonable Expenses incurred up that
time; and
-3-
(ii) the proceeds of disposition received by the Holder
from a disposition of the Collateral in accordance
with Section 3.1a(vi) of Schedule "C";
(r) "DIVIDEND PAID IN THE ORDINARY COURSE" has the meaning
ascribed thereto in Section 5.1;
(s) "ENCUMBRANCE" means, in respect of any Person, any mortgage,
debenture, pledge, hypothec, lien, charge, assignment by way
of security, consignment, lease, hypothecation, security
interest granted or permitted by such Person or arising by
operation of law, in respect of any such Person's property or
assets, or any consignment or Capital Lease of property by
such Person as consignee or lessee or any other security
agreement, trust or arrangement having the effect of security
for the payment of any debt, liability or obligation, or any
title defect, adverse claim or other encumbrance and
"ENCUMBRANCES", "ENCUMBER" and "ENCUMBERED" shall have
corresponding meanings;
(t) "EQUITY SHARES" has the meaning ascribed thereto in Section
5.1;
(u) "EVENT OF DEFAULT" means any of the events described in
Section 7.1;
(v) "EXISTING LOCATIONS" means 147 Hamelin Street, Winnipeg,
Manitoba and 10 Four Seasons Place, Suite 501, Toronto,
Ontario;
(w) "HOLDER'S COUNSEL" means the firm of Cassels Brock & Blackwell
LLP or such other firm of legal counsel as the Holder may from
time to time designate;
(x) "INDEBTEDNESS" means, without duplication, with respect to any
Person and calculated on a consolidated or combined basis, as
applicable, (i) indebtedness for borrowed money, (ii)
obligations under Capital Leases, (iii) obligations under
letters of credit, guarantees, legally binding comfort letters
or indemnities issued in connection therewith, whether issued
for the benefit of the Corporation or a Subsidiary of the
Corporation or another or others, (vi) obligations arising
pursuant to bankers' acceptance facilities or indemnities
issued in connection therewith, and (v) all other contingent
obligations incurred for the purpose of or having the effect
of providing financial assistance to another entity,
including, without limitation, guarantees, endorsements of
bills of exchange (other than for collection or deposit in the
ordinary course of business), obligations to purchase assets
regardless of the delivery or non-delivery thereof and
obligations to make advances or otherwise provide financial
assistance to any other entity,
(y) "INTEREST" has the meaning ascribed thereto in Section 3.1;
(z) "INTEREST CONVERSION PRICE" means the ten (10) day weighted
average trading price of the Corporation's Common Shares on
the TSX for the ten (10) consecutive trading days preceding
the giving of a Conversion Notice less the maximum discount
permitted by the TSX;
(aa) "INTEREST RATE" has the meaning ascribed thereto in Section
3.1;
-4-
(bb) "MATERIAL ADVERSE EFFECT" means, (i) a material adverse effect
on the business, assets, liabilities, operations, results of
operations or condition (financial or other) of the
Corporation on a consolidated basis, or the ability of the
Corporation to carry on its business or a significant part of
its business, (ii) any impairment of the ability of the
Corporation to perform any of its obligations hereunder or
otherwise, or (iii) any material impairment of any lien
granted by the Corporation to the Holder, in each case as
determined by the Holder;
(cc) "MATERIAL CONTRACT" means all Contracts, the breach or default
of which could have a Material Adverse Effect, all such
Material Contracts of the Corporation and its Subsidiaries as
of the date hereof being listed on Schedule "D" all as may be
amended, supplemented, restated or replaced from time to time;
and when used in relation to any Person, the term "Material
Contracts" shall mean and refer to Material Contracts to which
such Person is a party or by which it or any of its assets is
bound and includes any Material Contract to which such Person
may hereafter become a party or be bound, and "Material
Contract" means any one of them;
(dd) "MATURITY DATE" means 10:00 a.m. (Toronto time) on November 3,
2006;
(ee) "OBLIGATION" means all indebtedness, liabilities and
obligations (whether direct, indirect, absolute, contingent or
otherwise) of the Corporation from time to time, under or in
respect of this Debenture;
(ff) "OTHER DEBENTURE(s)" means the interest bearing convertible
secured debenture(s) of the Corporation being on the same
terms and conditions as this Debenture in favour of Leslie L.
Dan;
(gg) "OTHER HOLDER" means Leslie L. Dan;
(hh) "PATENTS" means the patents and patent applications identified
in Appendix 1 to Schedule "C", and all registrations and
recordings of those patents in Canada, the United States of
America or elsewhere, including any reissue, continuation or
other extension in whole or in part of any such patent;
(ii) "PAYMENT AND SECURITY SHARING AGREEMENT" means the agreement
of even date herewith among the Corporation, the Holder and
the Other Holder dealing with payment and security sharing
among the Holder and Other Holder;
(jj) "PERMITTED ENCUMBRANCES" means, in respect of any Person,
(i) undetermined or inchoate Encumbrances and charges
incidental to construction, maintenance or operations
which have not at the time been filed pursuant to law
or which relate to obligations not yet due and
delinquent;
(ii) the Encumbrance of taxes and assessments for the then
current year, the Encumbrance for taxes and
assessments not at the time overdue and Encumbrances
securing worker's compensation assessments and the
lien for specified taxes and assessments which are
overdue but the validity of which
-5-
is being contested at the time in good faith, if such
Person shall have made on its books provision
reasonably deemed by it to be adequate therefor;
(iii) any Encumbrance or any right of distress reserved in
or exercisable under any lease for rent and for
compliance with the terms of such lease provided that
such obligations are not in default;
(iv) any Encumbrance resulting from cash or governmental
obligations deposited in the ordinary course of
business in connection with contracts, bids, tenders
or to secure worker's compensation, unemployment
insurance, surety or appeal bonds, costs of
litigation, when required by law, public and
statutory obligations, liens or claims incidental to
current construction, mechanics', warehousemen's,
carriers' and other similar liens;
(v) any Encumbrance resulting from security given in the
ordinary course of business to a public utility or
any governmental authority when required by such
utility or governmental authority in connection with
the operations of the Corporation;
(vi) easements, rights of way and servitudes and other
similar rights in real property which in the opinion
of Holder's Counsel, acting reasonably, will not in
the aggregate materially impair the use of the land
concerned for the purpose for which it is held or
used by such Person;
(vii) title defects or irregularities which in the opinion
of Holder's Counsel, acting reasonably, are of a
minor nature and in the aggregate will not materially
impair the use of the property for the purposes for
which it is held by such person or materially affect
the Security Interest;
(viii) any Encumbrance resulting from any judgment rendered
or claim filed against such Person which such Person
shall be contesting in good faith and by appropriate
proceedings, if such Person shall have made on its
books provisions reasonably deemed by it to be
adequate therefor;
(ix) construction, contractors', mechanics', carriers',
warehousemen's, suppliers' and materialmen's liens
and liens in respect of vacation pay, workers'
compensation, unemployment insurance or similar
statutory obligations, provided the obligations
secured by such liens are not yet due and payable
and, in the case of construction liens, which have
not yet been filed or for which the Corporation has
not received written notice of a lien;
(x) liens arising from court or arbitral proceedings,
provided that the claims secured thereby are being
contested in good faith by the Corporation or a
subsidiary; execution thereon has been stayed and
continues to be stayed; and such liens do not, in the
aggregate, materially detract from the value of the
assets of the Corporation or materially impair the
use thereof in the business of the Corporation;
-6-
(xi) any Encumbrance resulting from the excess of the
amount of any taxes, rates, assessments or
governmental charges or levies for which final
assessments have not been received over and above the
amount of such taxes, rates, assessments or
governmental charges or levies as estimated by a
responsible officer of such Person;
(xii) all rights reserved to or vested in any governmental
authority by the terms of any lease, licence,
franchise, grant or permit held by such Person or by
any statutory provision to terminate any such lease,
licence, franchise grant or permit or to require
annual or periodic payments as a condition of the
continuance thereof or to distrain against or to
obtain a lien on any property or assets of such
Person in the event of failure to make such annual or
other periodic payments;
(xiii) liens in connection with any Capital Lease to the
extent they are limited to the assets which are the
subject of such Capital Leases (or other agreement
carrying the right to use);
(xiv) Purchase Money Security Interests;
(xv) the Security Interest;
(xvi) the security interest in the Other Debenture(s);
(xvii) such other liens as may be consented to in writing by
the Holder; and
(xviii) the extension, renewal or refinancing of any of the
above;
(kk) "PERMITTED INDEBTEDNESS" means in respect of the Corporation
and the Subsidiaries,
(i) Indebtedness incurred pursuant to this Debenture:
(ii) Indebtedness incurred pursuant to the Other
Debenture(s); and
(iii) Indebtedness secured by Permitted Encumbrances;
(ll) "PERSON" includes any individual, corporation, company,
partnership, association state, trust or government or any
agency of political subdivision of any government;
(mm) "PRINCIPAL" means the principal amount of indebtedness
outstanding from time to time under this Debenture;
(nn) "PROCEEDS", of any Collateral, means property in any form
derived, directly or indirectly, from any dealing with such
Collateral or the proceeds therefrom and includes any payment
representing indemnity or compensation for loss or damage to
such Collateral or proceeds therefrom, including, without
limitation, insurance proceeds;
-7-
(oo) "PURCHASE MONEY SECURITY INTEREST" means any Encumbrance
given, assumed or arising by operation of law, including
Capital Leases, to provide or secure, or to provide the
obligor with funds to pay, the whole or any part of the
consideration for the acquisition of property where the
principal amount of the obligation secured by such Encumbrance
is secured only by the property being acquired by the obligor,
and includes the renewal or refinancing of any such
Encumbrance upon the same property provided that the
indebtedness secured and the security therefore are not
increased thereby;
(pp) "REASONABLE EXPENSES" means any and all reasonable expenses
incurred from time to time by the Holder or any Receiver in
connection with the protection, perfection or preservation of
the security and other rights constituted hereby, in enforcing
payment or performance of the Obligations or any part thereof
or in locating, taking possession of, transporting, holding,
repairing, processing, preparing for and arranging for the
disposition of and/or disposing of the Collateral or in
contemplation of any of the foregoing and any and all other
reasonable expenses incurred by the Holder or any Receiver as
a result of the Holder or such Receiver exercising any of its
rights or remedies hereunder or at law, including, without in
any way limiting the generality of the foregoing, any and all
legal expenses including those incurred in any legal action or
proceeding or appeal therefrom commenced or taken in good
faith by the Holder and any and all fees and disbursements of
any counsel, accountant or valuator or any similar Person
employed by the Holder in connection with any of the foregoing
and the costs of insurance and payment of taxes (other than
taxes relating to the income of the Holder) and other charges
incurred in retaking, holding, repairing, processing and
preparing for disposition and disposing of the Collateral
(qq) "RECEIVER" means a receiver, a reorganization manager or any
similar Person appointed in accordance with Section 3 of
Schedule "C";
(rr) "SECURITY DOCUMENTS" has the meaning ascribed thereto in
Section 8.1;
(ss) "SECURITY INTEREST" has the meaning ascribed thereto in
Section 1(a) of Schedule "C";
(tt) "SUBSIDIARY" means 20025 Yukon Inc. and "SUBSIDIARIES" means
the Subsidiary and/or any other corporation of which more than
50% of the outstanding shares of any class carrying voting
rights are beneficially owned, directly or indirectly, by the
Corporation;
(uu) "TRADE MARKS" means the trade marks, trade names, trade
styles, service marks, certification marks, prints and labels
identified in Appendix 2 to Schedule "C, and all similar,
present or future marks, styles, prints or labels and all
applications, registrations and recordings thereof in Canada,
the United States of America or elsewhere, including every
renewal, reissue or other extension of any registration or
recording;
(vv) "TSX" means the Toronto Stock Exchange; and
-8-
(ww) "UNITS" means the units comprised of one Common Share and one
half of one Common Share Purchase Warrant to be issued upon
the conversion of this Debenture;
1.2. INTERPRETATION
For the purposes of this Debenture, except as expressly provided or
unless the context requires otherwise:
(a) the headings used throughout this Debenture are for ease of
reference only and shall not in any way affect the meaning or
interpretation of this Debenture;
(b) any reference herein to a numbered or lettered part or section
refers to the specified part or section of this Debenture;
(c) "hereto", "herein", "hereof", "hereunder" and similar
expressions refer to this Debenture and not to any particular
part or section of this Debenture;
(d) any words or expressions contained in this Debenture which
impart the singular number include the plural number and vice
versa;
(e) any words or expressions contained in this Debenture which
impart any gender include all genders; and
(f) all dollar amounts expressed herein refer to lawful currency
of Canada.
1.3. SCHEDULES
The following schedules attached hereto are hereby incorporated into
and form part of this Debenture:
Schedule "A" - Common Share Purchase Warrants
Schedule "B" - Conversion Notice
Schedule "C" - Security Interest
Schedule "D" - Material Contracts
1.4. PROPER LAW AND ATTORNMENT
This Debenture and all matters arising hereunder shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein. Each of the parties hereto, by the execution
and delivery of this Debenture, irrevocably and unconditionally, with respect to
any matter or thing arising out of or pertaining to this Debenture, hereby
attorns and submits to the non-exclusive jurisdiction of the courts of the
Province of Ontario for the determination of all matters arising pursuant to
this Debenture.
-9-
1.5. NON-BUSINESS DAYS
Whenever any payment hereunder (whether in regard to Principal,
Interest or otherwise) shall become due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day.
During an extension under this Section 1.5 of any due date for payment of any
Principal sum, Interest shall be payable to the date of actual payment of such
Principal sum at the rate payable hereunder.
1.6. APPLICATION OF PAYMENTS
All payments made in respect of the repayment of this Debenture shall
be applied firstly to payment of costs, secondly to payment of Interest and
thirdly to payment of Principal.
ARTICLE 2.
DEBENTURE
2.1. INDEBTEDNESS
The Corporation for value received hereby promises to pay to or to the
order of the Holder on the Maturity Date, the principal amount of Five Million
Dollars ($5,000,000). On the Maturity Date, or earlier as required by Section
7.2 hereof, payment of Principal is to be made in lawful money of Canada at the
address of the Holder set out in Section 9.1 or other location designated by the
Holder by notice to the Corporation. The Obligations and the rights of the
Holder and the Other Holder, as between themselves, are subject to the
provisions of the Payment and Security Sharing Agreement.
ARTICLE 3.
INTEREST
3.1. INTEREST
The Corporation shall pay interest ("Interest") on the Principal
outstanding from time to time under this Debenture (including without limitation
any capitalized interest), and any other monies due and payable hereunder, both
before and after maturity, default or judgment, at four and one half per cent
(4.5%) per annum, computed on a 365 day basis (the "Interest Rate"), accruing
daily and compounded annually until the Principal has been paid in full or has
been converted. For greater certainty, on November 3, 2005 all accrued interest
shall be capitalized and added to the Principal. Interest shall accrue until
full payment of the Principal has been received by the Holder or all of the
Principal has been converted into Units in accordance with Article 4.
ARTICLE 4.
CONVERSION
4.1. OPTIONAL CONVERSION
(a) Subject to the provisions of this Debenture, the Holder may,
at its option, at any time from the date of issuance of this
Debenture, in whole or in part, by delivering to the
Corporation this Debenture together with the conversion notice
attached as Schedule "B" hereto (the "Conversion Notice") duly
executed by the Holder,
-10-
indicating what portion of the Principal and/or accrued
Interest the Holder then wishes to convert, convert all or any
of the Principal and/or accrued Interest into Units, and the
Principal and/or accrued Interest will be deemed to be reduced
accordingly.
(b) The Principal will be converted into Units at the Conversion
Price and the Conversion Price will be subject to adjustment
in accordance with Article 5. Accrued Interest will be
converted into Units at the Interest Conversion Price.
(c) The completion by the Holder of a Conversion Notice and
delivery of same to the Corporation for conversion shall be
deemed to create and constitute a contract between the Holder
and the Corporation whereby (i) the Holder or its nominee
designated in the Conversion Notice subscribes for the number
of Units which the Holder shall be entitled to receive upon
such conversion of the Principal and Interest stated in the
Conversion Notice; (ii) provided the Common Shares comprising
the Units so subscribed for are issued as fully paid and
non-assessable, the indebtedness under this Debenture is
satisfied and discharged to the extent this Debenture is
converted; and (iii) the Corporation and the Holder agree that
the satisfaction and discharge of the Indebtedness under this
Debenture evidenced by this Debenture, to the extent of the
Principal and accrued Interest so converted, and completion of
conversion, constitutes full payment of the subscription price
for the Units issuable on such conversion and thereafter such
portion of the Principal and accrued Interest under this
Debenture shall not be considered outstanding hereunder and
the Holder shall have no right with respect to such Principal
and accrued Interest except to receive the certificate for
Common Shares and Common Share Purchase Warrants comprising
the Units. With respect to the Units, Common Shares and Common
Share Purchase Warrants, as required from time to time under
the securities legislation which governs the Corporation or
any hold period imposed by a regulatory authority, the Holder
agrees to be bound by any applicable hold period. The
certificates evidencing the Common Shares and Common Share
Purchase Warrants shall contain the following legend:
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND
MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE
SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE
HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY
BEFORE MARCH 4, 2005."
(d) Concurrently with the surrender of this Debenture for
conversion pursuant to this Article 4, the Corporation will
provide to the Holder a receipt acknowledging the
Corporation's obligation to issue Units to the Holder. As
promptly as practicable
-11-
after the surrender or deemed surrender of this Debenture for
conversion pursuant to this Section 4.1(d) (and in any event
within three Business Days), the Corporation will issue and/or
deliver, as the case may be, to the Holder or its nominee(s) a
certificate or certificates representing the number of fully
paid and non-assessable Common Shares and Common Share
Purchase Warrants comprising the Units into which all or any
portion of the Principal and accrued Interest has been
converted.
(e) Upon conversion pursuant to this Article 4, the Debenture
shall be deemed cancelled and the Principal and accrued
Interest evidenced hereby shall be and shall be deemed to be
fully satisfied and discharged, and, if any Principal remains
outstanding under this Debenture after giving effect to such
conversion, the Corporation will issue a new Debenture, in
form identical to this Debenture, except that it will be equal
in principal amount to the amount of the Principal amount
outstanding immediately following the conversion.
(f) The conversion of this Debenture pursuant to this Article 4
will be deemed to have been made at the close of business on
the date on which the certificate(s) referred to in Section
4.1(d) have been received by the Holder so that the Holder's
rights in respect of the converted portion of the Principal
and accrued Interest will terminate at that time and the
Person or Persons entitled to receive Units into which the
whole or any part of this Debenture is converted will be
treated, as between the Corporation and that Person or
Persons, as having become the holder or holders of record of
the Common Shares and Common Share Purchase Warrants
comprising those Units at that time.
(g) As a condition precedent to taking any action which would
require an adjustment or readjustment of the Conversion Price
pursuant to Article 5, the Corporation will take any action
which may, in the opinion of its counsel, be necessary for the
Corporation to validly and legally issue, as fully paid and
non-assessable common shares, all the Common Shares which the
Holder is entitled to receive on the conversion of the
Debenture. The Corporation agrees that it will at all times
keep sufficient Common Shares reserved for the purpose of
issue upon conversion of the Debenture. All Common Shares will
be duly and validly issued as fully paid and non-assessable
common shares in the capital of the Corporation.
ARTICLE 5.
ADJUSTMENT OF CONVERSION RIGHTS
5.1. DEFINITIONS
In this Article 5, the following terms have the following meanings:
"CURRENT MARKET PRICE" at any particular date means the weighted
average trading price of the Common Shares on the TSX (or, if the
Common Shares are not then listed and posted for trading on the TSX,
on any other stock exchange in Canada on which the Common Shares are
listed and posted for trading as may be selected for that purpose by
the Board) during the 20 consecutive trading days ending on a date not
earlier than the fifth trading day before the particular date or, if
the Common Shares are not listed and posted for trading on
-12-
any stock exchange, the current market price of the Common Shares as
determined by the Board, which determination shall be conclusive; and
for the purposes hereof, "trading day" means a day on which the
relevant stock exchange is open for business and the Common Shares may
be traded on that exchange on that day;
"DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the
Common Shares in any financial year of the Corporation, whether in
(i) cash,
(ii) securities of the Corporation, including
rights, options or warrants to purchase any
securities or property of the Corporation or
other assets of the Corporation (but
excluding rights, options or warrants
referred to in Section 5.3(b) and rights,
options or warrants referred to in
parentheses in Section 5.3(c)(iv)), or
(iii) property or other assets of the Corporation,
in each case to the extent that the amount or value of such dividend
together with the amount or value of all other such dividends
theretofore paid in such financial year (any such securities, property
or other assets so distributed to be valued at the fair market value
of such securities, property or other assets, as the case may be, as
determined by the board of directors of the Corporation, which
determination shall be conclusive) does not exceed the greater of:
(i) 150% of the greater of
(A) the aggregate amount of dividends
paid by the Corporation on the
Common Shares in the period of
twelve (12) consecutive months ended
immediately prior to the first day
of such financial year; and
(B) one-third of the aggregate amount of
dividends paid by the Corporation on
the Common Shares in the period of
thirty-six (36) consecutive months
ended immediately prior to the first
day of such financial year; or
(ii) 100% of the consolidated net income of the
Corporation before extraordinary items (but
after dividends payable on all shares
ranking prior to, or on a parity with the
Common Shares, with respect to the payment
of dividends) for the period of twelve (12)
consecutive months ended immediately prior
to the first day of such financial year,
such consolidated net income, extraordinary
items and dividends to be as shown in the
audited consolidated financial statements of
the Corporation for such period of twelve
(12) consecutive months or if there are no
audited consolidated financial statements
for such period, computed in accordance with
generally accepted accounting principles,
consistent with those applied in the
-13-
preparation of the most recent audited
consolidated financial statements of the
Corporation; and
"EQUITY SHARES" means the Common Shares and any shares of any other
class or series of the Corporation which may from time to time be
authorized for issue if by their terms such shares confer on the
holders thereof the right to participate in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation beyond a fixed sum or a fixed sum plus
accrued dividends.
5.2. ADJUSTMENT IN RIGHTS
(a) If, at any time after the date hereof and prior to the
Maturity Date, there is a reclassification of the outstanding
Common Shares or change of the Common Shares into other shares
or securities or any other capital reorganization of the
Corporation or a consolidation, merger or amalgamation of the
Corporation with or into any other corporation (any such event
being called a "Capital Reorganization"), the Holder shall be
entitled to receive and shall accept for the same aggregate
consideration, upon the conversion of this Debenture at any
time after the record date on which the holders of Common
Shares are determined for the purpose of the Capital
Reorganization (the "relevant record date"), in lieu of the
number of securities to which it was theretofore entitled upon
such exercise, the kind and amount of shares or other
securities of the Corporation or of the corporation resulting
from the Capital Reorganization that the Holder would have
been entitled to receive as a result of such Capital
Reorganization if, on the relevant record date, it had been
the holder of record of the number of Common Shares in respect
of which the Debenture is being converted, and such shares or
other securities shall be subject to adjustment thereafter in
accordance with provisions which are the same, as nearly as
may be possible, as those contained in this Article 5;
provided that no such Capital Reorganization shall be
implemented unless all necessary steps have been taken so that
the Holder shall be entitled to receive the kind and amount of
shares or other securities of the Corporation or of the
corporation resulting from the Capital Reorganization as
provided above.
(b) If, at any time after the date hereof and prior to the
Maturity Date, any adjustment in the Conversion Price shall
occur as a result of:
(i) an event referred to in Section 5.3(a);
(ii) the fixing by the Corporation of a record date for an
event referred to in Section 5.3(b); or
(iii) the fixing by the Corporation of a record date for an
event referred to in Section 5.3(c) if such event
constitutes the issue or distribution to the holders
of all of its outstanding Common Shares of (i) Equity
Shares, or (ii) securities exchangeable for or
convertible into Equity Shares at an exchange or
conversion price per share less than the Current
Market Price on such record date, or (iii) rights,
options or warrants to acquire Equity Shares or
securities exchangeable for or convertible into
Equity Shares at an exercise, exchange
-14-
or conversion price per share less than the Current
Market Price on such record date;
then the number of securities purchasable upon the subsequent
conversion of the Debenture shall be adjusted simultaneously
with the adjustment to the Conversion Price provided in
Section 5.3 by multiplying the number of securities issuable
upon the conversion of the Debenture immediately prior to such
adjustment by a fraction which shall be the reciprocal of the
fraction employed in the adjustment of the Conversion Price.
5.3. ADJUSTMENT IN CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) If, at any time after the date hereof and prior to the
Maturity Date, the Corporation:
(i) subdivides its outstanding Common Shares into a
greater number of shares,
(ii) consolidates its outstanding Common Shares into a
smaller number of shares, or
(iii) issues Common Shares to the holders of all of its
outstanding Common Shares by way of a stock dividend
or other distribution other than a Dividend Paid in
the Ordinary Course,
(any of such events being called a "Common Share
Reorganization"), the Conversion Price shall be adjusted
effective immediately after the record date on which the
holders of Common Shares are determined for the purpose of the
Common Share Reorganization (the "relevant record date") by
multiplying the Conversion Price in effect immediately prior
to the relevant record date by a fraction:
(A) the numerator of which shall be the number
of Common Shares outstanding on the relevant
record date before giving effect to the
Common Share Reorganization; and
(B) the denominator of which shall be the number
of Common Shares outstanding on the relevant
record date after giving effect to the
Common Share Reorganization.
(b) If, at any time after the date hereof and prior to the
Maturity Date, the Corporation fixes a record date for the
issue of rights, options or warrants to the holders of all of
its outstanding Common Shares (the "relevant record date")
under which such holders are entitled, during a period
expiring not more than 45 days after the relevant record date
(the "Rights Period"), to subscribe for or purchase Common
Shares at a price per share, or securities exchangeable for or
convertible into Common Shares at an exchange or conversion
price per share less than 95% of the Current Market Price on
the relevant record date (any of such events being called a
"Rights Offering"), the Conversion Price shall be adjusted
effective immediately after the end of the Rights
-15-
Period by multiplying the Conversion Price in effect
immediately prior to the end of the Rights Period by a
fraction:
(i) the numerator of which shall be the aggregate of:
(A) the number of Common Shares outstanding on
the relevant record date, and
(B) the number determined by dividing (1) either
(a) the product of the number of Common
Shares issued or subscribed for during the
Rights Period under the Rights Offering and
the price at which such Common Shares were
offered, or, as the case may be, (b) the
product of the exchange or conversion price
of the securities exchangeable for or
convertible into Common Shares and the
number of Common Shares for, or into which
the securities so offered pursuant to the
Rights Offering could have been exchanged or
converted during the Rights Period, by (2)
the Current Market Price on the relevant
record date; and
(ii) the denominator of which shall be, in the case of
Section 5.3(b)(i)(B)(1)(a), the number of Common
Shares outstanding on the relevant record date plus
the number of Common Shares actually issued or
subscribed for during the Rights Period upon exercise
of the rights, warrants or options under the Rights
Offering and, in the case of Section
5.3(b)(i)(B)(1)(b), the number of Common Shares
outstanding on the relevant record date plus the
number of Common Share for or into which the
securities so offered pursuant to the Rights Offering
could have been exchanged or converted during the
Rights Period.
If the Debenture has been converted during the period
beginning immediately after the record date for a Rights
Offering and ending on the last day of the Rights Period for
that Rights Offering then, in addition to the securities to
which the Holder is otherwise entitled upon such exercise
pursuant to this Debenture, the Holder shall be entitled to
that number of additional securities which, when added to the
number of securities to which the Holder is entitled upon such
exercise, equals the number of securities to which the Holder
would have been entitled upon exercise if the Holder had
converted the Debenture immediately after the end of the
Rights Period and after giving effect to the adjustment of the
Conversion Price provided for in this Section 5.3(b). Such
additional Common Shares shall be deemed to have been issued
to the Holder immediately following the end of the Rights
Period.
(c) If, at any time after the date hereof and prior to the
Maturity Date, the Corporation fixes a record date (the
"relevant record date") for the issue or distribution to the
holders of all of its outstanding Common Shares of:
(i) shares of any class in its capital,
(ii) evidences of its Indebtedness,
-16-
(iii) assets or property, or
(iv) rights, options or warrants to subscribe for or
purchase any of the foregoing (other than rights,
options or warrants to purchase Common Shares
exercisable within 45 days of the date of issue of
the rights, options or warrants at a price per share
equal to or greater than 95% of the Current Market
Price),
and if such issue or distribution does not constitute a Common
Share Reorganization, a Rights Offering or a Dividend Paid in
the Ordinary Course (any of such events referred to in
Sections 5.3(c)(i) through 5.3(c)(iv) being called a "Special
Distribution"), the Conversion Price shall be adjusted
immediately after the relevant record date by multiplying the
Conversion Price in effect on the relevant record date by a
fraction:
(A) the numerator of which shall be the
difference obtained when (a) the amount by
which the aggregate fair market value of the
shares, rights, options, warrants, evidences
of Indebtedness or assets or property, as
the case may be, which are distributed in
the Special Distribution exceeds the fair
market value of the consideration, if any,
received therefor by the Corporation, is
subtracted from (b) the product obtained
when the number of Common Shares outstanding
on the relevant record date is multiplied by
the Current Market Price on the relevant
record date; and
(B) the denominator of which shall be the
product obtained when the number of Common
Shares outstanding on the relevant record
date is multiplied by the Current Market
Price on the relevant record date;
provided that no such adjustment shall be made if the result
of such adjustment would be to increase the Conversion Price
in effect immediately before the relevant record date. Any
determination of fair market value shall be made by the Board
and their determination shall be conclusive. To the extent
that any Special Distribution is not made, the Conversion
Price shall be readjusted effective immediately to the
Conversion Price that would then be in effect based upon the
shares, rights, options or warrants, evidences of
Indebtedness, assets or property actually distributed.
5.4. RULES FOR ADJUSTMENT IN RIGHTS AND EXERCISE PRICE
For the purpose of this Article 5:
(a) The adjustments provided for in this Article 5 are cumulative
and shall be made successively wherever an event referred to
in a particular section of this Article occurs, subject to the
following provisions of this Article.
(b) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at
least 1% in the Conversion Price and no adjustment shall be
made in the number of securities issuable on conversion of the
Debenture unless it would result in a change of at least
one-hundredths of a
-17-
Common Share; provided, however, that any adjustments which,
by reason of this section, are not required to be made shall
be carried forward and taken into account in a subsequent
adjustment and so on.
(c) Any Common Shares owned by or held for the account of the
Corporation shall be deemed not to be outstanding for the
purpose of any computation under Section 5.3.
(d) No adjustment to the Conversion Price shall be made in respect
of any event described in Section 5.3 (other than the events
referred to in Sections 5.3(a)(i) and 5.3(a)(ii)) if the
Holder is entitled to participate in such event on the same
terms as though, and to the same effect as if, it had
converted this Debenture in full prior to or on the effective
date or record date of such event, provided that such
participation is subject to all necessary regulatory approval.
(e) In any case in which this Article 5 requires that an
adjustment become effective immediately after a record date
for an event referred to herein, the Corporation may defer,
until the occurrence of such event, issuing to the Holder in
respect of the conversion of the Debenture after such record
date and before the occurrence of such event the additional
securities issuable upon such exercise by reason of the
adjustment required by such event and delivering to the Holder
any distributions declared with respect to such additional
securities after such record date and before such event;
provided, however, that the Corporation delivers to the Holder
an appropriate instrument evidencing its right to receive such
additional securities and such distributions upon the
occurrence of the event requiring such adjustment.
(f) If the Corporation fixes a record date to determine the
holders of Common Shares entitled to receive any dividend or
distribution or fixes a record date to take any other action
and thereafter, but before the distribution to shareholders of
any such dividend or distribution or the taking of such other
action, the Corporation legally abandons its plan to pay such
dividend or distribution or take such other action, then no
adjustment pursuant to this paragraph shall be required by
reason of the fixing of such record date.
(g) If the Board does not fix a record date for a Common Share
Reorganization, Special Distribution or Rights Offering, the
Corporation shall be deemed to have fixed as the record date
therefor the close of business on the day on which the Board
authorizes the making of the Common Shares Reorganization,
Special Distribution or Rights Offering, as the case may be.
(h) If any question at any time arises with respect to the
Conversion Price or the number of Common Shares issuable upon
the conversion of this Debenture, such question shall be
conclusively determined by the auditors from time to time 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 the Corporation with the concurrence of the
Holder, and any such determination shall be binding upon the
Holder, the Corporation and all shareholders. If any such
determination is made, the Corporation shall deliver a
certificate to the Holder describing such determination.
-18-
(i) As a condition precedent to the taking of any action which
would require any adjustment to the conversion Rights or
Conversion Price, the Corporation must have taken all action
which may be necessary in order that the Corporation shall
have issued and reserved in its authorized capital and may
validly and legally issue as fully-paid and non-assessable all
of the Common Shares or other securities which the Holder is
entitled to receive on full conversion hereof in accordance
with the provisions hereof.
(j) In the case the Corporation, after the date of issuance of
this Debenture, takes any action affecting the Common Shares,
other than an action described in Article 5, which in the
opinion of the Board would materially affect the rights of the
Holder, the Conversion Price will be adjusted in such manner,
if any, and at such time by action by the Board but subject in
all cases to any necessary regulatory approval. Failure of the
taking of action by the Board so as to provide for an
adjustment on or prior to the effective date of any action by
the Corporation affecting the Common Shares will be conclusive
evidence that the Board has determined it to be equitable to
make no adjustment.
5.5. NOTICE OF ADJUSTMENT IN EXERCISE PRICE AND RIGHTS
(a) At least fourteen (14) days prior to the effective date or
record date, as the case may be, of any event which requires
or might require an adjustment pursuant to this Article 5, the
Corporation shall deliver to the Holder a certificate of the
Corporation specifying the particulars of such event and, if
determinable, the required adjustment and the computation of
such adjustment.
(b) In case any adjustment for which a notice in Section 5.5(a)
has been given is not then determinable, the Corporation shall
promptly after such adjustment is determinable deliver to the
Holder a certificate of the Corporation containing a
computation of such adjustment.
5.6. CORPORATION TO RESERVE SHARES
The Corporation covenants with the Holder that the Corporation will at
all times reserve and keep available out of its authorized Common Shares, solely
for the purpose of issue upon conversion of this Debenture as provided in this
Article 5, and issue to the Holder or its nominee upon exercise of the
conversion rights hereunder, such number of Common Shares as will then be
issuable upon the conversion of this Debenture.
5.7. APPLICABLE SECURITIES LEGISLATION
The Corporation will not, directly or indirectly, do any act or thing
or, to the extent that it is able, permit any act or thing to be done, which
would remove or deny any registration or prospectus exemption available under
any applicable securities legislation with respect to the issuance of Common
Shares upon the exercise of the conversion rights contained in this Debenture.
-19-
ARTICLE 6.
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1. CORPORATION'S REPRESENTATIONS AND WARRANTIES
The Corporation hereby represents, warrants and covenants to and with
the Holder and acknowledges that the Holder is relying upon such
representations, warranties and covenants (which representations, warranties and
covenants shall survive the date hereof) that:
(a) each of the Corporation and the Subsidiary is duly organized
and validly existing under the laws of Ontario and Yukon,
respectively; each is duly registered, licensed or qualified
as an extra-provincial corporation in each jurisdiction where
it carries on business or where the failure to be so
registered, licensed or qualified will result in a Material
Adverse Effect; other than the Subsidiary, a wholly-owned
subsidiary of the Corporation, the Corporation has no
Subsidiaries;
(b) the Corporation has the corporate power, capacity and
authority to enter into, and to perform its obligations under,
this Debenture; this Debenture has been duly authorized,
executed and delivered by the Corporation and is a valid and
binding obligation of it, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency and other
laws of general application limiting the enforceability of
creditors' rights and to the fact that specific performance is
an equitable remedy available only in the discretion of the
court; all agreements contemplated by this Debenture to which
the Corporation is a party will be duly authorized, executed
and delivered by the Corporation and will be valid and binding
obligations of it, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency
and other laws of general application limiting the
enforceability of creditors' rights and to the fact that
specific performance is an equitable remedy available only in
the discretion of the court;
(c) each of the Corporation and the Subsidiary has the corporate
power and capacity to own or lease its assets and to carry on
its business as now conducted by it and as is presently
intended to be conducted by it. The Corporation carries on
business only at the Existing Locations and all Collateral is
located at the Existing Locations;
(d) the issue of this Debenture and the performance by the
Corporation of its other obligations contemplated hereby does
not require the approval or consent of any government
authority having jurisdiction, except such as has already been
obtained and will not result in a breach of, and does not
create a state of facts which, after notice or lapse of time
or both, will result in a breach of, and does not and will not
conflict with, (i) any of the terms, conditions or provisions
of the constating documents or by-laws or resolutions of the
shareholders and directors of the Corporation or the
Subsidiary, any Material Contract; (ii) to the knowledge of
the Corporation, any statute, rule or regulation applicable to
the Corporation or the Subsidiary; and (iii) to the knowledge
of the Corporation, any judgment decree or order binding the
Corporation, the Subsidiary or the property or assets of the
Corporation or the Subsidiary;
-20-
(e) the authorized capital of the Corporation consists of an
unlimited number of Common Shares and an unlimited number of
preference shares, issuable in series, of which, as at the
date hereof 29,186,465 Common Shares (and no other shares) are
issued and outstanding as fully paid and non-assessable; the
authorized capital of the Subsidiary consists of an unlimited
number of class A shares of which, as at the date hereof, one
class A share (and no other shares) is issued and outstanding
as fully paid and non-assessable, and such share is owned by
the Corporation; all such issued and outstanding securities
have been validly issued and are outstanding as fully paid and
non-assessable; there are no shareholders agreements, pooling
agreements, voting trusts or other agreements or
understandings with respect to the voting of any securities,
or any of them, of the Corporation or of the Subsidiary; other
than the convertible debentures issued on June 20, 2002 to the
Holder and Other Holder which will be repaid on the date
hereof, 11,447,113 share purchase warrants issued and
outstanding and 1,596,992 options to purchase Common Shares,
each of which entitles the holder to purchase one Common Share
at varying exercise prices, there are no agreements, options,
warrants, rights of conversion or other rights pursuant to
which either the Corporation or the Subsidiary is, or may
become, obligated to issue any shares or any securities
convertible or exchangeable, directly or indirectly, into any
shares of the Corporation or the Subsidiary, respectively.
(f) the Common Shares to be delivered to the Holder, when
delivered to the Holder, shall be fully-paid and
non-assessable shares in the capital of the Corporation;
(g) the Corporation will, at all times while the Common Share
Purchase Warrants are outstanding, allot and maintain
sufficient number of Common Shares to satisfy the exercise of
Common Share Purchase Warrants comprising the Purchased Units;
(h) each of the Corporation and the Subsidiary is current and
up-to-date with all filings required to be made by it under
the corporate laws of its jurisdiction of incorporation and
the securities laws of the provinces of Canada where it is a
reporting issuer or its equivalent, as applicable except where
not filing would not have a Material Adverse Effect;
(i) the Corporation is a reporting issuer not in default of its
obligations under the securities laws of British Columbia,
Alberta, Manitoba and Ontario (the "Provinces") and no
material change relating to the Corporation has occurred with
respect to which the requisite material change report has not
been filed under the securities laws of the Provinces and no
such disclosure has been made on a confidential basis;
(j) none of the materials filed by or on behalf of the Corporation
with the applicable securities commissions or the stock
exchanges (the "Public Record") contained a misrepresentation
as at the date of such filing which has not been corrected;
(k) to the knowledge of the Corporation, each of the Corporation
and the Subsidiary has conducted and is conducting its
business in compliance with all applicable material licensing,
anti-pollution and environmental protection legislation,
regulations or by-laws or other similar legislation, laws,
by-laws, rules and regulations of any governmental or
regulatory bodies; to the knowledge of the Corporation, there
is no
-21-
licensing, anti-pollution or environmental legislation,
regulation, by-law or lawful requirement presently in force
which the Corporation anticipates that it or the Subsidiary
will be unable to comply with without adversely affecting its
financial condition, results of operations, business or
prospects in any jurisdiction in which its business is carried
on;
(l) to the knowledge of the Corporation, each of the Corporation
and the Subsidiary holds all material licenses, certificates,
registrations, permits, consents or qualifications required by
the appropriate state, provincial, municipal or federal
regulatory agencies or bodies necessary in order to enable its
business to be carried on as now conducted and to the
knowledge of the Corporation, all such licenses, certificates,
registrations, permits, consents and qualifications are valid
and subsisting and in good standing and do not contain any
unusual burdensome provision, condition or limitation which
has a Material Adverse Effect on the Corporation or the
Subsidiary and, to the knowledge of the Corporation, neither
the Corporation nor the Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
such licenses, certificates, registrations, permits, consents,
or qualifications which, if the subject of an unfavorable
decision, ruling or finding would materially and adversely
affect the conduct of the business, operations, financial
condition or income or future prospects of the Corporation or
the Subsidiary;
(m) to the knowledge of the Corporation, no legal or governmental
proceedings have been instituted or threatened to which either
the Corporation or the Subsidiary is a party or to which the
property of the Corporation or the Subsidiary is subject that
would result individually or in the aggregate in a Material
Adverse Effect;
(n) the audited consolidated annual financial statements of the
Corporation as at and for the year ended December 31, 2003
contained in the Corporation's annual report for such year:
(i) have been prepared in accordance with generally
accepted accounting principles applied on a basis
consistent with those of preceding fiscal periods;
(ii) represent fully, fairly and correctly the
consolidated assets, liabilities and financial
condition of the Corporation and the Subsidiary as at
the end of such fiscal year and the consolidated
results of its operations and the changes in its
financial position for the year then ended;
(iii) are in accordance with the books and records of the
Corporation and the Subsidiary; and
(iv) contain and reflect all necessary adjustments for the
fair presentation of the results of operations and
the financial condition of the business of the
Corporation and the Subsidiary on a consolidated
basis for the period covered thereby,
-22-
and there has not been any material adverse change in the
financial position of the Corporation or the Subsidiary, or
their businesses, assets, liabilities or undertaking since the
end of such fiscal year other than as specified in the Public
Record;
(o) the unaudited consolidated interim financial statements of the
Corporation as at and for the six months ended June 30, 2004:
(i) have been prepared in accordance with generally
accepted accounting principles applied on a basis
consistent with those of preceding fiscal periods;
(ii) represent fully, fairly and correctly the
consolidated assets, liabilities and financial
condition of the Corporation and the Subsidiary as at
June 30, 2004 and the consolidated results of its
operations and the changes in its financial position
for the period then ended;
(iii) are in accordance with the books and records of the
Corporation and the Subsidiary; and
(iv) contain and reflect all necessary adjustments for the
fair presentation of the results of operations and
the financial condition of the business of the
Corporation and the Subsidiary on a consolidated
basis for the period covered thereby,
and there has not been any material adverse change in the
financial position of the Corporation or the Subsidiary, or
their businesses, assets, liabilities or undertaking since the
end of such fiscal period other than as specified in the
Public Record;
(p) the auditors of the Corporation who audited the consolidated
financial statements for the most recently completed fiscal
year for which audited financial statements are available and
who provided their audit report thereon are independent public
accountants as required under applicable Canadian securities
laws;
(q) each of the Corporation and the Subsidiary has filed all
necessary tax returns and has paid all applicable taxes of
whatever nature for all tax years to the date hereof to the
extent such taxes have become due or have been alleged to be
due and there are no tax deficiencies or interest or penalties
accrued or accruing, or alleged to be accrued or accruing,
thereon with respect to the Corporation or the Subsidiary
which, in any of the above cases, might reasonably be expected
to result in an adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Corporation or the Subsidiary, other than
existing tax deficiencies not in excess of $50,000;
(r) no order ceasing or suspending trading in securities of the
Corporation or prohibiting the sale of securities by the
Corporation has been issued and, to the knowledge of the
Corporation, no proceedings for this purpose have been
instituted or are pending;
(s) to the knowledge of the Corporation, each of the Corporation
and the Subsidiary is in compliance with all laws respecting
employment and employment practices, terms
-23-
and conditions of employment, pay equity and wages, except
where such non-compliance would not constitute an adverse
material fact of the Corporation or the Subsidiary or result
in an adverse material change to the Corporation or the
Subsidiary, and has not and is not engaged in any unfair
labour practice;
(t) there is no requirement for the Corporation to make any filing
with, give notice to or obtain any licence, permit,
certificate, registration, authorization, consent or approval
of any governmental or regulatory authority or third party as
a condition to the execution, delivery and performance of this
Debenture by the Corporation except for filing with the
Ontario Securities Commission ("OSC") of a report on Form
45-501F1 or similar filings required on the issue of the
Common Shares and Common Share Purchase Warrants issuable
pursuant to this Debenture, each prepared and executed in
accordance with OSC Rule 45-501 and accompanied by the
prescribed fees, and complying with the requirements imposed
by the TSX as a condition to the listing of the Common Shares
issuable upon conversion of the Debenture and exercise of the
Warrants;
(u) each of the Corporation and the Subsidiary has good title to
the assets which are subject to the Security Interest, free
and clear of any Encumbrances other than Permitted
Encumbrances, whether fixed or floating, on any such assets
and no Person has any agreement or right to acquire an
interest in such assets, other than as provided herein;
(v) no Default or Event of Default has occurred and is continuing;
(w) neither the Corporation nor the Subsidiary has any
Indebtedness other than Permitted Indebtedness; and
(x) Appendix 1 and Appendix 2 of Schedule C provide a complete and
accurate description of all of the material Patents and Trade
Marks of the Corporation, respectively, and the Corporation
does not own, license or have any other interest in any other
material Patents or Trademarks except as disclosed therein.
6.2. HOLDER REPRESENTATIONS AND WARRANTIES
The Holder represents, warrants and certifies to the Corporation as
follows and acknowledges that the Corporation is relying on such
representations, warranties and certification in selling this Debenture:
(a) the Holder is purchasing the Debenture as principal for the
Holder's own account and not for the benefit of any other
Person;
(b) the Holder is a resident of the Province of Ontario;
(c) this Debenture has been duly authorized, executed and
delivered by, and constitutes a legal, valid, binding and
enforceable obligation of, the Holder;
(d) the Holder has not received any document purporting to
describe the business and affairs of the Corporation that has
been prepared primarily for delivery to and review
-24-
by prospective investors so as to assist those investors to
make an investment decision in respect of the Debentures being
sold;
(e) the Holder has not been created or is not being used primarily
for the purpose of acquiring or holding securities of the
Corporation;
(f) the Holder, if a company, either (i) had net assets of at
least $5,000,000 as reflected in its most recently prepared
financial statements; or (ii) is a wholly-owned subsidiary of
an individual who beneficially owns, or who together with a
spouse beneficially owns, financial assets having an aggregate
realizable value that, before taxes, but net of any related
liability (necessary liabilities incurred or assumed for the
purpose of financing the acquisition or ownership of financial
assets and liabilities that are secured by financial assets)
exceeds $1,000,000;
(g) the Holder, if an individual, beneficially owns, or together
with a spouse beneficially owns, financial assets having an
aggregate realizable value that, before taxes but net of any
related liabilities, exceeds $1,000,000.
6.3. HOLDER'S ACKNOWLEDGMENTS
The Holder acknowledges that:
(a) the Debentures and any securities into which they are
convertible will be subject to transfer and resale
restrictions pursuant to the Securities Act (Ontario) and the
regulation, rules, orders, instruments and published policy
statements applicable thereunder, including Multilateral
Instrument 45-102 Resale of Securities;
(b) the Holder's purchase of the Debentures has not been made
through or as a result of, and the distribution of the
Debentures is not being accompanied by, an advertisement or
general solicitation in printed or public media, or general or
regular print circulation, radio or television or
telecommunications, including electronic display of any other
form of advertisement;
(c) the Holder is responsible for obtaining such legal advice as
the undersigned considers appropriate in connection with the
execution, delivery and performance of this Debenture and any
subsequent transfer or resale of Debentures or any securities
into which they are convertible.
6.4. CORPORATION'S POSITIVE COVENANTS
The Corporation covenants and agrees that so long as this Debenture is
outstanding:
(a) Punctual Payment. It will duly and punctually pay or cause to
be paid all amounts payable by the Corporation to the Holder
hereunder at the times and in the manner provided for herein;
(b) Use of Proceeds. Principal amounts advanced under this
Debenture shall only be used to finance discovery research and
product development initiatives as approved by the Board;
-25-
(c) Conduct of Business. It will and will cause each of its
Subsidiaries to do all things necessary or desirable to
maintain its and their respective corporate existence in its
and their respective present jurisdictions of incorporation,
maintain its and their respective corporate power and capacity
to own its and their respective properties and assets, and
carry on its and their respective businesses in a commercially
reasonable manner;
(d) Maintain Property and Assets. It will maintain and cause each
of its Subsidiaries to maintain all of its property and assets
in good repair and working condition, consistent with the
industry standards, reasonable wear and tear excepted, and
continue to carry on its business as presently conducted and
in compliance with all licences and permits and maintain its
books and records in a manner consistent with good business
practice and in a manner sufficient to permit the Holder to
confirm compliance by the Corporation with the Corporation's
covenants hereunder;
(e) Inspection. It will at any reasonable time and from time to
time upon reasonable prior notice, permit the Holder or
representatives thereof to conduct inspections of the books
and records of the Holder and its Subsidiaries and to make
copies thereof, and to discuss the affairs, finances and
accounts of the Corporation and its Subsidiaries with the
auditors and officers of the Corporation;
(f) Other Obligations. It will pay or cause to be paid and cause
each of its Subsidiaries to pay or cause to be paid when
required all amounts related to taxes, wages, workers'
compensation obligations, government royalties or pension fund
obligations and any other amount which may result in an
Encumbrance against the assets of the Corporation or any of
its Subsidiaries arising under any statute or regulation,
other than a Permitted Encumbrance or to make adequate reserve
for any such amount the payment of which is being contested;
(g) Compliance with Applicable Law and Contracts. It will do or
cause to be done or cause each of its Subsidiaries to do or
cause to be done all acts necessary or desirable to comply
with all applicable, federal, provincial and municipal laws,
requirements, standards, the non-compliance with which could
have a Material Adverse Effect upon it or any Subsidiary. It
will and will cause each of its Subsidiaries to comply with
the requirements of all Material Contracts to which it and
they respectively are parties or by which respectively it and
they or its and their properties are bound, non-compliance
with which would, singly or in the aggregate, have a Material
Adverse Effect upon its or any one of its Subsidiaries'
respective business, property, financial condition or
prospects;
(h) Accounting Methods and Financial Records. It will and will
cause each of its Subsidiaries to maintain a system of
accounting which is established and administered in accordance
with Canadian generally accepted accounting principles, keep
adequate records and books of account in which accurate and
complete entries shall be made in accordance with Canadian
generally accepted accounting principles reflecting all
transactions required to be reflected by such accounting
principles and keep accurate and complete records of any
property owned by it and each of them, respectively;
-26-
(i) Financial Statements. It will provide the Holder with its
audited and unaudited financial statements for the Corporation
in accordance with applicable corporate and securities laws
together with such other financial information as the Holder
may request from time to time;
(j) Payment of Taxes and Claims. It will and will cause each of
its Subsidiaries to:
(i) pay and discharge all lawful claims for labour,
material and supplies;
(ii) pay and discharge all obligations which may result in
liens on its assets;
(iii) pay and discharge all taxes payable by it and each of
them, respectively; and
(iv) withhold and collect all taxes required to be
withheld and collected by it and each of them,
respectively, and remit such taxes to the appropriate
governmental body at the time and in the manner
required; provided that nothing in this Section
6.4(j) shall preclude the Corporation from contesting
in good faith any of the matters referred to therein
if it makes an adequate reserve for any such amount,
the payment of which is being contested;
(k) Notice of Event of Default. It will, as soon as it shall
become aware of the same, give notice to the Holder of any
Default, Event of Default, or the occurrence or non-occurrence
of any event which constitutes, or which with the passage of
time or giving of notice or both would constitute, a material
default under any other agreement to which it is a party or by
which it or any of its properties may be bound, giving in each
case the details thereof and specifying the action proposed to
be taken with respect thereto, regarding the Corporation or
any Subsidiary of the Corporation;
(l) Insurance. The Corporation shall maintain and cause its
Subsidiaries to maintain insurance on its and their respective
properties and assets and for the operation of its and their
respective businesses in such amounts and against such risks
as would be customarily obtained and maintained by a prudent
owner of similar properties and assets operating a similar
business (including without limitation appropriate liability
insurance), and shall provide certified copies of such
policies to the Holder upon request. Such policies of
insurance shall include coverage against loss or damage of its
property and assets by fire and other hazards, and business
interruption insurance. All such insurance policies relating
to properties and assets shall name the Holder and the Other
Holder as loss payees as their interests may appear and copies
thereof or certificates in respect of the coverage provided
thereby shall be delivered to the Holder upon request. The
Corporation shall pay all premiums in respect of such
insurance when due and shall promptly furnish the Holder upon
request with receipts or other satisfactory evidence of the
payment thereof. Prior to any Event of Default any insurance
proceeds in an amount (i) less than $25,000 shall be paid
directly to the Corporation to be used to replace or repair
the property in respect of which the proceeds have been paid,
and (ii) equal to or greater than $25,000 shall be paid
directly to the Holder and the Other Holder and may, at the
option of the Holder and the Other Holder by joint written
instruction to the Corporation, be applied against any
Obligations hereunder and under the Other Debenture(s) or
-27-
released to the Corporation without prejudicing any rights or
remedies of the Holder or Other Holder hereunder or under the
Other Debenture(s) or affecting any Obligations;
(m) Compliance with Securities Legislation and Matters. The
Corporation shall comply with the requirements of all
applicable securities laws and the regulations thereunder and
shall take no step with a view to, or which would result in,
the Corporation ceasing to be a reporting issuer in good
standing under the Securities Act (Ontario) or the Regulation
thereunder or under the securities laws of any other
jurisdiction;
(n) Maintain Listing. The Corporation shall continuously maintain
the listing of its Common Shares on the TSX or upon such other
stock exchange as may be acceptable to the Holder and shall
use reasonable efforts to ensure that all Common Shares which
are issuable upon the exercise of the conversion rights
hereunder are listed on such stock exchange as and when
issued; and
(o) Secondary Offering. If, at any time, the Corporation
undertakes a treasury offering of shares by way of prospectus,
the Holder may participate by way of a secondary offering of
which the Holder may sell all or any of the Common Shares
beneficially owned by the Holder, unless this right would, in
the opinion of the financial advisor and/or underwriter
retained to complete such transaction, materially prejudice
the offering.
6.5. CORPORATION'S NEGATIVE COVENANTS
The Corporation hereby covenants and agrees with the Holder that it
will not, so long as any amount owing hereunder shall remain unpaid, and it will
not permit or cause any of its Subsidiaries to, without the prior written
consent of the Holder:
(a) Security Interests. Create, issue, incur, assume or permit to
exist any Encumbrance on any of its property other than (i)
Encumbrances in favour of the Holder; and (ii) Permitted
Encumbrances, nor do or permit anything to adversely affect
the ranking or validity of the Security Interest except by
incurring a Permitted Encumbrance.
(b) Change in Nature of Business. Make or permit or cause any
Subsidiary to make any material change in the nature of its or
their respective existing business.
(c) Mergers. Enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, dissolution or
otherwise) whereby all or any substantial part of its
undertaking, property or assets would become the property of
any other Person or, in the case of any such amalgamation, of
the continuing corporation resulting therefrom.
(d) Disposal of Assets. Directly or indirectly, sell, lease,
assign, transfer, abandon, convey or otherwise dispose of any
of its undertaking or assets (including any capital stock of
any of its Subsidiaries or other corporation) except as
follows:
(i) the Corporation or any of its Subsidiaries may, in
the ordinary course of business, sell any inventory
or other assets that are customarily sold by the
-28-
Corporation or such Subsidiary as part of the normal
operation of its respective business; and
(ii) the Corporation or any of its Subsidiaries may, in
the ordinary course of business, sell equipment,
fixtures, materials or supplies that are no longer
required in the business of the Corporation or such
Subsidiary or that are worn-out or obsolete.
(e) Distributions. Declare, make or pay any dividend or other
distribution on any share in the capital of the Corporation or
a Subsidiary other than a distribution made by a Subsidiary to
the Corporation.
(f) Alteration of Capital. Purchase, redeem or retire in any way
any shares of its capital or otherwise reduce its issued or
paid up capital in respect of such shares or otherwise permit
a change in the authorized capital structure or in the terms
of any of its classes of share.
(g) Transactions Out of the Ordinary Course. Enter into or effect
any transactions out of the ordinary course of business.
(h) Financial Assistance. Provide any financial assistance to any
Person except financial assistance provided to the Corporation
by a Subsidiary of the Corporation or to a Subsidiary of the
Corporation by the Corporation.
(i) Maintenance and Ownership of Subsidiaries. In the case of the
Corporation, sell or otherwise dispose of any shares of the
capital of any of its Subsidiaries or permit any of such
Subsidiaries to issue, sell or otherwise dispose of any shares
of the capital or the capital of any other of such
Subsidiaries, except to the Corporation.
(j) Winding-up. Take or institute proceedings for the winding-up,
reorganization or dissolution of the Corporation or any
Subsidiary.
(k) Changing Location etc. Change its name or the location of its
chief executive office or remove or otherwise permit any
Collateral (other than inventory in transit) to be located at
any location other than Existing Locations, without providing
the Holder with 30 days prior written notice thereof and
promptly taking such other steps, if any, as the Holder may
require to maintain the perfection of the Security Interest.
(l) Additional Indebtedness. Incur any Indebtedness other than
Permitted Indebtedness.
(m) Subsidiaries. Have any Subsidiaries other than the Subsidiary
without the consent of the Holder.
-29-
ARTICLE 7.
EVENTS OF DEFAULT
7.1. EVENTS OF DEFAULT
The occurrence of any one or more of the following events or conditions
(each such event or condition being an "Event of Default") shall constitute a
default under this Debenture:
(a) except as otherwise provided in this Section, the Corporation
does not observe or perform any of the Corporation's
obligations under this Debenture or any other agreement or
document existing at any time between the Corporation and the
Holder and such default remains unremedied to the satisfaction
of the Holder seven calendar days after written notice thereof
is given to the Corporation by the Holder;
(b) any representation, warranty or statement made by or on behalf
of the Corporation to the Holder is untrue in any material
respect at the time when or as of which it was made;
(c) the Corporation ceases or threatens to cease to carry on in
the normal course the Corporation's business or any material
part thereof;
(d) the holder of a charge takes possession of all or any part of
the Corporation's property having a value in excess of
$150,000, or a distress, execution or other similar process is
levied against all or any part of such property having a value
in excess of $150,000;
(e) if an order ceasing or suspending or prohibiting trading in
any securities of the Corporation shall be issued by any stock
exchange or securities regulatory authority having
jurisdiction and such situation continues in excess of two
weeks;
(f) default by the Corporation or any of its Subsidiaries in the
performance or observance of any covenant, condition or
obligation contained in any agreement between the Corporation
or its Subsidiary, as the case may be, and any Person, where
such default gives rise to a right to enforce security against
the Corporation or its Subsidiary, as the case may be, where
the default, or the cumulative defaults are in excess of
$150,000;
(g) the Corporation fails to pay to any Person any Indebtedness in
excess of $250,000 in aggregate when due (whether at scheduled
maturity or by required prepayment, acceleration, demand or
otherwise) and such failure continues after any applicable
grace period, except as the Holder and Other Holder have
otherwise agreed;
(h) an event of default occurs under the Other Debenture(s);
(i) any event occurs which would have a Material Adverse Effect on
the Corporation and its Subsidiaries taken as a whole;
(j) if the Corporation or any of its Subsidiaries is in default
under any Material Contract to which it is a party and such
default is not cured before the earlier of (i) 30 days
-30-
after the occurrence of such default, and (ii) five Business
Days prior to the expiry of the applicable cure period, if
any, under such Material Contract;
(k) if a final judgment or decree for the payment of money due
shall have been obtained or entered against the Corporation or
any of its Subsidiaries in an amount of $100,000 or more and
such judgment or decree shall not have been and remain
vacated, discharged or stayed pending appeal within the
applicable appeal period;
(l) if a decree or order of a court of competent jurisdiction is
entered adjudging the Corporation or any of its Subsidiaries a
bankrupt or insolvent or approving as properly filed a
petition seeking the winding-up of the Corporation or any of
its Subsidiaries under the Companies' Creditors Arrangement
Act (Canada), the Bankruptcy and Insolvency Act (Canada) or
the Winding-Up and Restructuring Act (Canada) or any other
bankruptcy, insolvency or analogous law or issuing
sequestration or process of execution against any substantial
part of the assets of the Corporation or any of its
Subsidiaries or ordering the winding up or liquidation of its
affairs and any such decree or order continues unstayed and in
effect for a period of thirty (30) days;
(m) if the Corporation or any of its Subsidiaries becomes
insolvent, makes any assignment in bankruptcy or makes any
other assignment for the benefit of creditors, makes any
proposal under the Bankruptcy and Insolvency Act (Canada) or
any comparable law, seeks relief under the Companies'
Creditors Arrangement Act (Canada), the Winding Up and
Restructuring Act (Canada) or any other bankruptcy, insolvency
or analogous law, is adjudged bankrupt, files a petition or
proposal to take advantage of any act of insolvency, consents
to or acquiesces in the appointment of a trustee, receiver,
receiver and manager, interim receiver, custodian,
sequestrator or other Person with similar powers of itself or
of all or any substantial portion of its assets, or files a
petition or otherwise commences any proceeding seeking any
reorganization, arrangement, composition or readjustment under
any applicable bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting creditors'
rights or consents to, or acquiesces in, the filing of such a
petition; or
(n) if any Change of Control Event occurs.
7.2. RIGHTS UPON DEFAULT
Upon the occurrence of an Event of Default the entire Principal amount
outstanding hereunder shall at the option of the Holder forthwith become
immediately due and payable, with Interest thereon, at the rate determined as
herein provided, to the date of actual payment thereof, all without notice,
presentment, protest, demand, notice of dishonour or any other notice of demand
whatsoever, all of which are hereby expressly waived by the Corporation. In such
event the Holder may in its discretion exercise any right or recourse and/or
proceed by any action, suit, remedy or proceeding against the Corporation
authorized or permitted by law for the recovery of all the Indebtedness and
liabilities of the Corporation to the Holder and proceed to exercise any and all
rights hereunder and under the security constituted by the Security Interest. No
right will be exclusive of or dependent upon or merge in any other right, and
one or more of such rights may be exercised independently or in combination from
time to time.
-31-
7.3. CHARGES AND EXPENSES
The Corporation agrees to pay on demand all costs and expenses incurred
(including among other things legal fees) and fees charged by the Holder in
connection with obtaining or discharging this Debenture to and by the Holder or
any Receiver in exercising any remedy under this Debenture and in carrying on
the Corporation's business. All such amounts will bear interest from time to
time at the rate equal to the rate payable on the Principal sum hereunder, and
the Corporation will reimburse the Holder upon demand for any amount so paid.
7.4. FURTHER ASSURANCES
The Corporation will from time to time as soon as practicable upon
request by the Holder take such action as the Holder may consider necessary to
give effect to this Debenture.
7.5. PERFORMANCE BY THE SECURED PARTY
In the event that the Corporation fails to perform any obligations
under this Debenture, including keeping the Collateral free and clear of all
Encumbrances, other than Permitted Encumbrances, the Holder may, at its option
and without being under any obligation to do so, perform such obligations and
the Corporation shall pay to the Holder, immediately upon demand, all costs and
expenses (including, without limitation, legal fees on a solicitor-client basis)
incurred by the Holder in connection therewith and all such costs and expenses
shall form part of the Obligations, bear interest at the Interest Rate, both
before and after demand and judgment from the date incurred by the Holder and
shall be secured by the Security Interest. The performance by the Holder of any
obligation of the Corporation hereunder or the curing of any Event of Default by
the Holder shall not constitute a waiver by the Holder of any of its rights,
remedies or privileges hereunder or relieve the Corporation from its default or
any consequences thereof.
7.6. DEALINGS BY THE HOLDER
The Holder may grant renewals, extensions of time and other
indulgences, take and give up securities, accept compositions, grant full,
partial and conditional releases and discharges, perfect or fail to perfect any
securities, release any Collateral to third parties and otherwise deal or fail
to deal with the Corporation, debtors of the Corporation, guarantors, sureties
and others and with the Collateral and other securities as the Holder may see
fit, all without prejudice to any liability of the Corporation to the Holder or
the Holder's rights and remedies under this Debenture, the Personal Property
Security Act (Ontario) or otherwise at law.
7.7. NO SET-OFF
The Obligations shall be paid by the Corporation without regard to any
equities between the Corporation and the Holder or any right of set-off or
cross-claim that the Corporation may have against the Holder.
-32-
ARTICLE 8.
SECURITY
8.1. SECURITY
As general and continuing security for the payment and performance of
the Obligations, the Corporation hereby grants a security interest in favour of
the Holder as set out in Schedule "C" and shall execute and deliver in favour of
the Holder, all such further, security agreements, instruments and documents
(collectively with this Debenture being the "SECURITY DOCUMENTS") and do all
such other acts and things as the Holder may from time to time require, to
create, grant and maintain a first perfected Encumbrance on the Collateral in
favour of the Holder, subject only to Permitted Encumbrances. All Security
Documents shall, in form and substance, be satisfactory to the Holder, acting
reasonably. The Corporation acknowledges and agrees that as at the date hereof
there are additional Security Documents that will have to be executed and
delivered by the Corporation and additional registrations and other steps that
will have to be taken by the Corporation and others in order for the Security
Interest to constitute a first perfected Encumbrance on all of the Collateral,
subject only to Permitted Encumbrances, and agrees that the right of the Holder
to require such Security Documents and the performance of such other acts and
things at any time and from time to time shall not be prejudiced by any delay on
the part of the Holder in requesting same. The Corporation constitutes and
appoints the Holder and any officer or agent of the Holder, with full power of
substitution, as the Corporation's true and lawful attorney-in-fact with full
power and authority in the place of the Corporation and in the name of the
Corporation or in its own name, from time to time in the Holder's discretion
after any Event of Default or any default under this section, to take any and
all appropriate action and to execute any and all documents and instruments as,
in the opinion of such attorney may be necessary or desirable to accomplish the
purposes of this Debenture. These powers are coupled with an interest and are
irrevocable until this Debenture and the Security Documents are terminated and
released. Nothing in this section affects the right of the Holder as secured
party or any other Person on the Holder's behalf, to sign and file or deliver
(as applicable) all such financing statements, financing change statements,
notices, verification agreements and other documents relating to the Collateral
and this Debenture and any Security Documents as the Holder or such other Person
considers appropriate
ARTICLE 9.
GENERAL PROVISIONS
9.1. NOTICES
Any notice, communication, payment or demand required or permitted to
be given under this Debenture shall be deemed to have been sufficiently given to
the recipient if delivered personally, or (other than in the case of payment) if
sent by facsimile or sent by ordinary first class mail within Canada, postage
prepaid, addressed as follows:
-33-
(a) to the Corporation at:
Viventia Biotech Inc.
10 Four Seasons Place
Suite 501
Toronto ON M9B 6H7
Attention: Michael Byrne, Chief Financial Officer and
Corporate Secretary
Facsimile: (416) 335-9306
(b) to the Holder at:
386 Cortleigh Blvd.
Toronto, Ontario
M5N 1R5
Attention: Andrea Dan-Hytman
Facsimile: (416) 787-0311
Any such mailing shall be deemed to be received on the date of delivery
if delivered personally, on the next Business Day following the transmission by
facsimile confirmed by the sender thereof or on the third Business Day following
the date of mailing or, in the event of any disruption, strike or interruption
in the Canadian postal service after mailing and prior to receipt, on the third
Business Day following full resumption of such Canadian postal service. Either
party hereto may change its facsimile number or address for the purpose of this
Section 9.1 by giving written notice of such change to the other.
9.2. AMENDMENTS
Neither this Debenture nor any provision hereof may be amended, waived,
discharged, or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver, discharge, or
termination is sought. No delay or omission by the Holder in exercising any
rights or remedies hereunder or in respect of any Obligations or the performance
by the Corporation of any Obligations in default shall operate as a waiver
thereof or of any other rights or remedies of the Holder. No single or partial
exercise of any rights or remedies by the Holder shall preclude any other or
further exercise thereof or the exercise of any other rights or remedies. A
written waiver of any right or remedy shall be effective only for the specific
purpose and time, if any, stipulated therein and shall not operate as a waiver
of any other rights or remedies of the Holder. This Debenture may not be
amended, supplemented or otherwise modified without the prior written consent of
the Other Holder.
9.3. TIME OF THE ESSENCE
Time is expressly declared to be of the essence of this Debenture in
respect of all payments to be made hereunder, the exercise of any redemption and
conversion rights hereunder, and all covenants and agreements to be performed
and fulfilled.
-34-
9.4. SEVERABILITY
If any covenant or obligation of any party contained herein, or if any
provision of this Debenture or its application to any Person or circumstance
shall to any extent be invalid or unenforceable, the remainder of this Debenture
or the application of such covenant or obligation to Persons or circumstances
other than those to which it is held invalid or unenforceable shall not be
affected, and each provision and each covenant and obligation contained in this
Debenture shall be separately valid and enforceable, to the fullest extent
permitted by law or at equity.
9.5. COUNTERPARTS
This Debenture may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart.
9.6. FURTHER ASSURANCES
Each of the Corporation and the Holder shall promptly cure any default
by it in the execution and delivery of this Debenture or of any of the other
agreements provided for hereunder to which it is a party. The Corporation, at
its expense, shall promptly execute and deliver or cause to be executed and
delivered to the Holder, upon request by the Holder, all such other and further
documents, agreements, opinions, certificates and instruments in compliance
with, or accomplishment of the covenants and agreements of the Corporation
hereunder or more fully to state the obligations of the Corporation set out
herein or under any other loan document or to make any recording, file any
notice or obtain any consent, all as may be reasonably necessary or appropriate
in connection therewith. The Corporation hereby irrevocably constitutes and
appoints any officer for the time being of the Holder and each Receiver, the
true and lawful attorney of the Corporation, at any time that an Event of
Default shall have occurred and be continuing, with full power of substitution
to execute and deliver all such agreements, instruments and documents and to do
all such further acts and things with the right to use the name of the
Corporation whenever and wherever it may be deemed necessary or expedient.
9.7. ENTIRE AGREEMENT
This Debenture, the Payment and Security Sharing Agreement and the
confirmations delivered in respect of the Security Interest constitute the whole
and entire agreement between the parties hereto and cancel and supersede any
prior agreements, undertakings, declarations, commitments, representations,
written or oral, in respect thereof.
9.8. TRANSFERABILITY
Except for transfers provided for in the Payment and Security Sharing
Agreement, this Debenture may only be transferred by the Holder with the prior
written consent of the Corporation not to be unreasonably withheld or delayed.
-35-
9.9. PARTIES IN INTEREST
This Debenture shall be binding on the Corporation and its successors
and will be binding on and will enure to the benefit of the Holder and its
successors and assigns.
IN WITNESS WHEREOF the Corporation and the Holder have executed this
Debenture as of the 3rd day of November, 2004.
VIVENTIA BIOTECH INC.
By: /s/ Michael Byrne
------------------------------------
Name: Michael Byrne
Title: Chief Financial Officer
By:
------------------------------------
Name:
Title:
ADH INVESTMENTS (1999) INC.
By: /s/ Andrea Dan Hytman
------------------------------------
Name: Andrea Dan Hytman
Title:
SCHEDULE "A"
FORM OF COMMON SHARE PURCHASE WARRANT
SCHEDULE "B"
CONVERSION NOTICE
TO: Viventia Biotech Inc. (the "Corporation")
FROM: ADH Investments (1999) Inc. (the "Holder")
RE: The Convertible Secured Debenture issued by the Corporation to
the Holder as of November 3, 2004 (the "Debenture")
All terms used in this Conversion Notice which are defined in the
Debenture have the meanings attributed thereto in the Debenture.
The Holder hereby irrevocably elects to convert $_________________ of
the Principal outstanding as of the date hereof under this Debenture and
evidenced by the Debenture into Units at the Conversion Price and
$_________________ of the Interest outstanding as of the date hereof under this
Debenture and evidenced by the Debenture into Units at the Interest Conversion
Price. Please issue, register and deliver the Common Shares and Common Share
Purchase Warrants comprising such Units in the name of:
Name:
------------------------------------------
Address:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
DATED: , 200_.
ADH INVESTMENTS (1999) INC.
By:
-------------------------------
Name:
Title:
SCHEDULE "C"
SECURITY INTEREST
1. SECURITY
(a) Security. Subject to Sections 1(c) and 1(d) of this Schedule
"C", as continuing security for the due and timely payment and
performance by the Corporation of its obligations hereunder,
the Corporation hereby (i) grants a security interest in and
conveys, assigns, hypothecates, mortgages and charges, as and
by way of a first fixed and floating mortgage and charge to
and in favour of the Holder (the "Security Interest"), all its
undertaking and business and all its property and assets and
rights for the time being, both present and future, of
whatsoever nature and kind and wheresoever situate (the
"Collateral") including, without limitation,
(i) each of the Patents identified in Appendix 1,
including all rights to receive royalty, licence or
other payments due to the Corporation from any
licensed user or other use of the Patents;
(ii) each of the Trade Marks identified in Appendix 2,
including all goodwill of the business of the
Corporation symbolized by each of the Trade Marks and
all rights of the Corporation as the registered owner
of the Trade Marks, including the right to receive
royalty, licence or other payments due to the
Corporation from any registered user or other user of
any Trade Marks;
(iii) any present or future claim by, or right of action
of, the Corporation against any Person with respect
to the infringement of any of the Trade Marks or
Patents;
(b) Attachment. The parties acknowledge and agree that value has
been given for the granting of the Security Interest and that
they have not agreed to postpone the time for attachment,
except for after-acquired property forming part of the
Collateral, the attachment to which will occur forthwith upon
the Corporation acquiring rights in such Collateral.
(c) Exception for Last Day of Leases. The Security Interest
granted hereby does not and shall not extend to, and the
Collateral shall not include, the last day of the term of any
lease or sub-lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Corporation
but, upon the sale of the leasehold interest or any part
thereof, the Corporation shall stand possessed of such last
day in trust to assign the same as the Holder shall direct.
(d) Exception for Contractual Rights. The Security Interest hereby
granted does not and shall not extend to, and the Collateral
shall not include, any agreement, right, franchise, licence or
permit (collectively, "Contractual Rights") to which the
Corporation is a party or of which the Corporation has the
benefit, to the extent that the creation of the Security
Interest therein would constitute a breach of the terms of, or
permit any Person to terminate, the Contractual Rights (the
"Restricted Rights"), but the Corporation shall hold its
interest therein in trust for the Holder
-ii-
and shall assign such Restricted Rights to the Holder
forthwith upon obtaining the consent of the other party or
parties thereto. Upon the request of the Holder, the
Corporation shall use all commercially reasonable efforts to
obtain any consent required to permit any Restricted Rights to
be subject to the Security Interest. The Corporation shall use
commercially reasonable efforts to provide that any agreement
after the date hereof does not require any consent to permit
the Contractual Rights created thereunder to become subject to
the Security Interest and, except as disclosed to and approved
by the Holder in writing, none of the existing Restricted
Rights are Material Contracts.
(e) Permitted Dealings with Collateral. Unless an Event of Default
has occurred, the Corporation may, without the consent of the
Holder:
(i) deal with the Collateral as permitted by the
Debenture; and
(ii) subject to Section 2 of this Schedule "C", collect
proceeds and accounts in the ordinary course of
business.
(f) Delivery of Instruments, Securities, Etc.
(i) If an Event of Default has occurred the Corporation
shall, upon request of the Holder, forthwith deliver
to the Holder, to be held by the Holder hereunder,
all instruments, securities, letters of credit,
advances of credit and negotiable documents of title
in its possession or control which pertain to or form
part of the Collateral and shall, as required, duly
endorse the same for transfer in blank or as the
Holder may direct and shall use commercially
reasonable efforts to deliver to the Holder any and
all consents or other instruments or documents
necessary to comply with any restrictions on the
transfer thereof in order to transfer the same to the
Holder.
(ii) Subject to any other written agreements or
instruments in effect from time to time between the
parties, unless an Event of Default has occurred and
is continuing the Corporation shall be entitled (i)
to receive all distributions of any kind whatsoever
at any time payable on or with respect to the
Collateral and (ii) to vote the Collateral and to
give consents, waivers, notices and ratifications and
to take other action in respect of the Collateral;
provided, however, that no vote shall be cast and no
consent, waiver, notice or ratification shall be
given and no action be taken which would impair the
Collateral or which would be inconsistent with or
violate any provision of this Debenture or any other
written agreement or instrument in effect from time
to time between the parties.
(iii) Upon the occurrence of an Event of Default the Holder
and during the continuance thereof shall be entitled
to enjoy and exercise all of the rights referred to
in Section (f)(ii) of this Schedule "C" in such
manner as it sees fit.
(g) Verification of Collateral. The Holder shall have the right at
any time and from time to time to verify the existence and
state of the Collateral in any manner the Holder
-iii-
may consider appropriate and the Corporation agrees to furnish
all assistance and information and to perform all such acts as
the Holder may reasonably request in connection therewith and
for such purpose to grant to the Holder or its agents access
to all places where Collateral may be located and to all
premises occupied by the Corporation.
2. COLLECTION OF PROCEEDS AND ACCOUNTS
(a) Control of Proceeds and Accounts. After the occurrence of an
Event of Default the Holder, if demand has been made in
accordance with Section 3(a) of this Schedule "C", may take
control of any Proceeds and accounts and may notify any
account debtor or any obligor under any instrument held by the
Corporation or the Holder to make payment in respect of any
Proceeds and accounts directly to the Holder, whether or not
the Corporation has theretofore been making collections on the
Collateral.
(b) Proceeds and Accounts Received in Trust. After the occurrence
of an Event of Default has occurred, if the Corporation shall
collect or receive any accounts or shall be paid for any of
the other Collateral or shall receive any Proceeds, all money
so collected or received by the Corporation shall be received
by the Corporation as trustee for the Holder and, if demand
has been made in accordance with Section 3(a) of this Schedule
"C", shall be paid to the Holder forthwith upon demand and the
Holder may, in its discretion, apply the same in reduction of
the Obligations or hold the same as further Collateral
hereunder.
3. DEFAULT AND THE HOLDER'S REMEDIES
(a) Remedies Upon Default. Upon the occurrence of an Event of
Default, the Obligations shall, at the option of the Holder,
forthwith become immediately due and payable by the
Corporation to the Holder and the Holder may thereafter,
without further notice to the Corporation except as provided
at law or in this Debenture:
(i) commence legal action to enforce payment or
performance of the Obligations;
(ii) require the Corporation, at the Corporation's
expense, to assemble the Collateral at a place or
places designated by notice in writing given by the
Holder to the Corporation, and the Corporation agrees
to so assemble the Collateral;
(iii) require the Corporation, by notice in writing given
by the Holder to the Corporation, to disclose to the
Holder the location or locations of the Collateral,
and the Corporation agrees to make such disclosure
when so required by the Holder;
(iv) without legal process, enter any premises where the
Collateral may be situated and take possession of the
Collateral by any method permitted by law;
-iv-
(v) repair, process, complete, modify or otherwise deal
with the Collateral and prepare for the disposition
of the Collateral, whether on the premises of the
Corporation or otherwise and, in connection with any
such action, utilize any of the Corporation's
property without charge;
(vi) dispose of the Collateral by private or public sale,
lease or otherwise upon such terms and conditions as
the Holder may determine and whether or not the
Holder has taken possession of the Collateral;
(vii) carry on all or any part of the business or
businesses of the Corporation and, to the exclusion
of all others (including the Corporation), enter
upon, occupy and, subject to any requirements of law
and subject to any leases or agreements then in
place, use all or any of the premises, buildings,
plant, undertaking and other property of, or used by,
the Corporation for such time and in such manner as
the Holder sees fit, free of charge, and, except to
the extent required by law, the Holder shall not be
liable to the Corporation for any act, omission or
negligence in so doing or for any rent, charges,
depreciation or damages or other amount incurred in
connection therewith or resulting therefrom other
than from the Holder's gross negligence or wilful
misconduct;
(viii) file such proofs of claim or other documents as may
be necessary or desirable to have its claim lodged in
any bankruptcy, winding-up, liquidation, dissolution
or other proceedings (voluntary or otherwise)
relating to the Corporation;
(ix) borrow money for the purpose of carrying on the
business of the Corporation or for the maintenance,
preservation or protection of the Collateral and
mortgage, charge, pledge or grant a security interest
in the Collateral, whether or not in priority to this
Debenture, to secure repayment of any money so
borrowed;
(x) where the Collateral has been disposed of by the
Holder as provided in Section 3(a)(vi) of this
Schedule "C", commence legal action against the
Corporation for the Deficiency, if any;
(xi) appoint, by an instrument in writing delivered to the
Corporation, a Receiver of the Collateral and remove
any Receiver so appointed and appoint another or
others in its stead or institute proceedings in any
court of competent jurisdiction for the appointment
of a Receiver, it being understood and agreed that:
(A) the Holder may appoint any Person as
Receiver, including an officer or employee
of the Holder, with such Person's prior
written consent;
(B) such appointment may be made at any time
after an Event of Default, either before or
after the Holder shall have taken possession
of the Collateral;
-v-
(C) the Holder may, from time to time, fix the
reasonable remuneration of the Receiver and
direct the payment thereof out of the
Collateral or any Proceeds; and
(D) the Receiver shall be deemed to be the agent
of the Corporation for all purposes, and,
for greater certainty, the Holder shall not
be, in any way, responsible for any actions,
whether wilful, negligent or otherwise, of
any Receiver, and the Corporation hereby
agrees to indemnify and save harmless the
Holder from and against any and all claims,
demands, actions, costs, damages, expenses
or payments which the Holder may hereafter
suffer, incur or be required to pay as a
result of, in whole or in part, any action
taken by the Receiver or any failure of the
Receiver to do any act or thing;
(xii) pay or discharge any mortgage, charge, encumbrance,
lien, adverse claim or security interest claimed by
any Person in the Collateral ranking prior to or pari
passu with the Security Interest and the amount so
paid shall be added to the Obligations and shall bear
interest calculated from the date of payment at the
Interest Rate until paid; and
(xiii) take any other action, suit, remedy or proceeding
authorized or permitted by this Debenture or at law
or equity.
(b) Sale of Collateral. The parties acknowledge and agree that any
sale referred to in Section 3(a)(vi) of this Schedule "C" may
be either a sale of all or any portion of the Collateral and
may be by way of public auction, public tender, private
contract or otherwise without notice, advertisement or any
other formality, except as required by law, all of which are
hereby waived by the Corporation to the extent permitted by
law. To the extent not prohibited by law, any such sale may be
made with or without any special condition as to an upset
price, reserve bid, title or evidence of title or other matter
and, from time to time as the Holder in its sole discretion
thinks fit, with power to vary or rescind any such sale or buy
in at any public sale and resell. The Holder may sell the
Collateral for a consideration payable by instalments either
with or without taking security for the payment of such
instalments and may make and deliver to any purchaser thereof
good and sufficient deeds, assurances and conveyances of the
Collateral and give receipts for the purchase money, and any
such sale shall be a perpetual bar, both at law and in equity,
against the Corporation and all those claiming an interest in
the Collateral by, from, through or under the Corporation.
(c) Reference to Secured Party Includes Receiver. For the purposes
of Sections 3(a), 3(b) and 3(c)of this Schedule "C", a
reference to the "Holder" shall, where the context permits,
include any Receiver appointed in accordance with Section 3 of
this Schedule "C".
(d) Payment of Expenses. The amount of the Reasonable Expenses
shall be paid by the Corporation to the Holder, as applicable,
from time to time forthwith after demand therefor is given by
the Holder, as applicable, to the Corporation, together with
-vi-
interest thereon from the date that is five Business Days from
the date of such demand of such demand at the Interest Rate,
and payment of such Reasonable Expenses together with such
interest shall be secured by the Security Interest.
(e) Payment of Deficiency. Where the Collateral has been disposed
of by the Holder as provided herein, the Deficiency, if any,
shall be paid by the Corporation to the Holder forthwith after
demand therefor has been given by the Holder to the
Corporation, together with interest thereon calculated from
the date of such demand at the Interest Rate, and the payment
of the Deficiency together with such interest shall be secured
by the Security Interest.
(f) Rights and Remedies Not Mutually Exclusive. To the fullest
extent permitted by law, the Holder's rights and remedies,
whether provided for in this Debenture or otherwise, are not
mutually exclusive and are cumulative and not alternative and
may be exercised independently or in any combination.
(g) No Obligation to Enforce. The Holder shall not be under any
obligation to, or liable or accountable for any failure to,
enforce payment or performance of the Obligations or to seize,
realize, take possession of or dispose of the Collateral and
shall not be under any obligation to institute proceedings for
any such purpose.
(h) Exclusion of Liability of Holder and Receiver. The Holder
shall not, nor shall any Receiver appointed by it, be liable
for any failure to exercise its rights, powers or remedies
arising hereunder or otherwise, including without limitation
any failure to take possession of, collect, enforce, realize,
sell, lease or otherwise dispose of, preserve or protect the
Collateral, to carry on all or any part of the business of the
Corporation relating to the Collateral or to take any steps or
proceedings for any such purposes. Neither the Holder nor any
Receiver appointed by it shall have any obligation to take any
steps or proceedings to preserve rights against prior parties
to or in respect of Collateral including without limitation
any instrument, chattel paper or securities, whether or not in
the Holder's or the Receiver's possession, and neither the
Holder nor any Receiver appointed by it shall be liable for
failure to do so. Subject to the foregoing, the Holder shall
use reasonable care in the custody and preservation of the
Collateral in its possession.
4. POSSESSION OF COLLATERAL BY THE DEBENTUREHOLDER
Possession of Collateral. For so long as any Collateral is in the possession of
the Holder:
(a) the Holder may, at any time following the occurrence of an
Event of Default, grant or otherwise create a security
interest in such Collateral upon any terms, whether or not
such terms impair the Corporation's right to redeem such
Collateral;
(b) the Holder may, at any time following the occurrence of an
Event of Default use such Collateral in any manner and to such
extent as it deems necessary; and
(c) the Holder shall have no duty of care whatsoever with respect
to such Collateral other than to use reasonable care in the
custody and preservation thereof, provided that the Holder
need not take any steps of any nature to defend or preserve
the
-vii-
rights of the Corporation therein against the claims or
demands of others or to preserve rights therein against prior
parties.
APPENDIX 1 AND APPENDIX 2
LIST OF PATENTS AND TRADE MARKS
See attached list
Updated September 2004 Page 1
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ----------------- ------- ----- -----
95 922 373.6 A6 Human Monoclonal Antibodies Specific to June 16, 1995
Cell Cycle Independent Glioma Surface
Antigen (A6)
695 22 689.4-08 A6 Human Monoclonal Antibodies Specific to November 05, 2001
Cell Cycle Independent Glioma Surface
Antigen (A6)
EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001
Cell Cycle Independent Glioma Surface
Antigen (A6)
EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001
Cell Cycle Independent Glioma Surface
Antigen (A6)
08/264.093 A6 Human Monoclonal Antibodies Specific to June 21, 1994
Cell Cycle Independent Glioma Surface
Antigen (A6)
33696/97 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
PI 9710811-1 H11 Antigen Binding Fragments (H11) that November 10, 1998
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
95 922 373.6 Europe EP 0 766 736 September 12, 2001
695 22 689.4-08 Germany DE 695 22 689.4-08 April 12, 2002
EP 0 766 736 France EP(FR) 0766736 April 2002
EP 0 766 736 U.K. EP(UK) 0766736 April 2002
08/264.093 U.S. 5,639,863 June 17, 1997
33696/97 Australia AU 725238 January 25, 2001
PI 9710811-1 Brazil
Updated September 2004 Page 2
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ----------------- ------- ----- -----
255,540 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
CN 97194815.1 H11 Antigen Binding Fragments (H11) that November 28, 1998
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
97929703.3 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
P9902713 H11 Antigen Binding Fragments (H11) that May 22, 1987
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
127193 H11 Antigen Binding Fragments (H11) that November 28, 1998
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
255,540 Canada
CN 97194815.1 China
97929703.3 Europe
P9902713 Hungary
127193 Israel
Updated September 2004 Page 3
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ----------------- ------- ----- -----
9-542853 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
989695 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
332566 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
985,150 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
9805601-3 H11 Antigen Binding Fragments (H11) that May 22, 1997
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
9-542853 Japan
989695 Mexico
332566 New Zealand 332566 December 07, 2000
985,150 Norway
9805601-3 Singapore 60444 April 18, 2000
Updated September 2004 Page 4
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ------------------ ------- ----- -----
09/194,164 H11 Antigen Binding Fragments (H11) that November 20, 1998
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
101,108 H11 Antigen Binding Fragments (H11) that May 22, 2000
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
505305 (Divisional of 332566) H11 Antigen Binding Fragments (H11) that June 21, 2000
Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
72432/00 (Divisional of AU H11 Antigen Binding Fragments (H11) that December 20, 2000
Patent 725238) Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
08/862,124 (Priority over H11 Antigen Binding Fragments (H11) that May 22, 1997
08/657,449 CIP) Specifically Detect Cancer Cells,
Nucleotides Encoding the Fragments, and
Use Thereof for the Prophylaxis and
Detection of Cancers
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
09/194,164 US
101,108 Hong Kong
505305 (Divisional of 332566) N. Zealand NZ 505305 October 7, 2002
72432/00 (Divisional of AU Australia
Patent 725238)
08/862,124 (Priority US 6,207,153 March 27, 2001
over 08/657,449 CIP)
Updated September 2004 Page 5
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ----------------- ------- ----- -----
10/651,453 (Further H11 Antigen Binding Fragments (H11) that August 29, 2003
Continuation of US Specifically Detect Cancer Cells,
App.09/782,397 Nucleotides Encoding the Fragments, and
(US-2003-0021779-A1) which is Use Thereof for the Prophylaxis and
a Continuation of Detection of Cancers
App.08/862,124)
PCT/CA00/01027 Camel A6 Enhanced Phage Display Libraries of September 07, 2000
Human VH Fragments and Methods for
Producing Same
10/070,503 (National Phase Camel A6 Enhanced Phage Display Libraries of October 23, 2003
Entry in the U.S.) Human VH Fragments and Methods for
Producing Same
2384388 (National Phase Entry Camel A6 Enhanced Phage Display Libraries of March 03, 2002
in Canada) Human VH Fragments and Methods for
Producing Same
PCT/CA01/01845 (based on U.S. Llama A6 Phage Display Libraries of Human VH December 21, 2001
Provisional 60/258,031 filed Fragments
November 22, 2000)
10/451,585 (National Phase Llama A6 Phage Display Libraries of Human VH June 21, 2003
Entry in the U.S.) Fragments
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
10/651,453 (Further U.S.
Continuation of US
App.09/782,397
(US-2003-0021779-A1) which is
a Continuation of
App.08/862,124)
PCT/CA00/01027 Canada WO 01/18058 A2 March 15, 2001
10/070,503 (National Phase U.S.
Entry in the U.S.)
2384388 (National Phase Entry Canada
in Canada)
PCT/CA01/01845 (based on U.S. Canada WO 02-051870 July 04, 2002
Provisional 60/258,031 filed
November 22, 2000)
10/451,585 (National Phase U.S.
Entry in the U.S.)
Updated September 2004 Page 6
INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
VB (Ref) Patent/Patent App Product Title Filed
- -------- ----------------- ------- ----- -----
2,447,832 (National Phase Llama A6 Phage Display Libraries of Human VH June 20, 2003
Entry in Canada) Fragments
EP 01 27 1932.4 Llama A6 Phage Display Libraries of Human VH July 22, 2003
Fragments
PCT/CA2004/000637 Proxinium Methods for Treating Cancer Using an April 30, 2004
(V84-845) Immunotoxin
60/554,580 (Provisional) T-Cell Epitopes in March 19, 2004
60/578,291 (Provisional) VB1-008 Tumor Specific Antibody June 10, 2004
VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status
- -------- ----------------- ------- --------- ------------- --------------
2,447,832 (National Phase Canada
Entry in Canada)
EP 01 27 1932.4 Europe
PCT/CA2004/000637 U.S.
60/554,580 (Provisional) U.S.
60/578,291 (Provisional) U.S.
Updated September 2004 Page 1 INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF
APPLICATION NO. REGISTERED STATUS
- ----------------------------------------------------------------------------------------------------------------------------
1,070,975 VIVENTIA(TM) August 14, 2000 Canada TMA573,326 January 9, 2003
- -----------------------------------------------------------------------------------------------------------------------------
865627 VIVENTIA(TM) February 9, 2001 Australia 885627 January 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------
2093110 VIVENTIA(TM) February 14, 2001 Europe 2093110 February 19, 2003
- -----------------------------------------------------------------------------------------------------------------------------
76/205555 VIVENTIA(TM) February 5, 2001 U.S. 2,745,868 August 5, 2003
- -----------------------------------------------------------------------------------------------------------------------------
1,117,077 HYBRIDOMICS(TM) September 28, 2001 Canada TMA601,345 February 4, 2004
- -----------------------------------------------------------------------------------------------------------------------------
76/382,011 HYBRIDOMICS(TM) March 14, 2002 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
1,117,078 IMMUNO MINING(TM) September 28, 2001 Canada TMA591,709 October 7, 2003
- -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 2 INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF
APPLICATION NO. REGISTERED STATUS
- ----------------------------------------------------------------------------------------------------------------------------
76/382,289 IMMUNO MINING(TM) March 14, 2002 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
1,107,351 VBI Design Logo June 21, 2001 Canada TMA591,802 October 8, 2003
- -----------------------------------------------------------------------------------------------------------------------------
898237 VBI Design Logo December 17, 2001 Australia 898237 July 22, 2002
- -----------------------------------------------------------------------------------------------------------------------------
76/350,349 VBI Design Logo December 19, 2001 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
301 72 865.8/01 VBI Design Logo December 21, 2001 Germany 30172865 August 20, 2002
- -----------------------------------------------------------------------------------------------------------------------------
1,128,376 ARMED ANTIBODIES(TM) January 16, 2002 Canada TMA607,930 April 19, 2004
- -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 3 INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF
APPLICATION NO. REGISTERED STATUS
- ----------------------------------------------------------------------------------------------------------------------------
6/424,575 ARMED ANTIBODIES(TM) June 26, 2002 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
1,128,377 IMMUNOMINE(TM) January 16, 2002 Canada TMA 591,451 October 3, 2003
- -----------------------------------------------------------------------------------------------------------------------------
76/428,124 IMMUNOMINE(TM) June 27, 2002 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
1,140,763 UnLock(TM) May 13, 2002 Canada TMA607,270 April 7, 2004
- -----------------------------------------------------------------------------------------------------------------------------
76/467,853 UnLock(TM) November 8, 2002 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
30254575.1/05 UnLock(TM) November 7, 2002 Germany 30254575 August 25, 2003
- -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 4 INTELLECTUAL PROPERTY
VIVENTIA BIOTECH INC.
CONFIDENTIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF
APPLICATION NO. REGISTERED STATUS
- ----------------------------------------------------------------------------------------------------------------------------
1,211,855 Proxinium(TM) April 1, 2004 Canada
- -----------------------------------------------------------------------------------------------------------------------------
78/394,609 Proxinium(TM) April 1, 2004 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
1,211,862 Vicinium(TM) April 1, 2004 Canada
- -----------------------------------------------------------------------------------------------------------------------------
78/394,619 Vicinium(TM) April 1, 2004 U.S.
- -----------------------------------------------------------------------------------------------------------------------------
SCHEDULE "D"
MATERIAL CONTRACTS
See attached list.
MATERIAL AGREEMENTS
1. Exclusive License Agreement between Biovation Limited and Viventia Biotech
Inc., dated March 8, 2004
2. Exclusive License Agreement between the Trustees of Columbia University in
the City of New York and Viventia Biotech Inc., dated December 19, 2003
3. Exclusive License Option Agreement between the Trustees of Columbia
University in the City of New York and Viventia Biotech Inc., dated
March 1, 2002
4. License Agreement between McGill University and Novopharm Limited, dated
April 28, 1994
5. License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated
August 20, 2002
6. License Agreement between University of Zurich and Viventia Biotech Inc.,
dated January 9, 2003
7. Non-exclusive License Agreement between XOMA Ireland Limited and Viventia
Biotech Inc., dated November 30, 2001
8. Property Lease between Almad Investments Limited and Viventia Biotech
Inc., dated January 26, 2004
9. Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech
Inc., dated November 20, 2000