-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K7Cb3BWyCxIeJHDT0S13n44ogrKElZTAg13UWnSPOl0jQy5HJ6mh9c3iCxZvt5Zt 4Gb0fLfFRkC7m2uQ21WT4w== 0001206212-05-000063.txt : 20050303 0001206212-05-000063.hdr.sgml : 20050303 20050303160426 ACCESSION NUMBER: 0001206212-05-000063 CONFORMED SUBMISSION TYPE: F-10/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20050303 DATE AS OF CHANGE: 20050303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUROCHEM INC CENTRAL INDEX KEY: 0001259942 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: F-10/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-122965 FILM NUMBER: 05658044 BUSINESS ADDRESS: STREET 1: 275 ARMAND-FRAPPIER BLVD. CITY: LAVAL STATE: A8 ZIP: H7V 4A7 BUSINESS PHONE: 450-680-4500 MAIL ADDRESS: STREET 1: 275 ARMAND-FRAPPIER BLVD. CITY: LAVAL STATE: A8 ZIP: H7V 4A7 F-10/A 1 m15799a2fv10za.txt FORM 10/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 2005 REGISTRATION NO. 333-122965 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- AMENDMENT NO. 2 TO FORM F-10 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- NEUROCHEM INC. (Exact name of Registrant as specified in its charter) ----------------------- Canada 2834 Not Applicable (Province or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
275 Armand-Frappier Boulevard Laval, Quebec H7V 4A7, Canada (450) 680-4580 (Address and telephone number of Registrant's principal executive offices) ----------------------- CT Corporation System 111 Eighth Avenue, 13th Floor New York, New York 10011 (212) 894-8400 (Name, address (including zip code) and telephone number (including area code) of agent for service in the United States) ----------------------- Copies to: Richard Cherney, Esq. David Skinner Donald J. Murray, Esq. Davies Ward Phillips & Vineberg LLP Neurochem Inc. Dewey Ballantine LLP 1501, avenue McGill College 275 Armand-Frappier Boulevard 1301 Avenue of the Americas Montreal, Quebec H3A 3N9, Canada Laval, Quebec H7V 4A7, Canada New York, NY 10019 (514) 841-6400 (450) 680-4580 (212) 259-8000 Renaud Coulombe, Esq. Guy P. Lander, Esq. Ogilvy Renault Davies Ward Phillips & Vineberg LLP 1981 McGill College Avenue, Suite 1100 625 Madison Avenue Montreal, Quebec H3A 3C1, Canada New York, NY 10022 (514) 847-4604 (212) 588-5511
----------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. Province of Quebec, Canada (Principal jurisdiction regulating this offering) It is proposed that this filing shall become effective (check appropriate box): A. [X] Upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada) B. [ ] At some future date (check the appropriate box below) 1. [ ] pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner than 7 calendar days after filing). 2. [ ] pursuant to Rule 467(b) on ( ) at ( ) (designate at time 7 calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on ( ). 3. [ ] pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto. 4. [ ] after the filing of the next amendment to this Form (if preliminary material is being filed). If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus offering procedures, check the following box. [ ] --------------------------- 2 PART I INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS 3 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PRELIMINARY PROSPECTUS Subject to completion March 3, 2005 - ------------------------------------------------------------------------------- 4,000,000 Shares [Neurochem Logo] Neurochem Inc. Common Shares - ------------------------------------------------------------------------------- We are offering all of the 4,000,000 common shares offered by this prospectus. Our common shares are listed on the Toronto Stock Exchange under the trading symbol "NRM," and is quoted on the Nasdaq National Market under the symbol "NRMX." On March 2, 2005, the last reported sale price of our common shares on the Nasdaq National Market was US$13.68 per share, and the closing price of our common shares on the TSX was CDN$16.90 per share or US$13.62. Power Technology Investment Corporation ("PTIC"), a subsidiary of Power Corporation of Canada, and the FMRC Family Trust ("FMRC") of which Dr. Francesco Bellini, our Chairman, President and Chief Executive Officer is a beneficiary, each a 50% shareholder of Picchio Pharma Inc. (the parent company of P.P. Luxco Holdings s.a.r.l., one of our principal shareholders), have each confirmed an intention to purchase 250,000 of the Common Shares offered hereby. INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. BEFORE BUYING ANY SHARES, YOU SHOULD CAREFULLY READ THE DISCUSSION OF MATERIAL RISKS OF INVESTING IN OUR COMMON SHARES UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. WE ARE PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE PREPARE OUR CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. THEY MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OF THE UNITED STATES. THE NOTES TO OUR CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004 SET FORTH THE PRINCIPAL DIFFERENCES BETWEEN CANADIAN GAAP AND US GAAP AS THEY RELATE TO OUR BUSINESS. OWNING THE COMMON SHARES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED STATES AND CANADA. THIS PROSPECTUS MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO YOUR OWN PARTICULAR CIRCUMSTANCES. THE ABILITY OF UNITED STATES INVESTORS TO ENFORCE CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED UNDER THE LAWS OF CANADA, MOST OF OUR OFFICERS AND DIRECTORS ARE CANADIAN RESIDENTS, SOME OF THE UNDERWRITERS AND THE EXPERT NAMED IN THE REGISTRATION STATEMENT ARE CANADIAN RESIDENTS AND MOST OF OUR ASSETS ARE LOCATED OUTSIDE THE UNITED STATES.
PER SHARE TOTAL ------------ ------------- Public offering price US$ US$ ------------ ------------- Underwriting discounts and commissions US$ US$ ------------ ------------- Proceeds, before expenses, to us US$ US$ ------------ -------------
The underwriters may also purchase from us up to an additional 600,000 of our common shares at the public offering price less the underwriting discounts and commissions, to cover over-allotments, if any, within 30 days of the date of this prospectus. The underwriters are offering the common shares as described in "Underwriting." Delivery of the shares will be made on or about , 2005. Sole Book-Running Manager UBS INVESTMENT BANK CIBC WORLD MARKETS PIPER JAFFRAY DESJARDINS SECURITIES INTERNATIONAL INC. WELLS FARGO SECURITIES BMO NESBITT BURNS INC. FORTIS SECURITIES LLC You should rely only on the information contained or incorporated by reference in this prospectus. Neither Neurochem nor the Underwriters have authorized anyone to provide you with information different from that contained in this prospectus or incorporated herein by reference. Neurochem is offering to sell Common Shares and seeking offers to buy Common Shares only in the jurisdictions where offers and sales are permitted. Unless otherwise indicated, the information contained in this prospectus is accurate only as at the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Common Shares. Market data and certain industry forecasts used throughout this prospectus and the documents incorporated by reference herein were obtained from market research, publicly available information and industry publications. We believe that these sources are generally reliable, but the accuracy and completeness of such information is not guaranteed. Neither Neurochem nor the Underwriters has independently verified this information, and neither Neurochem nor the Underwriters make any representation as to the accuracy of the information. TABLE OF CONTENTS Prospectus summary.................................. 1 Risk factors........................................ 5 Forward-looking statements......................... 16 Exchange rate information.......................... 16 Use of proceeds.................................... 17 Capitalization..................................... 18 Price range and trading volumes of our Common Shares 20 Dividend policy.................................... 20 Our business....................................... 21 Description of share capital....................... 27 Certain income tax considerations.................. 28 Underwriting....................................... 33 Corporate information and registered office........ 36 Documents incorporated by reference................ 37 Documents filed as part of the registration statement 38 Where you can find more information................ 38 Enforcement of civil liabilities................... 38 Transfer agent and registrar....................... 38 Legal matters....................................... 39 Legal proceedings................................... 39 Eligibility for investment.......................... 39 Independent chartered accountants................... 39 Purchasers' statutory rights........................ 40
Prospectus summary The following is a summary only and is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus and in the documents incorporated by reference in this prospectus. As used in this prospectus, unless the context otherwise requires or indicates, the terms "we", "us", "our", "Neurochem" or the "Company" mean or refer to Neurochem and, unless the context otherwise requires, its subsidiaries and its Affiliates (as such term is defined in this prospectus). The holdings of Common Shares or actions in respect of our securities by Picchio Pharma through P.P. Luxco Holdings II S.A.R.L. are referred to in and for the purposes of this prospectus as being holdings and actions of Picchio Pharma. In this prospectus, unless otherwise indicated, all dollar amounts and references to "$" are to Canadian dollars, and "US$" refers to United States dollars. Unless otherwise indicated, the information contained in this prospectus does not give effect to the exercise of the Over-Allotment Option. OUR BUSINESS We are a biopharmaceutical company focused on the development and commercialization of innovative therapeutics for a variety of neurological disorders. We currently have one program which has completed a Phase II/III clinical trial, one program in a Phase III clinical trial and another program which has completed a Phase IIa clinical trial, each targeting disorders for which there are currently no known cures and limited therapies. Because our drugs target what are known or believed to be the underlying causes of disorders and potentially inhibit their progression, they are known as "disease modifiers". Our investigational product candidates consist of a new class of small molecules that mimic a type of naturally occurring component of proteoglycans known as glycosaminoglycans ("GAGs"). We call these molecules "GAG mimetics". By interacting with the amyloid protein, our molecules mimic GAGs and inhibit both the formation of fibrils and the resulting toxic effects. 1,3-propanedisulfonate (Fibrillex(TM)) and 3-amino-1-propanesulfonic acid (Alzhemed(TM) and Cerebril(TM)), our most advanced product candidates, are based on our GAG mimetics technology. PRODUCT PIPELINE The following table illustrates the stage of development and the estimated date of filing with the US Food and Drug Administration (FDA) of a New Drug Application (NDA) and the filing of the European Medicines Evaluation Agency (EMEA) equivalent:
ESTIMATED ESTIMATED US EUROPEAN EMEA PRODUCT CANDIDATE TARGET DISORDER STAGE OF DEVELOPMENT NDA FILING* FILING* - ----------------- ------------------- --------------------------------------- ------------ ------------- Fibrillex(TM) AA Amyloidosis Phase II/III clinical trial completed, Q2 2005(1) Q1 2006 results expected Q2 2005 Alzhemed(TM) Alzheimer's Disease North American Phase III clinical trial 2007(2) 2007(2) on-going European Phase III clinical trial 2008(2) 2008(2) expected to commence in the second half of 2005 Cerebril(TM) Hemorrhagic Stroke Phase IIa clinical trial completed (3) (3) due to CAA
* The actual date of filing, if any, can vary widely depending on a variety of factors. See "Risk Factors". (1) Rolling NDA and filing of pre-clinical data to be initiated in Q2 2005. We estimate that we will complete our submission in Q3 2005. (2) 2007 filing for Alzhemed(TM) is based on a single Phase III North American clinical trial satisfying regulatory (FDA and/or EMEA) requirements. If the European Phase III clinical trial is also required by the FDA, NDA filing expected in 2008. (3) Program currently being designed: scope and length, as well as results will influence timing. 1 The Offering Common Shares we are Offering............................ This Offering is an offering of Neurochem's Common Shares in the United States and in Canada. We are offering 4,000,000 Common Shares. Common Shares Outstanding after the Offering............................ 34,412,136 Common Shares Use of Proceeds..................... We currently intend to use the net proceeds of the Offering to fund clinical trials for our product candidates, primarily Alzhemed(TM); for other research and development programs; and the balance for marketing of Fibrillex(TM), working capital and general corporate purposes. See "Use of proceeds". TSX Symbol.......................... NRM NASDAQ Symbol....................... NRMX Risk factors........................ An investment in the Common Shares offered hereby involves significant risks which should be carefully considered by prospective investors. See "Risk factors".
The number of Common Shares referred to above that will be outstanding immediately after the completion of the Offering is based on the number of Common Shares outstanding as of March 2, 2005, and excludes: + up to 600,000 Common Shares that may be issued upon the exercise of the Over-Allotment Option as described under "Underwriting"; + 4,000,000 Common Shares issuable upon the exercise of warrants (the "Warrants") outstanding at a weighted average exercise price of $4.53 per Common Share. All of the Warrants are held by Picchio Pharma. Warrants to purchase 2.8 million Common Shares are exercisable at a price of $3.13 per share and expire on July 25, 2005, and Warrants to purchase 1.2 million Common Shares are exercisable at a price of $7.81 per share and expire on February 17, 2006. On February 14, 2005, Picchio Pharma confirmed its commitment to exercise the 2.8 million Warrants expiring on July 25, 2005, but did not specify the date of the anticipated exercise. The information presented in this prospectus does not give effect to the exercise of the Warrants by Picchio Pharma. See "Description of share capital"; + up to 4,438,767 additional Common Shares reserved for issuance under our Stock Option Plan, of which 2,497,067 stock options are issued and outstanding at a weighted average exercise price of $15.82 per share; and + up to 220,000 Common Shares issuable to our Chairman, President and Chief Executive Officer, of which 160,000 are subject to the achievement of specified performance targets, pursuant to an agreement dated December 1, 2004. See "Our Business - Recent Developments - Agreements with our Chairman, President and Chief Executive Officer". 2 Selected consolidated financial data Set forth below is our selected consolidated financial data as of the dates and for the periods indicated. Such selected consolidated financial data is derived from and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2004, the six-month period ended December 31, 2003, and the year ended June 30, 2003, which have been audited by KMPG LLP, and the related notes, as well as "Management's discussion and analysis of financial condition and results of operations" incorporated by reference in this prospectus. For your convenience, we have converted certain Canadian dollar amounts for the year ended December 31, 2004, into US dollars at the rate of US$0.8308 per $1.00 (the noon exchange rate quoted by the Bank of Canada on December 31, 2004). You should not view such translations as a representation that such Canadian dollar amounts actually represent such US dollar amounts or could be or could have been converted into US dollars at the rates indicated or at any other rate. We prepare our consolidated financial statements in accordance with Canadian GAAP. See Note 20 to our audited consolidated financial statements incorporated by reference for a description of the principal differences between Canadian GAAP and US GAAP as they relate to our business.
SIX-MONTH YEAR ENDED PERIOD DECEMBER 31, YEAR ENDED ENDED YEAR ENDED 2004 DECEMBER 31, DECEMBER 31, JUNE 30, STATEMENT OF OPERATIONS DATA: US$ 2004 2003(1) 2003 - ------------------------------------------------ ------------ ------------ ------------ ---------- (In thousands of dollars, except per share and share amounts) Revenues: Research contracts............................ $ - $ - $ - $ - Collaboration agreement....................... 110 132 - - ----------- ------------ ------------ ----------- 110 132 - - Expenses: Research and development...................... 25,881 31,152 8,661 18,782 Research tax credits.......................... (1,216) (1,463) (914) (1,410) Research grants and other..................... (279) (336) (208) (1,895) ----------- ------------ ------------ ----------- 24,386 29,353 7,539 15,477 General and administrative.................... 14,915 17,953 7,454 7,184 Stock-based compensation...................... 3,355 4,038 - - Special charges............................... 1,393 1,676 - - Depreciation of property and equipment........ 1,496 1,801 557 1,019 Amortization of patent costs.................. 204 245 89 178 Interest and bank charges..................... 230 277 46 144 ----------- ------------ ------------ ----------- 45,979 55,343 15,685 24,002 ----------- ------------ ------------ ----------- Net loss before undernoted items................ (45,869) (55,211) (15,685) (24,002) Investment and other income: Interest income............................... 856 1,030 520 800 Foreign exchange.............................. 1,078 1,298 (1,747) 100 Gain on disposal of intellectual property..... - - - 3,484 Other income.................................. 402 484 139 - ----------- ------------ ------------ ----------- Net loss........................................ $ (43,533) $ (52,399) $ (16,773) $ (19,618) =========== ============ ============ =========== Net loss per share Basic and diluted............................. $ (1.44) $ (1.74) $ (0.63) $ (0.90) Basic weighted average number of Common Shares outstanding..................................... 30,156,194 30,156,194 26,813,836 21,770,541
- ----------------------------- (1) We changed our fiscal year end from June 30 to December 31, effective December 31, 2003. 3
AS AT DECEMBER 31, 2004 -------------------------------------------------- AS ACTUAL ADJUSTED(1) AS BALANCE SHEET DATA: US$ US$ ACTUAL ADJUSTED(1),(2) - ------------------------------------------------------------- -------- ----------- ------- --------------- (In thousands of dollars) Cash, cash equivalents and marketable securities............. $ 24,237 $ 74,957 $ 29,173 $ 92,070 Working capital.............................................. 27,564 78,284 33,177 96,074 Total assets................................................. 63,515 114,235 76,448 139,345 Long-term debt and obligations under capital leases.......... 8,767 8,767 10,552 10,552 Total liabilities............................................ 29,706 29,706 35,754 35,754 Total shareholders' equity................................... 33,809 84,529 40,694 103,591
(1) As adjusted to give effect to the sale of 4,000,000 Common Shares pursuant to the Offering, at an assumed Offering price of US$13.68 per share, and our receipt of estimated net proceeds of US$50.72 million. See "Use of proceeds". (2) For the purposes of the adjustment, we have assumed that the net proceeds from the Offering will be received in US dollars and we have converted such proceeds using the noon exchange rate on March 2, 2005 for one Canadian dollar, expressed in US dollars, as quoted by the Bank of Canada, being US$0.8064. 4 RISK FACTORS - ----------------------------------------------------------------------------- Investing in our Common Shares involves a significant amount of risk. You should carefully consider the risks described below, together with all of the other information included in this prospectus and the documents incorporated by reference into this prospectus, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could be adversely affected. In such an event, the trading price of our Common Shares could decline and you may lose part or all of your investment. RISKS RELATED TO US AND OUR BUSINESS WE HAVE A HISTORY OF LOSSES, AND WE HAVE NOT GENERATED ANY PRODUCT REVENUES. WE MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY. All of our potential product candidates are in development, and as a result we have not to date generated any revenues from product sales. We have incurred substantial expenses in our efforts to develop products. Consequently, we have generated operating losses each year since our inception, and as of December 31, 2004, we had an accumulated deficit of approximately $140.9 million (US$117.1 million). Our losses have adversely impacted, and will continue to adversely impact our working capital, total assets and shareholders' equity. We do not expect to generate any revenues from product sales for several years, and our expenses are likely to increase as we expand our research and development and clinical study programs and our sales and marketing activities and seek regulatory approval for our product candidates. We may never commercialize any of our products. Even if we succeed in developing commercial products, we expect to incur additional operating losses for at least the next several years. If we do not ultimately commercialize products and achieve or maintain profitability, your investment in our shares could result in a significant or total loss. WE DO NOT HAVE THE REQUIRED APPROVALS TO MARKET ANY OF OUR PRODUCT CANDIDATES, AND WE DO NOT KNOW IF WE WILL EVER RECEIVE SUCH APPROVALS. None of our product candidates has received regulatory approval for commercial sale. We cannot market a pharmaceutical product in any jurisdiction until it has completed rigorous pre-clinical testing and clinical trials and such jurisdiction's extensive regulatory approval process. In general, significant research and development and clinical studies are required to demonstrate the safety and efficacy of our product candidates before we can submit regulatory applications. Preparing, submitting and advancing applications for regulatory approval is complex, expensive and time consuming and entails significant uncertainty. We have not completed this process for any product candidates. Even if a product candidate is approved by the FDA or any other regulatory authority, we may not obtain approval for an indication whose market is large enough to recoup our investment in that product candidate. We may never obtain the required regulatory approvals for any of our product candidates. OUR CLINICAL TRIALS MAY NOT YIELD RESULTS WHICH WILL ENABLE US TO OBTAIN REGULATORY APPROVAL FOR OUR PRODUCTS. We will only receive regulatory approval for a product candidate if we can demonstrate in carefully designed and conducted clinical trials that the product candidate is safe and effective. We do not know whether our pending or any future clinical trials will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or will result in marketable products. Clinical trials are lengthy, complex, expensive and uncertain processes. It will take us several years to complete our testing, and failure can occur at any stage of testing. Results attained in pre-clinical testing and early clinical studies, or trials, may not be indicative of results that are obtained in later studies. We may suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies. Based on results at any stage of clinical trials, we may decide to repeat or redesign a trial or discontinue development of one or more of our product candidates. If we fail to adequately demonstrate the safety and efficacy of our products under development, we will not be able to obtain the required regulatory approvals to commercialize our product candidates. 5 RISK FACTORS - ----------------------------------------------------------------------------- Clinical trials are subject to continuing oversight by governmental regulatory authorities and institutional review boards and: + must meet the requirements of these authorities; + must meet requirements for informed consent; and + must meet requirements for good clinical practices. We may not be able to comply with these requirements. We rely on third parties, including contract research organizations and outside consultants, to assist us in managing and monitoring clinical trials. Our reliance on these third parties may result in delays in completing, or in failing to complete, these trials if they fail to perform with the speed and level of competence we expect. If clinical trials for a product candidate are unsuccessful, we will be unable to commercialize such product candidate. If one or more of our clinical trials are delayed, we will be unable to meet our anticipated development or commercialization timelines. Either circumstance could cause the price of our shares to decline. IF WE ENCOUNTER DIFFICULTIES ENROLLING PATIENTS IN OUR CLINICAL TRIALS, OUR TRIALS COULD BE DELAYED OR OTHERWISE ADVERSELY AFFECTED. Clinical trials for our product candidates require that we identify and enroll a large number of patients with the disorder under investigation. We may not be able to enroll a sufficient number of patients to complete our clinical trials in a timely manner. Patient enrollment is a function of many factors including: + design of the protocol; + the size of the patient population; + eligibility criteria for the study in question; + perceived risks and benefits of the drug under study; + availability of competing therapies; + efforts to facilitate timely enrollment in clinical trials; + patient referral practices of physicians; and + availability of clinical trial sites. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing clinical trials. A SETBACK IN ANY OF OUR CLINICAL TRIALS WOULD LIKELY CAUSE A DROP IN THE PRICE OF OUR SHARES. We have completed a Phase II/III clinical trial of Fibrillex(TM) and began enrollment for Phase III clinical trial of Alzhemed(TM) in 2004. The Phase II/III clinical trial of Fibrillex(TM) was recently completed and study data is expected to be released in the second quarter of 2005, and, consequently, will not be available prior to the closing of this Offering. Setbacks in any phase of the clinical development of our product candidates would have a financial impact (including with respect to our collaboration agreement and distribution agreement with Centocor, Inc., a wholly-owned subsidiary of Johnson and Johnson ("Centocor")) and would likely cause a drop in the price of our shares. Moreover, because Alzhemed(TM) and Cerebril(TM) are the same compound, a failure in the development of either of these product candidates could have a negative impact on the development of the other. 6 RISK FACTORS - ----------------------------------------------------------------------------- EVEN IF WE OBTAIN REGULATORY APPROVALS FOR OUR PRODUCT CANDIDATES, WE WILL BE SUBJECT TO STRINGENT ONGOING GOVERNMENT REGULATION. Even if regulatory authorities approve any of our product candidates, the manufacture, marketing and sale of such products will be subject to strict and ongoing regulation. Compliance with such regulation will be expensive and consume substantial financial and management resources. For example, an approval for a product may be conditioned on our conducting costly post-marketing follow-up studies. In addition, if based on these studies, a regulatory authority does not believe that the product demonstrates a benefit to patients, such authority could limit the indications for which the product may be sold or revoke the product's regulatory approval. We and our contract manufacturers will be required to comply with applicable current Good Manufacturing Practice ("GMP") regulations for the manufacture of our products. These regulations include requirements relating to quality assurance, as well as the corresponding maintenance of records and documentation. Manufacturing facilities must be approved before we can use them in commercial manufacturing of our products and are subject to subsequent periodic inspection by regulatory authorities. In addition, material changes in the methods of manufacturing or changes in the suppliers of raw materials are subject to further regulatory review and approval. If we or any future marketing collaborators or contract manufacturers fail to comply with applicable regulatory requirements, we may be subject to sanctions including fines, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously granted regulatory approvals and criminal prosecution. Any of these penalties could delay or prevent the promotion, marketing or sale of our products. IF OUR PRODUCTS DO NOT GAIN MARKET ACCEPTANCE, WE MAY BE UNABLE TO GENERATE SIGNIFICANT REVENUES. Even if our products are approved for sale, they may not be successful in the marketplace. Market acceptance of any of our products will depend on a number of factors including: + demonstration of clinical effectiveness and safety; + the potential advantages of our products over alternative treatments; + the availability of acceptable pricing and adequate third-party reimbursement; and + the effectiveness of marketing and distribution methods for the products. If our products do not gain market acceptance among physicians, patients and others in the medical community, our ability to generate significant revenues from our products would be limited. WE MAY NOT ACHIEVE OUR PROJECTED DEVELOPMENT GOALS IN THE TIME FRAMES WE ANNOUNCE AND EXPECT. We set goals for and make public statements regarding timing of the accomplishment of objectives material to our success, such as the commencement and completion of clinical trials, anticipated regulatory approval dates and time of product launch. The actual timing of these events can vary dramatically due to factors such as delays or failures in our clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize our products. There can be no assurance that our clinical trials will be completed, that we will make regulatory submissions or receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the launch of any of our products. If we fail to achieve one or more of these milestones as planned, the price of our shares could decline. IF WE FAIL TO OBTAIN ACCEPTABLE PRICES OR ADEQUATE REIMBURSEMENT FOR OUR PRODUCTS, OUR ABILITY TO GENERATE REVENUES WILL BE DIMINISHED. Our ability to successfully commercialize our products will depend significantly on our ability to obtain acceptable prices and the availability of reimbursement to the patient from third-party payers, such as government and private insurance plans. While we have not commenced discussions with any such parties, these third-party payers frequently require companies to provide predetermined discounts from list prices, and they are increasingly challenging the prices charged for pharmaceuticals and other 7 RISK FACTORS - ----------------------------------------------------------------------------- medical products. Our products may not be considered cost-effective, and reimbursement to the patient may not be available or sufficient to allow us to sell our products on a competitive basis. We may not be able to negotiate favorable reimbursement rates for our products. In addition, the continuing efforts of third-party payers to contain or reduce the costs of healthcare through various means may limit our commercial opportunity and reduce any associated revenue and profits. We expect proposals to implement similar government control to continue. In addition, increasing emphasis on managed care will continue to put pressure on the pricing of pharmaceutical and biopharmaceutical products. Cost control initiatives could decrease the price that we or any current or potential collaborators could receive for any of our future products and could adversely affect our profitability. In addition, in Canada and in many other countries, pricing and/or profitability of some or all prescription pharmaceuticals and biopharmaceuticals are subject to government control. If we fail to obtain acceptable prices or an adequate level of reimbursement for our products, the sales of our products would be adversely affected or there may be no commercially viable market for our products. COMPETITION IN OUR TARGETED MARKETS IS INTENSE, AND DEVELOPMENT BY OTHER COMPANIES COULD RENDER OUR PRODUCTS OR TECHNOLOGIES NON-COMPETITIVE. The biopharmaceutical industry is highly competitive. New products developed by other companies in the industry could render our products or technologies non-competitive. Competitors may have developed or may be developing technologies that could form the basis for competitive products. Some of these products may be more effective or have an entirely different approach or means of accomplishing the desired effect than our products. We expect competition from biopharmaceutical and pharmaceutical companies and academic research institutions to increase over time. Many of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Our competitors may succeed in developing products earlier and in obtaining regulatory approvals and patent protection for such products more rapidly than we can or at a lower price. WE MAY NOT OBTAIN ADEQUATE PROTECTION FOR OUR PRODUCTS THROUGH OUR INTELLECTUAL PROPERTY. Our success depends, in large part, on our ability to protect our competitive position through patents, trade secrets, trademarks and other intellectual property rights. The patent positions of pharmaceutical and biopharmaceutical firms including Neurochem are uncertain and involve complex questions of law and fact for which important legal issues remain unresolved. The patents issued or to be issued to us may not provide us with any competitive advantage. Our patents may be challenged by third parties in patent litigation, which is becoming widespread in the biopharmaceutical industry. In addition, it is possible that third parties with products that are very similar to ours will circumvent our patents by means of alternate designs or processes. We may have to rely entirely on method of use protection for our products, which may not confer the same protection as composition of matter patents. We cannot be certain that we are the first creator of inventions covered by pending patent applications or that we were the first to file patent applications for any such inventions and, if we are not, we may be subject to inventorship claims. We may be required to disclaim part of the term of certain patents or all of the term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that our patents would be declared by a court to be valid or enforceable or that a competitor's technology or product would be found by a court to infringe our patents. Applications for patents and trademarks in Canada, the United States and in foreign markets have been filed and are being actively pursued by us. Pending patent applications may not result in the issuance of patents, and we may not develop additional proprietary products which are patentable. Patent applications relating to or affecting our business have been filed by a number of pharmaceutical and biopharmaceutical companies and academic institutions. A number of the technologies in these applications or patents may conflict with our technologies, patents or patent applications, and such 8 RISK FACTORS - ----------------------------------------------------------------------------- conflict could reduce the scope of patent protection which we could otherwise obtain. We could also become involved in interference proceedings in connection with one or more of our patents or patent applications to determine priority of invention. In addition to patents, we rely on trade secrets and proprietary know-how to protect our intellectual property. We generally require our employees, consultants, outside scientific collaborators and sponsored researchers and other advisors to enter into confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of our employees, the agreements provide that all of the technology which is conceived by the individual during the course of employment is our exclusive property. These agreements may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of our proprietary information. In addition, it is possible that third parties could independently develop proprietary information and techniques substantially similar to ours or otherwise gain access to our trade secrets. We currently have the right to use certain technology under license agreements with third parties. Our failure to comply with the requirements of material license agreements could result in the termination of such agreements, which could cause us to terminate the related development program and cause a complete loss of our investment in that program. As a result of the foregoing factors, we cannot rely on our intellectual property to protect our products in the marketplace. WE MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS. Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. There could be issued patents of which we are not aware that our products infringe or patents, that we believe we do not infringe, but that we may ultimately be found to infringe. Moreover, patent applications are in many cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes. In the event of infringement or violation of another party's patent, we may be required to obtain a license from that party or redesign our products so as not to infringe the patent. We may not be able to enter into licensing arrangements at a reasonable cost or effectively redesign our products. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us. PATENT LITIGATION IS COSTLY AND TIME CONSUMING AND MAY SUBJECT US TO LIABILITIES. Our involvement in any patent litigation, interference or other administrative proceedings will likely cause us to incur substantial expenses, and the efforts of our technical and management personnel will be significantly diverted. In addition, an adverse determination could subject us to significant liabilities. WE MAY NOT OBTAIN TRADEMARK REGISTRATIONS. The Company has filed trademark registrations in connection with Fibrillex(TM), Alzhemed(TM) and Cerebril(TM) in various jurisdictions, including the United States. Although we do not believe that any of these trade names is critical to the success of the product candidate to which it relates, we intend to defend any opposition to our trademark registrations. No assurance can be given that any of our trademarks will be registered in the United States or elsewhere or that the use of any trademark will confer a competitive advantage in the marketplace. Furthermore, even if we are successful in our trademark registrations, the FDA has its own process for drug nomenclature and its own views concerning appropriate 9 RISK FACTORS - ----------------------------------------------------------------------------- proprietary names. It also has the power, even after granting market approval, to request a company to reconsider the name for a product because of evidence of confusion in the market place. No assurance can be given that the FDA or any other regulatory authority will approve of any of our trademarks or will not request reconsideration of one of our trademarks at some time in the future. WE WILL REQUIRE SIGNIFICANT ADDITIONAL FINANCING, AND WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL. We will require additional capital to pursue planned clinical trials, regulatory approvals, as well as further research and development and marketing efforts for our product candidates. Except as expressly described in this prospectus or in the documents incorporated by reference herein, we do not anticipate generating revenues from operations in the foreseeable future, and we have no committed sources of capital. We intend to raise additional funds through public or private financing, collaborations with other pharmaceutical companies or financing from other sources. Additional funding may not be available on terms which are acceptable to us. If adequate funding is not available on reasonable terms, we may need to delay, reduce or eliminate one or more of our product development programs or obtain funds on terms less favorable than we would otherwise accept. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of those securities could result in dilution to our shareholders. Moreover, the incurrence of debt financing could result in a substantial portion of our operating cash flow being dedicated to the payment of principal and interest on such indebtedness and could impose restrictions on our operations. This could render us more vulnerable to competitive pressures and economic downturns. In November 1999, we entered into an agreement with the Government of Canada pursuant to which we have received approximately $7 million of funding for the development of oral therapeutics for AD. The agreement contains a number of conditions and requirements with respect to such funding. We are currently in discussions with the Government of Canada in order to make the terms of the agreement, including such conditions and requirements, more conducive to our current strategy and to our public reporting obligations in Canada and the US. The Government of Canada has not enforced strict adherence with the terms of the agreement and we are in on-going discussions with respect to an amendment thereof. There can be no assurance that the terms of the agreement will be amended in the manner expected by us and, in the event that we are not able to agree on the amendments with the Government of Canada, we could be required to repay the amounts provided to us thereunder together with interest on such amount and other amounts payable under the agreement that cannot be determined at this time. However, given our discussions with the Government of Canada to date, we have no reason to believe that we will not be able to agree on such amendments. We anticipate that our existing working capital and anticipated revenues will be sufficient to fund our development programs, clinical trials and other operating expenses into fiscal 2006. However, our future capital requirements are substantial and may increase beyond our current expectations depending on many factors including: + the duration and results of our clinical trials for Fibrillex(TM), Alzhemed(TM) and Cerebril(TM); + unexpected delays or developments in seeking regulatory approvals; + the time and cost in preparing, filing, prosecuting, maintaining and enforcing patent claims; + other unexpected developments encountered in implementing our business development and commercialization strategies; and + further arrangements, if any, with collaborators. OUR REVENUES AND EXPENSES MAY FLUCTUATE SIGNIFICANTLY, AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR SHARE PRICE. Our revenues and expenses have fluctuated in the past and are likely to do so in the future. These fluctuations could cause our share price to decline. Some of the factors that could cause our revenues and expenses to fluctuate include: + the inability to complete product development in a timely manner that results in a failure or delay in receiving the required regulatory approvals to commercialize our product candidates; 10 RISK FACTORS - -------------------------------------------------------------------------------- + the timing of regulatory submissions and approvals; + the timing and willingness of any current or future collaborators to invest the resources necessary to commercialize our product candidates; + the timing of receipts of milestone payments from current or future collaborators; and + failure to enter into new or the expiration or termination of current agreements with collaborators. Due to fluctuations in our revenues and expenses, we believe that period-to-period comparisons of our results of operations are not a good indication of our future performance. It is possible that in some future quarter or quarters, our revenues and expenses will be below the expectations of securities analysts or investors. In this case, the price of our shares could fluctuate significantly or decline. WE ARE DEPENDENT ON CENTOCOR FOR THE COMMERCIALIZATION OF FIBRILLEX(TM) We are dependent on Centocor for the further development and commercialization of Fibrillex(TM) in most jurisdictions. Risks that we face in connection with this collaboration include the following: + while Centocor is contractually prohibited from developing or commercializing, either alone or with others, products and services that are similar to or competitive with Fibrillex(TM), this restriction does not apply to its affiliates; + Centocor may underfund or not commit sufficient resources to marketing, distribution or other development of Fibrillex(TM); + Centocor may not properly maintain or defend certain intellectual property rights that may be important to the commercialization of Fibrillex(TM); + Centocor may encounter conflicts of interest, changes in business strategy or other issues which could adversely affect its willingness or ability to fulfill its obligations to us (for example, pharmaceutical companies historically have re-evaluated their priorities following mergers and consolidations, which have been common in recent years in this industry); and + disputes may arise between us and Centocor delaying or terminating the development or commercialization of Fibrillex(TM), resulting in litigation or arbitration that could be time-consuming and expensive, or causing Centocor to act in its own self-interest and not in our interest or those of our shareholders. Centocor can terminate our collaboration with them for a variety of reasons, including without cause upon one-year's notice, upon a change of control of Neurochem and upon short notice if the results from the Fibrillex(TM) Phase II/III clinical trial fail to satisfy certain criteria or if the FDA takes certain adverse actions with respect to an NDA filing. If this collaboration were to be terminated, we would be required to devote additional resources to developing and commercializing Fibrillex(TM) or seek a new collaborator or abandon this product. We are seeking a collaboration with respect to Alzhemed(TM). Any such collaboration would likely subject us to the same general types of risks as those described above. WE ARE CURRENTLY DEPENDENT ON THIRD PARTIES FOR A VARIETY OF FUNCTIONS AND MAY ENTER INTO FUTURE COLLABORATIONS FOR THE MANUFACTURE OF OUR PRODUCTS. OUR ARRANGEMENTS WITH THESE THIRD PARTIES MAY NOT PROVIDE US WITH THE BENEFITS WE EXPECT. We currently rely upon third parties to perform functions related to the research, development and clinical trials of our product candidates. In addition, because we do not have the resources, facilities or experience to manufacture our product candidates on our own, we currently rely, and will continue to rely, on contract manufacturers to produce our product candidates for clinical trials, and, if our products are approved, in quantities for commercial sales. We do not currently have long-term supply agreements with our third-party manufacturers. Our reliance on these relationships poses a number of risks, including the following: 11 RISK FACTORS - -------------------------------------------------------------------------------- + disagreements with third parties could delay or terminate the research, development or manufacturing of product candidates, or result in litigation or arbitration; + we cannot effectively control the resources our third-party partners will devote to our programs or products; + contracts with our third parties may fail to provide sufficient protection or we may have difficulty enforcing the contracts if one of these partners fails to perform; + the third parties with whom we contract may fail to comply with regulatory requirements; + conflicts of interest may arise between their work for us and their work for another entity, and we may lose their services; + with respect to our contract manufacturers: + we may not be able to locate acceptable manufacturers or enter into favorable long-term agreements with them; + third parties may not be able to manufacture our product candidates in a cost-effective or timely manner or in quantities needed for clinical trials or commercial sales; + delays in, or failures to achieve, scale-up to commercial quantities, or changes to current raw material suppliers or product manufacturers (whether the change is attributable to us or the supplier or manufacturer) could delay clinical studies, regulatory submissions and commercialization of our product candidates; and + we may not have all of the required intellectual property rights to the manufacturing processes for our product candidates. Given these risks, our current and future collaborative efforts with third parties may not be successful. Failure of these efforts could require us to devote additional internal resources to the activities currently performed, or to be performed, by third parties, to seek alternative third-party collaborators, or to delay our product development or commercialization. WE WILL NOT BE ABLE TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCT CANDIDATES IF WE ARE UNABLE TO CREATE SALES, MARKETING AND DISTRIBUTION CAPABILITIES OR MAKE ADEQUATE ARRANGEMENTS WITH THIRD PARTIES FOR SUCH PURPOSES. In order to commercialize our product candidates successfully, we intend, on a product-by-product basis, either to develop internal sales, marketing and distribution capabilities or make arrangements with third parties to perform some or all of these services. We currently have no marketing or sales force and we have limited experience in developing, training or managing a marketing or sales force. To the extent we internally develop a sales force, the cost of establishing and maintaining a sales force would be substantial and may exceed its cost effectiveness. In addition, in marketing our products, we would likely compete with many companies that currently have extensive and well-funded marketing and sales operations. Despite our marketing and sales efforts, we may be unable to compete successfully against these companies. For example, we are seeking a co-development and co-promotion partner to assist us in completing the development and commercialization of Alzhemed(TM). We may not be able to do so on favorable terms. We do not currently have any arrangements in place with third parties for the sale, marketing or distribution of any of our products, except for the distribution rights granted to Centocor. We may rely on additional third parties to market and sell our products in certain territories, rather than establish our own sales force. If we contract with third parties for the sales and marketing of our products, our revenues will depend upon the efforts of these third parties, whose efforts may not be successful. If we fail to establish successful marketing and sales capabilities or to make arrangements with third parties for such purposes, our business, financial condition and results of operations will be materially adversely affected. 12 RISK FACTORS - -------------------------------------------------------------------------------- WE ARE SUBJECT TO INTENSE COMPETITION FOR OUR SKILLED PERSONNEL, AND THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT ADDITIONAL PERSONNEL COULD IMPAIR OUR ABILITY TO CONDUCT OUR OPERATIONS. We are highly dependent on our management and our clinical, regulatory and scientific staff, the loss of whose services might adversely impact the achievement of our objectives. Recruiting and retaining qualified management and clinical, scientific and regulatory personnel will be critical to our success. Competition for skilled personnel is intense, and our ability to attract and retain qualified personnel may be affected by such competition. WE ARE SUBJECT TO THE RISK OF PRODUCT LIABILITY CLAIMS, FOR WHICH WE MAY NOT HAVE OR BE ABLE TO OBTAIN ADEQUATE INSURANCE COVERAGE. Human therapeutic products involve the risk of product liability claims and associated adverse publicity. Currently, our principal risks relate to participants in our clinical trials, who may suffer unintended consequences. If we ultimately are successful in commercializing a product, claims might be made directly by patients, healthcare providers or pharmaceutical companies or others selling our products. We may not have or be able to obtain or maintain sufficient and affordable insurance coverage, and without sufficient coverage any claim brought against us could have a materially adverse effect on our business, financial condition or results of operations. OUR BUSINESS INVOLVES THE USE OF HAZARDOUS MATERIALS WHICH REQUIRES US TO COMPLY WITH ENVIRONMENTAL REGULATION. Our discovery and development processes involve the controlled use of hazardous and radioactive materials. We are subject to federal, provincial and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result, and any such liability could exceed our resources. We may not be adequately insured against this type of liability. We may be required to incur significant costs to comply with environmental laws and regulations in the future, and our operations, business or assets may be materially adversely affected by current or future environmental laws or regulations. LEGISLATIVE ACTIONS, POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS AND HIGHER INSURANCE COSTS ARE LIKELY TO IMPACT OUR FUTURE FINANCIAL POSITION OR RESULTS OF OPERATIONS. Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with greater frequency and are expected to occur in the future, and we may make or be required to make changes in our accounting policies in the future. Compliance with changing regulations of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for companies such as ours, and insurance costs are increasing as a result of this uncertainty. WE MAY INCUR LOSSES ASSOCIATED WITH FOREIGN CURRENCY FLUCTUATIONS. Our operations are in some instances conducted in currencies other than the Canadian dollar (principally in US dollars), and fluctuations in the value of foreign currencies relative to the Canadian dollar could cause us to incur currency exchange losses. RISKS RELATED TO THE OFFERING OUR LARGEST SHAREHOLDER HAS INFLUENCE OVER OUR BUSINESS AND CORPORATE MATTERS, INCLUDING THOSE REQUIRING SHAREHOLDER APPROVAL. THIS COULD DELAY OR PREVENT A CHANGE IN CONTROL. 13 RISK FACTORS - -------------------------------------------------------------------------------- After giving effect to the Offering, Picchio Pharma will beneficially own or control approximately 20.54% of our outstanding Common Shares, and 28.81% of our Common Shares after giving effect to the exercise of the four million Warrants currently held by Picchio Pharma. The foregoing does not give effect to any other Common Shares that may be purchased pursuant to the commitment of Picchio Pharma described under "Description of Capital". In addition, three of our ten directors are nominees of Picchio Pharma. As a result, Picchio Pharma has the ability to exercise influence over our business and the outcome of various corporate matters, including those requiring shareholder approval. In particular, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the price of our shares. Dr. Francesco Bellini, O.C., our Chairman, President and Chief Executive Officer, is a beneficiary of a trust which owns 50% of the voting shares of Picchio Pharma. OUR SHARE PRICE MAY BE VOLATILE, AND AN INVESTMENT IN OUR SHARES COULD SUFFER A DECLINE IN VALUE. Our Common Shares are listed only on NASDAQ and the TSX. Our valuation and share price since the beginning of trading after our initial public offerings in the United States and Canada have had no meaningful relationship to current or historical financial results, asset values, book value or many other criteria based on conventional measures of the value of shares. The market price of our shares will fluctuate due to various factors including: + clinical and regulatory developments regarding Fibrillex(TM), Alzhemed(TM) and Cerebril(TM) and our other product candidates; + developments regarding current or future third-party collaborators; + other announcements by us regarding technological, product development or other matters; + arrivals or departures of key personnel; + government regulatory action affecting our product candidates and our competitors' products in the United States, Canada and foreign countries; + developments or disputes concerning patent or proprietary rights; + actual or anticipated fluctuations in our revenues or expenses; + general market conditions and fluctuations for the emerging growth and biopharmaceutical market sectors; and + economic conditions in the United States, Canada or abroad. Listing on NASDAQ and the TSX may increase share price volatility due to various factors including: + different ability to buy or sell our shares; + different market conditions in different capital markets; and + different trading volume. In the past, following periods of large price declines in the public market price of a company's securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management's attention and resources, which would adversely affect our business. Any adverse determination in litigation could also subject us to significant liabilities. BECAUSE WE ARE A CANADIAN COMPANY, CERTAIN CIVIL LIABILITIES AND JUDGMENTS MAY BE UNENFORCEABLE AGAINST US BY US INVESTORS. We are incorporated under the laws of Canada. Most of our directors and officers are residents of Canada. Most of our assets and the assets of such persons are located outside of the United States. As a result, it may be difficult for our US-based shareholders to initiate a lawsuit within the United States. It may also be difficult for shareholders to enforce a United States judgment in Canada or elsewhere or to succeed in a lawsuit in Canada or elsewhere based only on violations of United States securities laws. 14 WE CURRENTLY DO NOT INTEND TO PAY DIVIDENDS IN THE NEAR FUTURE. We have never declared or paid any dividends on our Common Shares. We currently intend to retain our future earnings, if any, to finance further research and the expansion of our business. As a result, the return on an investment in our Common Shares will depend upon any future appreciation in value. There is no guarantee that our Common Shares will appreciate in value or even maintain the price at which shareholders have purchased their shares. 15 Forward-looking statements This prospectus contains forward-looking statements concerning the business, operations, financial performance and condition of Neurochem. When used in this prospectus the words "believe", "anticipate", "intend", "estimate" and "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and are naturally subject to uncertainty and changes in circumstances that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to technological change, regulatory change, the general state of the economy and competitive factors. More detailed information about these and other factors is included in this prospectus under the section entitled "Risk factors". Many of these factors are beyond our control; therefore, future events may vary substantially from what we currently foresee. You should not place undue reliance on such forward-looking statements. Neurochem is under no obligation to update or alter such forward-looking statements whether as a result of new information, future events or otherwise. Exchange rate information The following table sets forth: (i) the noon exchange rates for one Canadian dollar, expressed in US dollars, in effect at the end of the periods indicated, as quoted by the Bank of Canada; (ii) the high and low noon exchange rates during such periods as quoted by the Bank of Canada; and (iii) the average noon exchange rates for such periods.
SIX-MONTH PERIOD YEAR ENDED ENDED YEAR ENDED DECEMBER 31, 2004 DECEMBER 31,2003 JUNE 30, 2003 ------------------ ------------------ ------------------ Closing.............................. US$ 0.8308 US$ 0.7738 US$ 0.7378 High................................. 0.8493 0.7738 0.7495 Low.................................. 0.7159 0.7084 0.6273 Average.............................. 0.7683 0.7417 0.6622
The average exchange rate is calculated based on the last business day of each month for the applicable period. On March 2, 2005, the noon exchange rate for one Canadian dollar, expressed in US dollars, as quoted by the Bank of Canada, was US$0.8064. Unless otherwise indicated, all US dollar amounts referred in this prospectus which have been converted into US dollars from Canadian dollars have been so converted using the noon exchange rate on March 2, 2005, expressed in US dollars for $1.00, as quoted by the Bank of Canada, being US$0.8064 16 Use of proceeds We estimate that the net proceeds from the sale of the 4,000,000 Common Shares we are offering will be approximately US$50.72 million, after deducting underwriting fees and commissions, and the estimated Offering expenses payable by us, based on an assumed Offering price of US$13.68 per Common Share. If the Underwriters exercise their Over-Allotment Option in full, we estimate that the net proceeds will be approximately US$58.46 million. We currently intend to use the net proceeds of the Offering as follows: + approximately US$43 million to fund clinical trials for our product candidates, primarily Alzhemed(TM); + approximately US$6 million for other research and development programs; and + the balance for the marketing of Fibrillex(TM), working capital and general corporate purposes. The amounts actually expended for the purposes described above may vary significantly depending on, among other things, the progress of our research and development programs, regulatory filings, technological advances, activities in anticipation of the commercialization of our products, the terms of any additional collaborations or in-licensing arrangements and the status of competitive products. 17 Capitalization The following table presents our cash, cash equivalents and Marketable Securities and our capitalization as at December 31, 2004: + on an actual basis; and + on an as adjusted basis to give effect to the receipt by us of estimated net proceeds of US$50.72 million for our Offering of 4,000,000 Common Shares at an assumed offering price of US$13.68 per share, after deducting the underwriting fees and commissions and the estimated Offering expenses payable by us Since December 31, 2004, the only changes in the number of outstanding Common Shares resulted from the issuance of 91,717 Common Shares pursuant to the exercise of stock options." For your convenience, we have converted certain Canadian dollar amounts for the year ended December 31, 2004 into US dollars at the rate of US$0.8308 per $1.00 (the noon exchange rate quoted by the Bank of Canada on December 31, 2004). You should not view such currency translations as a representation that such Canadian dollar amounts actually represent such US dollar amounts or could be or could have been converted into US dollars at the rates indicated or at any other rate.
AS AT DECEMBER 31, 2004 ------------------------------------------------------- AS ACTUAL AS ADJUSTED ACTUAL ADJUSTED(1) --------- ----------- ---------- ----------- (IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES) US$ US$ $ $ Cash, cash equivalents and marketable securities......... $ 24,237 $ 74,957 $ 29,173 $ 92,070 ========= =========== ========== ========== Long-term debt and obligations under capital leases...... $ 8,767 $ 8,767 $ 10,552 $ 10,552 --------- ----------- ---------- ---------- Shareholders' equity: Common Shares: Authorized - unlimited number; issued and outstanding 30,320,419 (as adjusted 34,320,419)...... 146,100 200,820 175,855 243,712 Preferred shares: - - - - Authorized - unlimited number of shares issuable in series; issued and outstanding - Nil (as adjusted - Nil) Additional paid-in capital............................ 4,790 4,790 5,765 5,765 Deficit............................................... (117,081) 121,081 (140,926) 145,886 --------- ----------- ---------- ---------- Total shareholders' equity 33,809 84,529 40,694 103,591 --------- ----------- ---------- ---------- Total capitalization..................................... $ 42,576 $ 93,296 $ 51,246 $ 114,143 ========= =========== ========== ==========
(1) For the purposes of the adjustment, we have assumed that the net proceeds from the Offering will be received in US dollars, and we have converted such proceeds using the noon exchange rate on March 2, 2005 for one Canadian dollar, expressed in US dollars, as quoted by the Bank of Canada, being US$0.8064. The information presented in the table does not include: + up to 600,000 Common Shares that may be issued upon the exercise of the Over-Allotment Option as described under "Underwriting"; + 4,000,000 Common Shares issuable upon the exercise of warrants (the "Warrants") outstanding at a weighted average exercise price of $4.53 per Common Share. All of the Warrants are held by Picchio Pharma. Warrants to purchase 2.8 million Common Shares are exercisable at a price of $3.13 per share and expire on July 25, 2005, and Warrants to purchase 1.2 million Common Shares are exercisable at a price of $7.81 per share and expire on February 17, 2006. On February 14, 2005, Picchio Pharma confirmed its commitment to exercise the 2.8 million Warrants expiring on July 25, 2005, but did not specify the date of the anticipated exercise. The information presented in this prospectus does not give effect to the exercise of the Warrants by Picchio Pharma. See "Description of share capital"; + up to 4,438,767 additional Common Shares reserved for issuance under our Stock Option Plan, of which 2, 497,067 stock options are issued and outstanding at a weighted average exercise price of $15.82 per share; and + up to 220,000 Common Shares issuable to our Chairman, President and Chief Executive Officer, of which 160,000 are subject to the achievement of specified performance targets, pursuant to an 18 CAPITALIZATION - -------------------------------------------------------------------------------- agreement dated December 1, 2004. See "Our Business - Recent Developments - Agreements with our Chairman, President and Chief Executive Officer". 19 PRICE RANGE AND TRADING VOLUMES OF OUR COMMON SHARES Our Common Shares are quoted on NASDAQ and listed and posted for trading on the TSX. The following table sets forth, for the periods indicated, the reported high and low sales prices and the aggregate volume of trading of our Common Shares on NASDAQ and the TSX.
NASDAQ(1) (US$) TSX ($) ------------------------- --------------------------- PERIOD HIGH LOW VOLUME HIGH LOW VOLUME - ------- ------ ------ ----------- ------- ----- --------- Calendar 2003 First Quarter........................... N/A N/A N/A 9.59 7.61 5,390,381 Second Quarter.......................... N/A N/A N/A 15.00 8.00 7,925,365 Third Quarter........................... 17.98 11.25 5,152,501 19.96 10.80 9,053,511 Fourth Quarter.......................... 24.27 11.93 5,263,380 31.69 16.02 8,999,361 Calendar 2004 First Quarter........................... 26.04 18.05 3,853,387 33.24 22.05 6,806,084 Second Quarter.......................... 27.43 19.49 6,617,780 36.55 26.20 5,775,204 Third Quarter........................... 24.48 11.85 11,097,629 31.00 15.55 7,456,225 Fourth Quarter.......................... 20.97 15.33 6,008,670 25.09 19.50 4,009,027 Calendar 2005 First Quarter (through March 2)......... 20.80 13.62 5,864,405 25.50 16.90 5,069,439
(1) Our Common Shares began trading on NASDAQ on September 18, 2003. DIVIDEND POLICY We have not declared any dividends since our incorporation. Any future determination to pay dividends will remain at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and such other factors as our Board of Directors deems relevant. 20 OUR BUSINESS The following provides an overview of our business and also describes certain recent developments. We are a biopharmaceutical company focused on the development and commercialization of innovative therapeutics for a variety of neurological disorders. We currently have one program which has completed a Phase II/III clinical trial, one program in a Phase III clinical trial and another program which has completed a Phase IIa clinical trial, each targeting disorders for which there are currently no known cures and limited therapies. Because our drugs target what are known or believed to be the underlying causes of disorders and potentially inhibit their progression, they are known as "disease modifiers". Our investigational product candidates consist of a new class of small molecules that mimic a type of naturally occurring component of proteoglycans known as glycosaminoglycans ("GAGs"). We call these molecules "GAG mimetics". By interacting with the amyloid protein, our molecules mimic GAGs and inhibit both the formation of fibrils and the resulting toxic effects. 1,3-propanedisulfonate (Fibrillex(TM)) and 3-amino-1-propanesulfonic acid (Alzhemed(TM) and Cerebril(TM)), our most advanced product candidates, are based on our GAG mimetics technology. Fibrillex(TM), our most advanced product candidate, has completed a Phase II/III clinical trial. We expect to announce the results in the second quarter of 2005. Fibrillex(TM) is specifically targeted to treat Amyloid A Amyloidosis ("AA Amyloidosis"). In December 2004, through our wholly-owned subsidiary Neurochem (International) Limited, we entered into a definitive collaboration and distribution agreement with Centocor, a wholly-owned subsidiary of Johnson & Johnson, for the exclusive distribution rights for Fibrillex(TM) for the prevention and treatment of AA Amyloidosis. See "Recent developments". Alzhemed(TM), our next most advanced product candidate, is our product for the treatment of Alzheimer's disease ("AD"). Alzhemed(TM) is currently in a Phase III clinical trial, designed to assess the efficacy and safety in mild-to-moderate AD patients. This trial began in North America in June, 2004. We expect to complete the randomization of this North American trial by the end of the second quarter of 2005 or early in the third quarter of 2005. We are in discussions with various potential partners for collaboration and commercialization with respect to Alzhemed(TM). We have received several proposals to date from various parties, and these proposals are currently under consideration and discussion. Cerebril(TM), our third product candidate, is designed to treat Hemorrhagic Stroke due to Cerebral Amyloid Angiopathy ("CAA"). Cerebril(TM) completed a Phase IIa clinical trial in January 2004. We expect to commence a Phase IIb trial to test the safety and efficacy of Cerebril(TM) for the prevention of the recurrence of Hemorrhagic Stroke due to CAA near year-end 2005. Our focus in neurology has also led to the development of compounds to prevent epileptic seizures induced by Traumatic Brain Injury ("TBI"). We are conducting pre-clinical testing on a compound, NC-1461, for the prevention of epileptic seizures induced by TBI. In addition to these clinical and developmental stage drug candidates, we have ongoing discovery programs that are focused on the development of next generation compounds for the treatment of AD and of a vaccine for AD, as well as researching various other aspects of neuroprotection and other amyloid-related disorders. Our vaccine program consists of a modified A(beta) peptide to induce an immune response. We also have a minority investment in Innodia Inc., a company focused on developing therapeutic treatments for diabetes. FIBRILLEX(TM) FOR AA AMYLOIDOSIS Fibrillex(TM) is our product candidate for the treatment of AA Amyloidosis, a chronic, systemic disorder. AA Amyloidosis is characterized by the over-expression of Serum Amyloid A ("SAA"), a protein found in 21 OUR BUSINESS - ------------------------------------------------------------------------------- the blood that is produced in response to inflammation. SAA is a precursor to an amyloid protein known as the AA protein (Amyloid A). In AA Amyloidosis, the AA protein forms fibrils that accumulate in the kidney, gastrointestinal tract, spleen, liver and other internal organs, compromising their function. As AA Amyloidosis progresses, it results in serious illness, organ failure and potentially death. There is at present no known cure for the disorder, and patients with AA Amyloidosis normally have a life expectancy of five to 15 years. It is estimated that approximately 40,000 patients are diagnosed with AA Amyloidosis in the United States and Europe. Fibrillex(TM) has received Fast-Track Designation from the US Food and Drug Administration (FDA). It has also been selected by the Cardio-Renal Drug Product Division of the FDA to be part of the Continuous Marketing Applications Pilot 2 program, which is aimed at expediting the development and availability to patients of investigational drugs. Fibrillex(TM) has also received Orphan Drug Status designation in the United States and Orphan Medicinal Product designation in Europe, which normally provide a drug seven and ten years of market exclusivity, respectively, upon regulatory approval. The Phase II/III trial was a two-year, international, multi-center, randomized, double-blind, placebo-controlled, and parallel-designed trial conducted to investigate the safety and efficacy of Fibrillex(TM) in 183 patients suffering from AA Amyloidosis at 27 sites across the United States, Europe, Turkey and Israel. The most frequent underlying diseases in patients enrolled in the trial were rheumatoid arthritis and Familial Mediterranean Fever (49% and 19%, respectively). Eighty-five percent of patients who completed the Phase II/III clinical trial joined an open-label extension study and are to receive Fibrillex(TM) for an additional two year period. Fibrillex(TM) has been well tolerated in these studies, and no major safety issues have been reported by the independent Data Safety Monitoring Board established to monitor the safety of patients during the trial. ALZHEMED(TM) FOR ALZHEIMER'S DISEASE Alzhemed(TM) is our product candidate for Alzheimer's Disease, a degenerative neurological disorder that progressively impairs a person's cognitive functions and gradually destroys the brain. According to the American Alzheimer's Association, it is estimated that over four and a half million North Americans are currently afflicted with AD. There is no cure currently available for AD, and existing drugs only treat symptoms such as cognitive function deficit. In its early stages, AD may cause only minor incidences of memory loss or forgetfulness. However, as it progresses, the symptoms multiply and intensify and the patient experiences the deterioration of both cognitive and motor functions, leading ultimately to death within an average of seven to 10 years. Although there is an increased prevalence with aging, AD is increasingly being diagnosed in individuals in their 50s and 60s. The pathogenesis of AD is still somewhat ill-defined. It is now well recognized in published scientific material that, although there is an early onset form of the disease that is genetically inherited, the vast majority of cases have no known genetic cause and occur later in life. Common to all cases of AD is the deposition of amyloid fibrils in the brain. These fibrils result when the Amyloid (beta) protein (A(beta)), interacts with naturally occurring GAGs. We are pursuing an amyloid-based approach in developing a treatment for AD. Alzhemed(TM) is a small molecule that binds to soluble non-fibrillar A(beta) and inhibits it from interacting with naturally occurring GAGs. By inhibiting the binding of GAGs to A(beta), Alzhemed(TM) can prevent the A(beta) protein from assuming its fibrillar structure, thus inhibiting amyloid deposition in brain tissue and the associated toxicity and neuronal damage. Alzhemed(TM) is designed to stop the progression of the disease in symptomatic patients and has been shown to decrease amyloid deposition and to favor A(beta) clearance from the brain in an animal model of AD. In June 2004, we initiated a North American Phase III clinical trial for Alzhemed(TM). The trial is a large multi-center, international, randomized, double-blind, placebo-controlled and parallel group study that will include approximately 950 patients with mild-to-moderate AD who will be treated for 18 months. The trial is being conducted at approximately 50 U.S. and 20 Canadian clinical centers. As of February 21, 2005, 803 patients had been screened and of these 519 are now randomized and are receiving study medication, either placebo or one of two doses of Alzhemed(TM). We expect to complete the randomization of this North American trial by the end of the second quarter of 2005 or early in the third quarter of 2005. The primary objective of the study is to evaluate the efficacy and safety of Alzhemed(TM). The primary 22 OUR BUSINESS - ------------------------------------------------------------------------------- efficacy endpoints of this study include the evaluation of cognitive abilities and a global measure of performance utilizing the Alzheimer's Disease Assessment Scale-cognitive subpart (ADAS-cog), and the Clinical Dementia Rating Scale-Sum of Boxes (CDR-SB). If treatment efficacy is established, disease modification will be assessed by measuring changes in brain volume by Magnetic Resonance Imaging (MRI). The Alzhemed(TM) European Phase III clinical trial is expected to be initiated in the second half of 2005. Alzhemed(TM) is Neurochem's first generation product candidate for AD. Our Alzhemed Phase II clinical study, which concluded in March 2003 and the results of which were released in June 2003, primarily investigated the safety, tolerability and pharmacokinetic profile of Alzhemed over a 12-week period in patients with mild-to-moderate AD. There were no safety findings of concern in the Phase II clinical trial. An open-label Phase II extension study was initiated in January of 2003, with patients invited to join the extension study as they completed the Phase II trial and all received Alzhemed. On February 22, 2005, we announced that after 28 months on study medication and in line with previously released interim data, the majority of the mild patients showed a stabilized or improved cognitive function on the ADAS-cog test while the moderate AD patients had cognitive scores similar to comparable historical controls. CEREBRIL(TM) FOR HEMORRHAGIC STROKE DUE TO CEREBRAL AMYLOID ANGIOPATHY Cerebril(TM) is our product candidate to treat Hemorrhagic Stroke due to Cerebral Amyloid Angipathy, a fatal neurological disorder that is characterized by recurrent brain hemorrhage. Hemorrhagic Stroke due to CAA is a syndrome of recurrent strokes caused by amyloid deposits that cause blood vessels in the brain to rupture or otherwise malfunction. This type of stroke represents approximately seven percent of all strokes, with the incidence increasing as the population ages. It is typically diagnosed in patients aged 55 years or older with multiple hemorrhages confined to lobar brain regions and no other cause of hemorrhage. Hemorrhagic Stroke due to CAA can appear alone in some patients and is also a common pathology found in 50% or more of patients with AD. CAA is responsible for approximately 20% to 30% of bleeding strokes in the elderly. Hemorrhagic Stroke due to CAA remains a largely untreated disorder which is often undiagnosed unless it is confirmed by an autopsy. No effective therapy has yet been developed. Cerebril(TM) is designed to prevent the recurrence of Hemorrhagic Stroke due to CAA by reducing the deposit of amyloid fibrils within the microvasculature of the brain. The active ingredient in Cerebril(TM) is the same compound as Alzhemed(TM) and therefore has the same chemical properties as Alzhemed(TM). Cerebril(TM) has been found to markedly reduce CAA in an animal model of brain amyloidosis. In March 2004, Cerebril(TM) completed a Phase IIa clinical trial. The trial was a multi-center, randomized, double-blind and parallel-designed study, conducted in five centers in the United States. Twenty-four CAA patients with lobar cerebral hemorrhage were randomized to receive 3 different daily doses of Cerebril(TM) (100, 200 and 300 mg) for a period of twelve weeks. The data showed no safety findings of concern based on patients' clinical laboratory tests, vital signs and electrocardiograms during follow-up physical exams. An independent Data Safety Monitoring Board was put in place to monitor the safety of patients throughout the duration of the study. The Data Safety Monitoring Board for Cerebril(TM) did not report to us any safety findings of concern. We expect to commence a Phase IIb clinical trial protocol in collaboration with the principal investigator and Clinical Advisory Board member for this product candidate, Steven M. Greenberg, M.D., Co-Director of the Neurology Clinical Unit of the Massachusetts General Hospital. The trial is expected to test the safety and efficacy of Cerebril(TM) for the prevention or recurrence of Hemorrhagic Stroke due to CAA. NC-1461 - OUR SOLUTION TO EPILEPTIC SEIZURES DUE TO TBI We have identified a series of compounds, of which NC-1461 is the lead candidate, to prevent epileptic seizures due to TBI. In the United States, approximately 1.5 million people sustain a TBI each year. TBI causes severe damage to the brain with internal bleeding, inflammation and neuronal cell death. TBI can lead to an imbalance between the activities of two specialized types of neuronal cells. This imbalance is due to 23 OUR BUSINESS - ------------------------------------------------------------------------------- the uncontrolled up-regulation of excitatory neurons, coupled with a strong down-regulation of inhibitory neurons. The imbalance leads to an uncontrolled electrical discharge which manifests itself as an epileptic seizure. Approximately 13% of patients who have had a TBI will start experiencing epileptic seizures 12 to 18 months following their injury. Since it is impossible to identify patients with a TBI who will develop epileptic seizures, all patients who have suffered a TBI would benefit from treatment early on following the injury to prevent the later development of seizures. PRODUCT PIPELINE The following table illustrates the stage of development and the estimated date of filing with the US Food and Drug Administration (FDA) of a New Drug Application (NDA) and the filing of the European Medicines Evaluation Agency (EMEA) equivalent:
ESTIMATED ESTIMATED US EUROPEAN EMEA PRODUCT CANDIDATE TARGET DISORDER STAGE OF DEVELOPMENT NDA FILING* FILING* - ----------------- ------------------ -------------------------------------- ------------ -------------- Fibrillex(TM) AA Amyloidosis Phase II/III clinical trial completed, Q2 2005(1) Q1 2006 results expected Q2 2005 Alzhemed(TM) Alzheimer's Disease North American Phase III clinical trial 2007(2) 2007(2) on-going European Phase III clinical trial 2008(2) 2008(2) expected to commence in the second half of 2005 Cerebril(TM) Hemorrhagic Stroke Phase IIa clinical trial completed (3) (3) due to CAA
* The actual date of filing, if any, can vary widely depending on a variety of factors. See "Risk Factors". (1) Rolling NDA and filing of pre-clinical data to be initiated in Q2 2005. We estimate that we will complete our submission in Q3 2005. (2) 2007 filing for Alzhemed(TM) is based on a single Phase III North American clinical trial satisfying regulatory (FDA and/or EMEA) requirements. If the European Phase III clinical trial is also required by the FDA, NDA filing expected in 2008. (3) Program currently being designed: scope and length, as well as results will influence timing. RESEARCH AND DEVELOPMENT PROGRAMS In addition to our clinical and developmental stage drug candidates, we have an ongoing discovery effort that is focused on the development of next generation compounds for the treatment of AD and of a vaccine for AD. Our approach to AD has been to focus on targeting a particular amyloid protein called A(beta) protein before it organizes into fibrils and causes neuronal damage. One approach to block the development of AD is to intervene early using a vaccine strategy. Our vaccine approach consists of a modified A(beta) peptide to induce an immune response which targets soluble A(beta) (prior to any structural change which leads to fibril formation). Preliminary in vivo studies have shown promising results where immune recognition of soluble A(beta) reduces brain amyloid protein levels but does not attack fibrillar deposits, thereby minimizing the risk of brain inflammation. To advance our efforts to prevent and treat AD, in January 2004 we signed a strategic alliance with the National Research Council of Canada's Institute for Biological Sciences (NRC-IBS) and, more specifically, with Dr. Harold J. Jennings, a world leader in the development of innovative conjugated vaccines. We also entered into an in-licensing agreement with PRAECIS PHARMACEUTICALS INCORPORATED, a biopharmaceutical company, relating to certain A(beta)-amyloid peptides for use in the development of a novel synthetic vaccine to prevent and treat AD. In addition, we are actively researching various other aspects of disease modification, neuroprotection, as well as other Amyloid-related disorders. 24 OUR BUSINESS - ------------------------------------------------------------------------------- RECENT DEVELOPMENTS FIBRILLEX(TM) - AGREEMENT WITH CENTOCOR On December 21, 2004, we entered into a collaboration and distribution agreement, granting Centocor, a wholly-owned subsidiary of Johnson & Johnson, exclusive distribution rights for Fibrillex(TM). The agreement includes up-front, regulatory and sales-based milestone payments valued at up to US$54 million. A tiered distribution fee will also be paid to Neurochem, the percentage of which will be based upon annual net sales of Fibrillex(TM) in the applicable territories over the life of the agreement. Upon execution of the agreement, we became entitled to a payment of $14,443,000. One-half of this payment is potentially refundable, based in part on the results of our Phase II/III clinical trial for Fibrillex(TM). Distribution rights granted to Centocor are worldwide, with the exception of Canada, Switzerland, China, Japan, Taiwan and South Korea which remain with Neurochem. Under the agreement, Neurochem will be responsible for product approval activities in the United States and in Europe, as well as for global manufacturing activities. Centocor and other affiliates will manage the marketing and sales of Fibrillex(TM) in the applicable territories. Centocor will also be responsible for worldwide safety surveillance. The financial terms of the agreement, including payment of milestones and distribution fees, depend upon the results of the Phase II/III clinical trials, the approval for the commercial sale of Fibrillex(TM) by the FDA, the European Medicines Evaluation Agency and other similar regulatory authorities and upon the volume of sales of Fibrillex(TM) over the life of the agreement. We anticipate filing for regulatory approval in 2005. AGREEMENTS WITH OUR CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER On December 1, 2004, the management services agreement between Picchio International Inc. and Neurochem, pursuant to which Picchio International Inc. provides the services of Dr. Francesco Bellini as Chairman, President and Chief Executive Officer and other management services and which is more fully described in the Management Proxy Circular of Neurochem dated April 6, 2004, was extended by amendment as of the 1st day of December, 2004, until November 30, 2007. The agreement provides for the payment of a monthly fee of $200,000 to Picchio International Inc. The agreement also provides for performance based fees determined at the discretion of our Board of Directors. The agreement may not be terminated by Picchio International Inc. prior to May 31, 2006. Pursuant to an agreement made as of December 1, 2004 between us and our Chairman, President and Chief Executive Officer, Dr. Francesco Bellini, we agreed to issue up to 220,000 Common Shares to Dr. Bellini in consideration of his services and subject to the accomplishment of certain performance targets. In particular, we agreed to issue 60,000 Common Shares to Dr. Bellini upon execution of the agreement, 55,000 Common Shares upon the execution of a collaboration agreement in respect of Alzhemed(TM), 55,000 Common Shares upon the execution of a collaboration agreement in respect of Fibrillex(TM), 25,000 Common Shares upon the completion of a third-party equity and/or debt financing and 25,000 Common Shares upon the restructuring of our management structure, including formalizing a succession plan. The issuance of the shares pursuant to the agreement is subject to regulatory and shareholder approval (which we will seek at the next annual general meeting of shareholders) and provides that we may, at our option, purchase Common Shares in the open market to satisfy our obligations under the agreement. Dr. Bellini has met the performance target in respect of the Fibrillex(TM) transaction and will meet the performance target in respect of the financing upon the closing of this Offering. ADDITIONS TO OUR MANAGEMENT TEAM We have recently made the following additions and changes to our management team: - - On January 16, 2004, we announced that Judith Paquin, B.B.A., had joined us as Vice-President, Human Resources and Christine Lennon, MBA, had joined us as Vice-President, Business Development. - - On October 5, 2004, we announced that Dr. Andreas Orfanos, M.B.B. Ch., MBA, was appointed to the position of Executive Vice President, Strategic Planning and Scientific Affairs. Dr. Orfanos has 25 OUR BUSINESS - ------------------------------------------------------------------------------- overall responsibility for many of our activities, including research as well as drug development and global strategic planning. - - On December 10, 2004, we announced the appointment of Mariano Rodriguez, C.A., CPA, to the position of Vice President, Finance, and Chief Financial Officer, replacing Mr. Claude Michaud who left Neurochem the same day to pursue other interests. - - On January 20, 2005, we announced that Shona McDiarmid, PhD., joined us as Vice President, Intellectual Property, and Daniel Delorme, PhD., joined us as Vice President, Research. Philippe Calais, Pharm. D., President at the time, was appointed President, Global Business with Dr. Bellini assuming the office of President of Neurochem, and Denis Garceau, PhD, Vice President, Drug Development, became Senior Vice President, Drug Development. Francine Gervais, PhD., Vice President, Research and Development, left her employment with us but remains as a consultant to Neurochem. 26 Description of share capital Our authorized share capital consists of an unlimited number of Common Shares and an unlimited number of preferred shares ("Preferred Shares"), all without nominal or par value. As of March 2, 2005, before giving effect to this Offering (and excluding shares issuable upon exercise of the Warrants and outstanding options), 30,412,136 Common Shares and no Preferred Shares were issued and outstanding. We have no current intention to issue Preferred Shares. Common Shares. Each Common Share entitles the holder thereof to one vote at any meeting of the shareholders of the Company, except meetings at which only holders of a specified class of shares are entitled to vote. Subject to the rights of holders of the Preferred Shares, the Common Shares are entitled to receive, as and when declared by our Board of Directors, dividends in such amounts as shall be determined by our Board of Directors. The holders of Common Shares have the right, subject to the rights of the holders of Preferred Shares, to receive the remaining property of the Company in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary. Preferred Shares. The Preferred Shares may be issued from time to time in one or more series, the terms of each series including the number of shares, the designation, rights, preferences, privileges, priorities, restrictions, conditions and limitations to be determined at the time of creation of each such series by our Board of Directors without shareholder approval, provided that all Preferred Shares will rank, with respect to dividends and return of capital in the event of liquidation, dissolution, winding-up or other distribution of our assets for the purpose of winding-up its affairs, pari passu among themselves and in priority to all Common Shares or shares of any class ranking junior to the Preferred Shares. Except as provided for in our articles of incorporation (as amended), the holders of Preferred Shares shall not be entitled to receive notice of meetings of our shareholders nor to attend thereat and shall not be entitled to vote at any such meeting. Warrants. Warrants to purchase 4,000,000 Common Shares are currently outstanding. All of the Warrants are held by Picchio Pharma. Warrants to purchase 2.8 million Common Shares are exercisable at a price of $3.13 per share and expire on July 25, 2005, and Warrants to purchase 1.2 million Common Shares are exercisable at a price of $7.81 per share and expire on February 17, 2006. On February 14, 2005, Picchio Pharma confirmed its commitment to exercise the 2.8 million Warrants expiring on July 25, 2005, but did not specify the date of the anticipated exercise. Picchio Pharma also committed, subject to certain conditions, to make an additional investment in us, up to a maximum of $20 million, which amount includes the total proceeds to us of $8,764,000 from the exercise of the 2.8 million Warrants described above, or such lesser amount as would be necessary to allow us to operate generally in accordance with our budget for the year ending December 31, 2005, in the event we are not able to raise such funds from other sources, including from this Offering. The information presented in this prospectus does not give effect to the exercise of the Warrants or any additional investment in us by Picchio Pharma. 27 Certain Income Tax Considerations CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS The following summarizes the principal Canadian federal income tax considerations under the Income Tax Act (Canada) (the "Tax Act") generally applicable to holders of Common Shares who, at all relevant times, for purposes of the Tax Act, are resident in Canada, deal at arm's length and are not affiliated with Neurochem, all within the meaning of the Tax Act, and acquire and hold their Common Shares as capital property ("Resident Shareholders"), and to holders of Common Shares who, at all relevant times, for purposes of the Tax Act, are not resident in Canada, deal at arm's length with Neurochem, acquire and hold their Common Shares as capital property, do not use and are not deemed to use or hold their Common Shares in the course of carrying on, or otherwise in connection with, a business in Canada and who, at all relevant times, for the purposes of the Canada-United States Income Tax Convention 1980, as amended, (the "Treaty"), are resident in the United States, have never been resident in Canada, and have not held or used (and do not hold or use) Common Shares in connection with a permanent establishment or fixed base in Canada ("US Shareholders"). Generally, Common Shares will be considered to be capital property to a holder thereof provided that the holder does not use or hold the Common Shares in the course of carrying on a business or in one or more transactions considered to be an adventure or concern in the nature of trade. Certain Resident Shareholders may, in certain circumstances, treat Common Shares as capital property by making an irrevocable election permitted by subsection 39(4) of the Tax Act. This summary does not deal with special situations, such as the particular circumstances of traders or dealers in securities, limited liability companies, tax-exempt entities, insurers, "authorized foreign banks", "specified financial institutions" and "financial institutions" as defined in the Tax Act (including those to which the mark-to-market provisions of the Tax Act apply), holders an interest in which is a "tax shelter investment" for the purposes of the Tax Act, or otherwise. This summary is based on the current provisions of the Tax Act and the regulations thereunder (the "Regulations"), all specific proposals to amend the Tax Act and Regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the "Proposed Amendments"), the current provisions of the Treaty and counsel's understanding of the current administrative policy and practices of the Canada Revenue Agency (the "Administrative Practices"). It has been assumed that all Proposed Amendments will be enacted substantially as proposed and that there will be no other relevant changes in any governing law, the Treaty or Administrative Practices, although no assurances can be given in these respects. This summary does not take into account provincial, territorial, United States or other foreign income tax considerations, which may differ significantly from those discussed herein. This summary is not exhaustive of all possible Canadian federal income tax consequences. It is not intended as legal or tax advice to any prospective holder of Common Shares and should not be construed as such. No representations with respect to the income tax consequences to any such holder are made. The tax consequences to any prospective holder of Common Shares will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdictions in which that holder is subject to taxation and, generally, according to that holder's particular circumstances. Each holder should consult the holder's own tax advisor with respect to the tax consequences applicable to the holder's own particular circumstances including the application and effect of the income and other tax law of any country, province, state or local tax authority. All amounts relevant in computing the liability of a US Shareholder under the Tax Act are to be reported in Canadian currency at the rate of exchange prevailing at the relevant time. TAXATION OF RESIDENT SHAREHOLDERS In the case of a Resident Shareholder who is an individual, any dividends received on the Common Shares will be included in computing his income and will be subject to gross-up and dividend tax credit rules normally applicable to taxable dividends paid by taxable Canadian corporations. 28 CERTAIN INCOME TAX CONSIDERATIONS - ------------------------------------------------------------------------------- In the case of a Resident Shareholder that is a corporation, dividends received on the Common Shares will be included in computing the corporation's income and will generally be deductible in computing its taxable income. A Resident Shareholder that is a corporation may be liable to pay tax under Part IV of the Tax Act on dividends received on the Common Shares to the extent that such dividends are deductible in computing the corporation's taxable income. However, a public corporation which is not controlled, whether because of a beneficial interest in one or more trusts or otherwise, by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts) will not be liable to pay tax under Part IV of the Tax Act. A corporation that pays tax under Part IV of the Tax Act is generally entitled to a refund of such tax at the rate of $1.00 for every $3.00 of taxable dividends paid by it. A disposition, or a deemed disposition, of a Common Share will give rise to a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the Common Share, net of any costs of disposition, exceed (or are less than) the adjusted cost base of the Common Shares to the Resident Shareholder. For this purpose, the adjusted cost base to a Resident Shareholder of a Common Share will be determined by averaging the cost of that Common Share with the adjusted cost base of all Common Shares held at that time by the Resident Shareholder. One-half of any capital gain realized by a Resident Shareholder will be included in computing the Resident Shareholder's income as a taxable capital gain. One-half of any capital loss realized by a Resident Shareholder may generally be deducted against taxable capital gains realized in the year of realization of such loss or the three preceding taxation years or any subsequent taxation year, subject to detailed rules contained in the Tax Act in this regard. A capital loss realized by a Resident Shareholder that is a corporation, including a corporation that is a member of a partnership, or a trust of which a corporation, partnership or trust is a beneficiary will be reduced by the amount of dividends received in certain circumstances. Capital gains realized by an individual may give rise to a liability for alternative minimum tax. TAXATION OF US SHAREHOLDERS Under the Treaty, dividends paid or credited or deemed to be paid or credited by Neurochem to a US Shareholder in respect of Common Shares and beneficially owned by such US Shareholder are generally subject to Canadian withholding tax at a rate of 15% (or 5% in the case of corporate US Shareholders owning at least 10% of the voting shares of Neurochem). A US Shareholder is generally not subject to tax under the Tax Act in respect of a capital gain realized on the disposition of a Common Share unless such share is "taxable Canadian property", as defined in the Tax Act, to the holder thereof and the US Shareholder is not entitled to relief from taxation in Canada under the Treaty with respect to such disposition. A Common Share will generally not be taxable Canadian property to a US Shareholder at the time of a disposition provided that the Common Shares are listed on a prescribed stock exchange (which includes the TSX) at that time and that at no time during the 60 month period ending at the time of disposition of the Common Share the US Shareholder, persons with whom the US Shareholder did not deal at arm's length, or the US Shareholder together with such persons, owned or had options, warrants or other rights to acquire, 25% or more of the issued shares of any class or series of Neurochem. In the case of a US Shareholder to whom Common Shares constitute, or are deemed to constitute, taxable Canadian property, no tax under the Tax Act will generally be payable on a capital gain realized on the disposition of such shares by virtue of the relieving provisions of the Treaty unless, at the time of disposition, the value of such shares is derived principally from real property situated in Canada. We believe that, at the date of this prospectus, the value of the Common Shares is not derived principally from real property situated in Canada. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material US federal income tax consequences to US Holders (as defined below) of the acquisition, ownership and disposition of Common Shares by a US Holder who acquires Common Shares pursuant to the Offering, holds Common Shares as capital assets and does not 29 CERTAIN INCOME TAX CONSIDERATIONS - ------------------------------------------------------------------------------- own, directly, indirectly or constructively, 10% or more of Neurochem's outstanding voting stock. The following discussion is not a complete analysis or description of all potential US federal income tax consequences to US Holders in light of their particular circumstances and does not address all US federal income tax considerations that may be relevant to specific categories of US Holders (such as persons that are dealers in securities, traders that have elected mark-to-market accounting, banks, insurance companies, partnerships (and other entities treated as partnerships for US federal income tax purposes), tax-exempt organizations, persons that hold shares as part of an integrated investment (including a straddle), investors whose functional currency is not the US dollar and other investors subject to special rules). The discussion does not address US federal estate or gift tax consequences or any state or local tax consequences. US Holders are urged to consult their own tax advisors concerning the US federal, state and local income tax consequences of the ownership of Common Shares in light of their particular circumstances. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), judicial decisions, administrative pronouncements, and final, temporary and proposed US Treasury regulations, all as of the date hereof, and changes to any of which after the date of this prospectus could apply on a retroactive basis and affect the tax consequences described herein. As used below, the term "US Holder" means a beneficial owner of Common Shares that is, for US federal income tax purposes, (i) a citizen or resident alien of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any State thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income subject to United States federal income tax regardless of its source, or (iv) a trust (a) the administration of which is subject to the primary supervision of a court in the United States and for which one or more US persons have the authority to control all substantial decisions or (b) that has a valid election in effect under applicable US Treasury regulations to be treated as a US person. Distributions made by Neurochem with respect to Common Shares, including deemed dividends and certain distributions of stock or stock rights (which for these purposes will include the amount of any Canadian withholding tax paid with respect to such distributions and withheld therefrom) generally will be treated as foreign source income taxable as an ordinary dividend to the extent that such distributions are paid out of Neurochem's current or accumulated earnings and profits as determined under US federal income tax principles. To the extent, if any, that the amount of any such distribution exceeds Neurochem's current and accumulated earnings and profits as so computed, it will first reduce the US Holder's tax basis in its Common Shares to the extent thereof, and to the extent in excess of such tax basis, will be treated as gain from the sale or exchange of property. The amount of any cash distribution paid in Canadian dollars will be equal to the US dollar value of the Canadian dollars on the date of distribution regardless of whether the payment is in fact converted into US dollars at that time. Gain or loss, if any, realized on the sale or disposition of Canadian dollars will generally be US source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution. Dividends received by non-corporate US Holders in tax years beginning on or before December 31, 2008 generally are subject to reduced rates of taxation, subject to certain limitations. US Holders generally will not be entitled to claim the corporate dividends received deduction with respect to distributions by Neurochem. Subject to certain limitations and restrictions, Canadian taxes withheld from or paid on dividend distributions may be eligible for credit against the US Holder's US federal income taxes. A US Holder must satisfy minimum holding requirements in order to be eligible to claim a foreign tax credit for taxes withheld on dividends. A foreign tax credit is not allowed for foreign taxes withheld on dividends in circumstances where the US Holder is under an obligation to make related payments in connection with positions in "substantially similar or related property". The limitation on foreign taxes eligible for credit is calculated separately with respect to specific "baskets" of income. For this purpose, dividends paid by Neurochem with respect to Common Shares generally will constitute "passive income" or, in the case of certain US Holders, "financial services income". Under the American Jobs Creation Act of 2004, the foreign tax credit "baskets" will be modified for tax years beginning after December 31, 2006. The rules relating to foreign tax credits are complex, and US Holders should consult with their 30 CERTAIN INCOME TAX CONSIDERATIONS - ------------------------------------------------------------------------------- own tax advisors with regard to the availability of a foreign tax credit and the application of foreign tax credit limitations to their particular circumstances. A US Holder generally will recognize capital gain or loss for US federal income tax purposes on the sale, exchange or other taxable disposition of Common Shares in the same manner as on the sale or disposition of any other shares held as capital assets in an amount equal to the difference between the amount realized on the disposition and the US Holder's adjusted tax basis in such shares. Gain or loss, if any, generally will be US source gain or loss and will be long-term capital gain or loss if the US Holder held the Common Shares for more than one year. Non-corporate taxpayers generally are subject to a maximum rate of 15% on net long-term capital gain. US Holders should consult their own tax advisors with respect to their ability to credit Canadian capital gains tax or withholding tax, if any, against their US federal income taxes. We will be a passive foreign investment company ("PFIC") for US federal income tax purposes in any taxable year, if 75% or more of our gross income (including the pro-rata share of the gross income of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value) is passive income, or on average at least 50% of the gross value of our assets is held for the production of, or produces, passive income. PFIC status is determined on an annual basis. We do not expect to be a PFIC for the year ended December 31, 2005. However, because our income and assets and the nature of our activities may vary from time to time, we cannot assure you that we will not be considered a PFIC for any taxable year. If you own Common Shares during a taxable year in which we are a PFIC, the PFIC rules generally will apply to you thereafter, even if in subsequent taxable years we no longer meet the test described above to be treated as a PFIC. No ruling will be sought from the IRS regarding whether we are or are not a PFIC. In general, if a US Holder of our shares fails to make a timely QEF election (described below) for any taxable year that we are treated as a PFIC, the U.S. federal income tax consequences to such US Holder will be determined under the so-called "interest charge" method. Under such regime, (i) dividends would not be eligible for the reduced rates described above, (ii) any gain derived from the disposition of PFIC stock (possibly including a gift, exchange in a corporate reorganization or grant as security for a loan), as well as any "excess distribution" that is received from the PFIC (i.e., a distribution that exceeds 125% of the average distributions from the shorter of the prior three years, or the US Holder's holding period for the stock), would be treated as ordinary income that was earned ratably over each day in the US Holder's holding period for the PFIC stock, (iii) the portion of such gain or distribution that is allocable to prior taxable years, other than any year before we became a PFIC, would be subject to US federal income tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to the US Holder, and (iv) an interest charge would be imposed on the resulting US federal income tax liability as if such liability represented a tax deficiency for the past taxable years, other than any year before we became a PFIC. In addition, a step-up in the tax basis of the PFIC stock may not be available upon the death of an individual US Holder. If a US Holder has made a timely QEF election (covering all taxable years during which the holder held the Common Shares and during which we are treated as a PFIC), such holder is required to annually include in gross income (i) as ordinary income, the holder's pro-rata share of our ordinary earnings, and (ii) as long-term capital gain, a pro-rata share of our net capital gain, regardless of whether such earnings or gain have in fact been distributed. An electing US Holder that is a corporation will not be eligible for the dividends received deduction in respect of such income or gain. In addition, in the event that we incur a net loss for a taxable year, such loss will not be available as a deduction to an electing US Holder, and may not be carried forward or back in computing our ordinary earnings and net capital gain in other taxable years. US HOLDERS OF COMMON SHARES ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE PFIC RULES, INCLUDING THE ADVISABILITY, PROCEDURE AND TIMING OF MAKING A QEF ELECTION, IN CONNECTION WITH THEIR HOLDING OF COMMON SHARES. 31 CERTAIN INCOME TAX CONSIDERATIONS - ------------------------------------------------------------------------------- In general, backup withholding and information reporting requirements may apply to dividend payments (or other taxable distributions) in respect of the Common Shares or to the proceeds of a sale or redemption in respect of the Common Shares made to a non-corporate United States person. Backup withholding, currently at the rate of 28%, may apply to such payments if the US Holder: (i) fails to furnish its social security or other taxpayer identification number ("TIN") within a reasonable time after a request therefor; (ii) furnishes an incorrect TIN; (iii) fails to report interest or dividends properly; or (iv) fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the TIN provided is the holder's correct number and that the holder is not subject to backup withholding. Any amount withheld from a payment under the backup withholding rules is allowable as a credit against the US Holder's US federal income tax liability (and may entitle the US Holder to a refund), provided that the required information is furnished to the IRS. Certain persons are exempt from backup withholding, including corporations and certain financial institutions. Each US Holder should consult its tax advisor as to its qualification for exemption from backup withholding and the procedure for obtaining such exemption. 32 Underwriting We are offering all of the Common Shares described in this prospectus through the underwriters named below. UBS Securities LLC, CIBC World Markets Corp., Piper Jaffray & Co., Desjardins Securities Inc., Wells Fargo Securities, LLC, BMO Nesbitt Burns Inc. and Fortis Securities LLC are the representatives of the underwriters. UBS Securities LLC is the sole book running manager of this Offering. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the number of shares listed next to its name in the following table:
NUMBER OF UNDERWRITERS SHARES - ------------ --------- UBS Securities LLC............................. CIBC World Markets Corp. ...................... Piper Jaffray & Co. ........................... Desjardins Securities Inc. .................... Wells Fargo Securities, LLC.................... BMO Nesbitt Burns Inc. ........................ Fortis Securities LLC.......................... --------- Total....................................... 4,000,000 =========
The obligations of the underwriters under the underwriting agreement may be terminated at their discretion on the basis of their assessment of the state of the financial markets and may also be terminated upon the occurrence of certain stated events. The underwriting agreement provides, however, that the underwriters must buy all of the shares if they buy any of them. The underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below. Our Common Shares are offered subject to a number of conditions, including: - - receipt and acceptance of our Common Shares by the underwriters, and - - the underwriters' right to reject orders in whole or in part. This Offering is being made concurrently in the United States and all of the provinces of Canada pursuant to the multijurisdictional disclosure system implemented by the securities regulatory authorities in the United States and Canada. The Common Shares will be offered in the United States and Canada through the Underwriters either directly or through their respective United States or Canadian broker-dealer affiliates or agents, as applicable. None of Piper Jaffray & Co., Wells Fargo Securities, LLC or Fortis Securities LLC has a registered Canadian broker-dealer affiliate or agent, and, consequently, will only offer Common Shares in the United States. Subject to applicable law, the Underwriters may offer the Common Shares outside of the United States and Canada. In connection with this Offering, certain of the underwriters or securities dealers may distribute prospectuses electronically. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the United States Securities Act of 1933, as amended, and applicable Canadian securities legislation. If we are unable to provide this indemnification, we will contribute to payments the underwriters may be required to make in respect of those liabilities. OVER-ALLOTMENT OPTION We have granted the underwriters an option to buy up to an additional 600,000 of our Common Shares. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this Offering. The underwriters have 30 days from the date of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. 33 UNDERWRITING - ------------------------------------------------------------------------------- FEES AND COMMISSIONS The gross proceeds from the sale of the Common Shares will be paid to the Company in Canadian and US dollars in proportion to the number of shares paid for in each currency. For convenience only, the Offering price, underwriting fees and commissions and the net proceeds from the Offering are shown in US dollars; the whole based on the US-Canadian dollar noon exchange rate on March 2, 2005, as quoted by the Bank of Canada, being US$0.8064. We will pay to the Underwriters underwriting fees and commissions equal to % (US$ per Common Share) of the gross proceeds from the sale of shares to the public. Power Technology Investment Corporation ("PTIC"), a subsidiary of Power Corporation of Canada, and the FMRC Family Trust ("FMRC"), of which Dr. Francesco Bellini, our Chairman, President and Chief Executive Officer is a beneficiary, each a 50% shareholder of Picchio Pharma Inc. (the parent company of P.P. Luxco Holdings s.a.r.l., one of our principal shareholders), have each confirmed an intention to purchase 250,000 of the Common Shares offered hereby. We will pay to the Underwriters underwriting fees and commissions equal to o % (US$ o per Common Share) of the gross proceeds from the sale of shares to PTIC and FMRC. Shares sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ o per share from the public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $ o per share from the public offering price. If all the shares are not sold at the public offering price, the representative may change the offering price and the other selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein, and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. The following table shows the per share and total underwriting fees and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional 600,000 shares. The per share amounts reflect the weighted average of the underwriting fees and commissions that we will pay to the Underwriters, giving effect to the sale of the shares to the public and to PTIC and FRMC.
NO EXERCISE FULL EXERCISE ----------- ------------- Per share.................... $ o $ o Total........................ $ o $ o
We estimate that the total expenses of this Offering payable by us, not including the underwriting fees and commissions, will be approximately US $922,000. NO SALES OF SIMILAR SECURITIES We, each of our directors and officers and Picchio Pharma have entered into lock-up agreements with the underwriters. Under these agreements, we and each of these persons may not, without the prior written approval of UBS Securities LLC, subject to certain permitted exceptions, offer, sell, contact to sell or otherwise dispose of or sell our Common Shares or securities convertible into or exercisable or exchangeable for our Common Shares. These restrictions will apply for a period of 90 days after the date of the Underwriting Agreement. The 90-day lock up period may be extended under certain circumstances where we announce or pre-announce earnings or material news or a material event within approximately 18 days prior to, or approximately 16 days after, the termination of the 90-day period. At any time and without public notice, UBS Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements. TORONTO STOCK EXCHANGE LISTING AND NASDAQ NATIONAL MARKET QUOTATION Our Common Shares are listed on the Toronto Stock Exchange (the "TSX") under the trading symbol "NRM". and are quoted on the Nasdaq National Market under the symbol "NRMX". The TSX has conditionally approved the listing of the Common Shares offered hereby, subject to compliance with the requirements of the TSX on or before May 27, 2005. PRICE STABILIZATION, SHORT POSITIONS, PASSIVE MARKET MAKING In connection with this Offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our Common Shares, including: - - stabilizing transactions; - - short sales; 34 UNDERWRITING - -------------------------------------------------------------------------------- - - purchases to cover positions created by short sales; - - imposition of penalty bids; - - syndicate covering transactions; and - - passive market making. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our Common Shares while this Offering is in progress. These transactions may also include making short sales of our Common Shares, which involves the sale by the underwriters of a greater number of shares than they are required to purchase in this Offering and purchasing Common Shares on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. Naked short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned there may be downward pressure on the price of shares in the open market after pricing that could adversely affect investors who purchase in this Offering. The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting fee received by it because the representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. As a result of these activities, the price of our Common Shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. The underwriters may carry out these transactions on the Nasdaq National Market, the TSX, in the over-the-counter market or otherwise. In addition, in connection with this Offering, certain of the underwriters (and selling group members) may engage in passive market making transactions in our Common Shares on the Nasdaq National Market or the TSX prior to the pricing and completion of the Offering. Passive market making consists of displaying bids on the Nasdaq National Market no higher than the bid prices of independent market makers and making purchases at prices no higher than these independent bids and effected in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker's average daily trading volume in our Common Shares during a specified period and must be discontinued when such limit is reached. Passive market making may cause the price of the Common Shares to be higher than the price that otherwise would exist in the open market in the absence of such transactions. If passive market making is commenced, it may be discontinued at any time. AFFILIATIONS Certain underwriters and their affiliates have provided and may provide certain commercial banking, financial advisory and investment banking services for us for which they receive customary fees. Certain underwriters and their affiliates may from time to time in the future engage in transactions with us and perform services for us in the ordinary course of their business. 35 Corporate information and registered office Neurochem Inc. was incorporated on June 17, 1993 under the Canada Business Corporations Act. Neurochem Inc. has an indirect wholly-owned subsidiary, Neurochem (International) Limited, a Swiss corporation. Neurochem (International) Limited is wholly-owned by Neurochem Holdings Limited, a Swiss corporation which is, in turn, wholly-owned by Neurochem Luxco II S.A.R.L., a Luxembourg corporation. Neurochem Luxco II S.A.R.L. is wholly-owned by Neurochem Luxco I S.C.S., a Luxembourg limited partnership whose sole limited partner is Neurochem Inc. and whose sole general partner is Neurochem Luxco I S.A.R.L., a Luxembourg corporation wholly-owned by Neurochem Inc. Neurochem Inc. is also the sole shareholder of Neurochem U.S. LLC, a Delaware limited liability company. All of such entities, other than Neurochem Inc., are sometimes collectively referred to in this prospectus as our "Affiliates". Our drug development facilities, laboratories and registered office are located in Canada, at 275 Armand-Frappier Boulevard, Laval, Quebec, H7V 4A7. Neurochem (International) Limited also has offices in the Parc Scientifique-Ecole Polytechnique Federale de Lausanne in Ecublens, Switzerland. 36 Documents incorporated by reference INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS FROM DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN CANADA (INCLUDING THE PERMANENT INFORMATION RECORD IN THE PROVINCE OF QUEBEC). Copies of documents incorporated by reference herein and not delivered with this prospectus may be obtained upon request without charge from our Secretary at 275 Armand-Frappier Boulevard, Laval, Quebec H7V 4A7, telephone (450) 680-4500 or by accessing the disclosure documents available through the Internet on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), which can be accessed at www.sedar.com. For the purpose of the Province of Quebec, this simplified prospectus contains information to be completed by consulting the permanent information record. A copy of the permanent information record may be obtained from our Secretary at the above-mentioned address and telephone number. The following documents filed with the securities commission or similar regulatory authority in each of the provinces of Canada are specifically incorporated by reference in, and form an integral part of, this prospectus: - - the audited consolidated balance sheets of Neurochem as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for the year ended December 31, 2004, the six-month period ended December 31, 2003, the year ended June 30, 2003 and for the period from inception (June 17, 1993) to December 31, 2004, together with the auditors' report thereon, the notes thereto and Management's discussion and analysis of financial condition and results of operations in respect of the year ended December 31, 2004, December 31, 2003 and June 30, 2003; - - the annual information form of Neurochem dated May 12, 2004 for the six-month period ended December 31, 2003; - - the management proxy circular of Neurochem dated April 6, 2004; - - the material change report dated January 27, 2005; and - - the material change report dated February 28, 2005. Any document of the type referred to in the preceding paragraph along with any management proxy circulars and material change reports (other than any confidential material change reports) filed by Neurochem with a securities commission or similar regulatory authority in any province of Canada, after the date of this prospectus and before the termination of this Offering, will be deemed to be incorporated by reference in this prospectus. Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for the purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not be deemed an admission that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission of a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. 37 Documents filed as part of the registration statement The following documents have been filed with the SEC as part of the registration statement of which this prospectus forms a part: (i) the documents listed under "Documents Incorporated by Reference"; and (ii) powers of attorney from our directors and officers and from our authorized representative in the United States. Where you can find more information Copies of this prospectus and the documents incorporated by reference herein may be obtained on request without charge from the Secretary of Neurochem, at our registered office; 275 Armand-Frappier Boulevard, Laval, Quebec, H7V 4A7, telephone (450) 680-4500. Copies of these documents are available on the System for Electronic Document Analysis and Retrieval of the Canadian Securities Administrators (SEDAR), at www.sedar.com. We have filed with the SEC under the United States Securities Act of 1933, as amended, a registration statement on Form F-10 relating to the Common Shares and of which this prospectus is a part. This prospectus does not contain all of the information set forth in such registration statement, as to which reference is made for further information. We are subject to the informational requirements of the United States Securities Exchange Act of 1934 (the "Exchange Act"), as amended, and in accordance therewith are required to file reports and other information with the SEC. Under the multijurisdictional disclosure system adopted by the United States, such reports and other information may be prepared in accordance with the disclosure requirements of Canada, which requirements are different from those of the United States. Such registration statement, reports and other information may be inspected without charge at the Public Reference Section of the SEC at Room 1024, Judicial Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at regional offices of the SEC located at 233 Broadway, New York, New York 10279 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604. Copies of all or any portion of the registration statement and such reports and other information may be obtained from the Public Reference Section of the SEC, upon payment of the prescribed fees. As a "foreign private issuer" under the Exchange Act, we provide to our shareholders proxy statements and annual reports prepared in accordance with applicable Canadian law. Our annual reports are available within 90 days of the end of each fiscal year and will contain our audited consolidated financial statements. We will also make available quarterly reports containing unaudited summary consolidated financial information for each of the first three fiscal quarters. We intend to prepare these financial statements, in accordance with Canadian GAAP and to include a reconciliation to US GAAP in the notes to the annual consolidated financial statements. We are exempt from provisions of the Exchange Act which require us to provide proxy statements in prescribed form to shareholders and which relate to short swing profit reporting and liability. Enforcement of civil liabilities We are incorporated under the laws of Canada. Most of our directors and officers are residents of Canada. Most of our assets and the assets of such persons are located outside of the United States. As a result, it may be difficult for our US-based shareholders to initiate a lawsuit within the United States. It may also be difficult for shareholders to enforce a United States judgment in Canada or elsewhere or to succeed in a lawsuit in Canada or elsewhere based only on violations of United States securities laws. Transfer agent and registrar Computershare Trust Company of Canada is the Canadian transfer agent and registrar for our Common Shares and Computershare Trust Company, Inc. is the US transfer agent and registrar for our Common Shares. 38 Legal matters Certain legal matters in connection with the Offering will be passed upon on our behalf by Davies Ward Phillips & Vineberg LLP (Montreal) and Davies Ward Phillips & Vineberg LLP (New York). Ogilvy Renault LLP is Canadian counsel and Dewey Ballantine LLP is US counsel to the Underwriters in connection with the Offering. As of the date of this prospectus, the partners and associates of each of Davies Ward Phillips & Vineberg LLP, Davies Ward Phillips & Vineberg LLP (New York), Ogilvy Renault LLP and Dewey Ballantine LLP, respectively, beneficially owned, directly or indirectly, less than 1% of any class of securities of Neurochem or any associated party or affiliate of Neurochem. Legal proceedings Neurochem executed an agreement with Immtech International, Inc. ("Immtech") of Vernon Hills, Illinois in 2002 pursuant to which Immtech provided Neurochem with certain compounds for testing and granted to Neurochem an option to license such compounds (the "Agreement"). On August 12, 2003, Immtech filed certain legal proceedings with the federal district court for the Southern District of New York, United States, with respect to the Agreement. The parties entered into settlement discussions in September 2003 and, as settlement did not occur, in January 2004, Neurochem brought a motion to compel arbitration under the terms of the Agreement. The dispute has now been submitted to an arbitral tribunal convened in accordance with the rules of the International Court of Arbitration. Neurochem continues to vigorously defend against the claims brought by Immtech. Immtech has claimed monetary damages which, to date, it has estimated at a total of between US$18 million and US$42 million, which includes an estimated valuation for equitable relief. The arbitral proceedings are at the early stages and the outcome of this matter, or the likelihood and the amount of loss, if any, is not determinable. No provision for possible loss has been made or recorded by Neurochem in connection with this matter. Eligibility for investment In the opinion of Davies Ward Phillips & Vineberg LLP (counsel to the Company) and Ogilvy Renault LLP (Canadian counsel to the Underwriters), the Common Shares, if issued on the date hereof, would be qualified investments under the Income Tax Act (Canada) (the "Tax Act") and the regulations thereunder for a trust governed by a registered retirement savings plan, a registered retirement income fund, a deferred profit sharing plan and a registered education savings plan and would not be "foreign property" for the purposes of Part XI of the Tax Act. Independent chartered accountants Our auditors are KPMG LLP, located at 2000 McGill College Avenue, Suite 1900, Montreal, Quebec, Canada H3A 3H8. Our consolidated balance sheets as at December 31, 2004 and 2003 and our consolidated statements of operations, deficit and cash flows for the year ended December 31, 2004, the six-month period ended December 31, 2003, the year ended June 30, 2003 and for the period from inception (June 17, 1993) to December 31, 2004 incorporated by reference herein have been audited by independent chartered accountants. 39 Purchasers' statutory rights Securities legislation in several of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities within two business days after receipt or deemed receipt of a prospectus, the accompanying prospectus supplement relating to securities purchased by a purchaser and any amendment thereto. In several of the provinces, securities legislation further provides a purchaser with remedies for rescission or, in some provinces, damages where the prospectus, the accompanying prospectus supplement relating to securities purchased by a purchaser or any amendment thereto, contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province for the particulars of these rights or consult with a legal advisor. 40 PART II INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS Indemnification Under the Canada Business Corporations Act, the Registrant may indemnify a director or officer of the Registrant, a former director or officer of the Registrant or another individual who acts or acted at the Registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Registrant or other entity. The Registrant may not indemnify an individual unless the individual (i) acted honestly and in good faith with a view to the best interests of the Registrant or, as the case may be, in the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Registrant's request, (ii) and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful. Such indemnification may be made in connection with an action by or on behalf of the Registrant or other entity to procure a judgment in its favour only with court approval. A director or officer is entitled to indemnification from the Registrant as a matter of right if he or she was not judged by the Court or other competent authority to have committed any fault or omitted to do anything that he or she ought to have done and fulfilled the conditions set forth above. The Registrant may advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to above. The individual shall repay the moneys if he or she does not fulfill the conditions set forth above to qualify for indemnification. In accordance with provisions of the Canada Business Corporations Act described above, the by-laws of the Registrant provide that the Registrant shall, unless its board of directors otherwise determines in any particular case, indemnify a director or officer of the Registrant, a former director or officer of the Registrant, or another individual who acts or acted at the Registrant's request as a director or officer or an individual acting in a similar capacity, of another entity, to the maximum extent not prohibited by the Canada Business Corporations Act. The Registrant maintains directors' and officers' liability insurance that provides coverage for losses as a result of claims against directors and officers of the Registrant and former directors and officers of the Registrant in their capacities as directors or officers of the Registrant. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is therefore unenforceable. 4 EXHIBIT INDEX Exhibit No. Description - ----------- ---------------------------------------------------- 3. Form of Underwriting Agreement 4.1* The audited consolidated balance sheets of the Registrant as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for the year ended December 31, 2004, the six-month period ended December 31, 2003, the year ended June 30, 2003 and for the period from inception (June 17, 1993) to December 31, 2004, together with the auditors' report thereon, the notes thereto and Management's discussion and analysis of financial condition and results of operations in respect of the year ended December 31, 2004, December 31, 2003 and June 30, 2003 4.2* The annual information form of the Registrant dated May 12, 2004 for the six-month period ended December 31, 2003 4.3* The management proxy circular of the Registrant dated April 6, 2004 4.4* The material change report of the Registrant dated January 27, 2005 4.5 The material change report of the Registrant dated February 28, 2005 5. Consent of KPMG LLP 7.1 Consent of Davies Ward Phillips & Vineberg LLP 7.2 Consent of Davies Ward Phillips & Vineberg LLP (New York) 8. Consent of Ogilvy Renault LLP 10.* Power of Attorney (contained on the signature pages of this Registration Statement on Form F-10) - ---------- *Previously filed. 5 PART III UNDERTAKING AND CONSENT TO SERVICE OF PROCESS ITEM 1. UNDERTAKING The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission Staff, and to furnish promptly, when requested to do so by the Commission Staff, information relating to the securities registered pursuant to Form F-10 or to transactions in said securities. ITEM 2. CONSENT TO SERVICE OF PROCESS Concurrently with the filing of the Registration Statement on Form F-10 on February 23, 2005, the Registrant filed with the Commission a written irrevocable consent and power of attorney on Form F-X. 6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Laval, Province of Quebec, Country of Canada, on this 3rd day of March, 2005. NEUROCHEM INC. By: * ----------------------------------------------------------- Name: Francesco Bellini, Ph.D. Title: Chairman of the Board, President and Chief Executive Officer By: /s/ DAVID SKINNER -------------------------------- David Skinner Attorney-in-fact 7 Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities indicated on this 3rd day of March, 2005. Name Title * - ------------------------------------ Chairman, President, Chief Executive Francesco Bellini, Ph.D. Officer and Director (Principal Executive Officer) * - ------------------------------------ Vice President, Finance and Chief Mariano Rodriguez Financial Officer (Principal Financial and Accounting Officer) * - ------------------------------------ Director Colin Bier, Ph.D. * - ------------------------------------ Director Jean-Guy Desjardins * - ------------------------------------ Director Peter Kruyt * - ------------------------------------ Director Francois Legault * - ------------------------------------ Director Dr. Frederick H. Lowy * - ------------------------------------ Director John Molloy * - ------------------------------------ Director Ronald M. Nordmann * - ------------------------------------ Director Graeme K. Rutledge * - ------------------------------------ Director Dr. Emil Skamene By: /s/ DAVID SKINNER -------------------------------- David Skinner Attorney-in-fact AUTHORIZED REPRESENTATIVE Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the authorized representative has duly caused this Registration Statement to be signed on its behalf by the undersigned, solely in its capacity as the duly authorized representative of Neurochem Inc. in the United States, in the State of New Jersey, Country of the United States of America, on the 3rd day of March, 2005. By: * -------------------------------------------------------------- Name: Ronald M. Nordmann By: /s/ DAVID SKINNER -------------------------------- David Skinner Attorney-in-fact 9 EXHIBIT INDEX Exhibit No. Description - ----------- ----------------------------------------------------- 3. Form of Underwriting Agreement 4.1* The audited consolidated balance sheets of the Registrant as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for the year ended December 31, 2004, the six-month period ended December 31, 2003, the year ended June 30, 2003 and for the period from inception (June 17, 1993) to December 31, 2004, together with the auditors' report thereon, the notes thereto and Management's discussion and analysis of financial condition and results of operations in respect of the year ended December 31, 2004, December 31, 2003 and June 30, 2003 4.2* The annual information form of the Registrant dated May 12, 2004 for the six-month period ended December 31, 2003 4.3* The management proxy circular of the Registrant dated April 6, 2004 4.4* The material change report of the Registrant dated January 27, 2005 4.5 The material change report of the Registrant dated February 28, 2005 5. Consent of KPMG LLP 7.1 Consent of Davies Ward Phillips & Vineberg LLP 7.2 Consent of Davies Ward Phillips & Vineberg LLP (New York) 8. Consent of Ogilvy Renault LLP 10.* Power of Attorney (contained on the signature pages of this Registration Statement on Form F-10) - ---------- *Previously filed. 10 EX-3 2 m15799a2exv3.txt UNDERWRITING AGREEMENT Exhibit 3 Neurochem Inc. 4,000,000 Common Shares FORM OF UNDERWRITING AGREEMENT March __, 2005 NEUROCHEM INC. UNDERWRITING AGREEMENT March ___, 2005 UBS Securities LLC CIBC World Markets Corp. Piper Jaffray & Co. Desjardins Securities Inc. Wells Fargo Securities, LLC BMO NESBITT BURNS INC. FORTIS SECURITIES LLC c/o UBS Securities LLC 299 Park Avenue New York, New York 10171-0026 Ladies and Gentlemen: Neurochem Inc., a corporation organized under the Canada Business Corporations Act (the "Company"), proposes to issue and sell to the underwriters named in Schedule A annexed hereto (the "Underwriters") an aggregate of 4,000,000 shares of its common shares without nominal or par value (the "Common Shares") (the "Firm Shares") of the Company. In addition, solely for the purpose of covering over-allotments, the Company proposes to grant to the Underwriters the option to purchase from the Company up to an additional 600,000 shares of its Common Shares (the "Additional Shares"). The Firm Shares and the Additional Shares are hereinafter collectively sometimes referred to as the "Shares." The Shares are described in the Prospectuses which are referred to below. The Company has prepared and filed with the securities regulatory authorities (the "Canadian Commissions") in each of the provinces of Canada (the "Provinces") a preliminary base PREP short form prospectus dated February 23, 2005 relating to the distribution of the Shares (together with any documents incorporated therein by reference, any supplements or amendments thereto and with any translations thereof, the "Canadian Preliminary Prospectus") in accordance with applicable securities legislation of the Provinces and the rules, regulations, blanket rulings, orders and notices made thereunder and the local, uniform and national policies adopted by the Canadian Commissions (collectively, as applied and interpreted, the "Canadian Securities Laws"). The Company has prepared the Canadian Preliminary Prospectus pursuant to the Canadian Securities Administrators' National Instruments 44-101 Short Form Prospectus Distributions and 44-103 Post-Receipt Pricing. The Company has also prepared and filed with the U.S. Securities and Exchange Commission (the "Commission") pursuant to the Canada/U.S. Multi-Jurisdictional Disclosure System adopted by the Canadian Commissions and the Commission (the "MJDS"), a registration statement on Form F-10 (Registration No. 333-122965) covering the registration of the Shares under the U.S. Securities Act of 1933, as amended (together with the rules and regulations thereunder, the "1933 Act"), including the Canadian Preliminary Prospectus with such deletions therefrom and additions or changes thereto as are permitted or required by Form F-10 and the applicable rules and regulations of the Commission (the "U.S. Preliminary Prospectus"). The Company has also prepared and filed with the Commission an Appointment of Agent for Service of Process and Undertaking on Form F-X at the time of the initial filing of the Registration Statement (the "Form F-X"). In addition, the Company (a) has prepared and filed (i) with the Canadian Commissions a final base PREP short form prospectus dated the date hereof relating to the distribution of the Shares (including any documents incorporated therein by reference and any supplements or amendments thereto and with any translations thereof, the "Canadian Final Prospectus"), pursuant to the Canadian Securities Administrators' National Instruments 44-101 Short Form Prospectus Distributions and 44-103 Post-Receipt Pricing, omitting the PREP Information (as hereinafter defined) in accordance with the rules and procedures established pursuant to the Canadian Securities Administrators' National Instrument 44-103 Post-Receipt Pricing (the "PREP Procedures") and (ii) with the Commission an amendment to such registration statement, including the Canadian Final Prospectus (with such deletions therefrom and additions thereto as are permitted or required by Form F-10 and the applicable rules and regulations of the Commission) omitting the PREP Information, and (b) will prepare and file, as promptly as possible and in any event within two Business Days of the execution and delivery of this Agreement, (i) with the Canadian Commissions, in accordance with the PREP Procedures, a supplemented prospectus setting forth the PREP Information (including any documents incorporated therein by reference and any supplements or amendments thereto and with any translations thereof, the "Canadian Supplemented Prospectus"), and (ii) with the Commission, in accordance with the General Instructions of Form F-10, the Canadian Supplemented Prospectus (with such deletions therefrom and additions thereto as are permitted or required by Form F-10 and the applicable rules and regulations of the Commission (the "U.S. Supplemented Prospectus")). The information, if any, included in the Canadian Supplemented Prospectus that is omitted from the Canadian Final Prospectus for which a final receipt has been obtained from the Canadian Commissions, but that is deemed under the PREP Procedures to be incorporated by reference into the Canadian Final Prospectus as of the date of the Canadian Supplemented Prospectus, is referred to herein as the "PREP Information." Each aforesaid prospectus relating to the distribution of the Shares (a) used in the United States (i) before the time the registration statement on Form F-10 became effective under the 1933 Act (the "Effective Date") or (ii) after such effectiveness and prior to the execution and delivery of this Agreement or (b) used in Canada (i) before a receipt for the Canadian Final Prospectus had been obtained from the Canadian Commissions or (ii) after such receipt had been obtained and prior to the execution and delivery of this Agreement, in each case, including the documents incorporated by reference therein and any supplements or amendments thereto and with any translations thereof, that omits the PREP Information, is herein called a "Preliminary Prospectus." The registration statement on Form F-10, including the exhibits thereto and the documents incorporated by reference therein, as amended at the time it became effective, is herein called the "Registration Statement." The prospectus included in the Registration Statement at the time it became effective, including the documents incorporated by reference therein and any supplements thereto, is herein called the "U.S. Prospectus," except that if a U.S. Supplemented Prospectus is thereafter furnished to the Underwriters, including a U.S. Supplemented Prospectus that includes the PREP Information, after the execution of this Agreement (whether or not such prospectus is required to be filed pursuant to the 1933 Act), the term "U.S. Prospectus" shall mean such U.S. Supplemented Prospectus, including the documents incorporated by reference therein and any supplements thereto. The Canadian Final Prospectus for which a final receipt has been obtained from the Canadian Commissions is herein referred to as the "Canadian Prospectus," except that, if, after the execution of this Agreement, a Canadian Supplemented Prospectus is thereafter filed with the Canadian Commissions, the term "Canadian Prospectus" shall mean such Canadian Supplemented Prospectus, including the documents incorporated by reference therein and any amendments or supplements thereto and with any translations thereof. Any amendment to the Canadian Prospectus, and any amended or supplemented prospectus or auxiliary material, information, evidence, return, report, application, statement or document that may be filed by or on behalf of the Company under the Canadian Securities 2 Laws prior to the Time of Purchase (as hereinafter defined) or, where such document is deemed to be incorporated by reference into the Canadian Prospectus, prior to the expiry of the period of distribution of the Shares, is referred to herein collectively as the "Supplementary Material." The U.S. Preliminary Prospectus and the Canadian Preliminary Prospectus are hereinafter collectively sometimes referred to as the "Preliminary Prospectuses." The U.S. Supplemented Prospectus and the Canadian Supplemented Prospectus are hereinafter collectively sometimes referred to as the "Supplemented Prospectuses." The U.S. Prospectus and the Canadian Prospectus are hereinafter collectively sometimes referred to as the "Prospectuses." The Underwriters shall offer the Shares for sale to the public directly and through other investment dealers and brokers in the Provinces and the United States only as permitted by applicable law and upon the terms and conditions set forth in the Prospectuses and this Agreement. The Underwriters agree that they will not, directly or indirectly, distribute the Registration Statement, the Canadian Preliminary Prospectus, the Canadian Prospectus, the U.S. Preliminary Prospectus or the U.S. Prospectus or publish any prospectus, circular, advertisement or other offering material in any jurisdiction other than the Provinces or such states of the United States where the Shares are duly qualified under U.S. federal and applicable U.S. state securities laws, in such manner as to require registration of the Shares or the filing of a prospectus or any similar document with respect to the Shares by the Company therein. The Underwriters agree that each of the Underwriters that is not registered as a broker-dealer under Section 15 of the U.S. Securities Exchange Act of 1934, as amended (together with the rules and regulations thereunder, the "1934 Act"), will not offer or sell any Shares in, or to persons who are nationals or residents of, the United States other than through one of its U.S. registered broker-dealer affiliates or otherwise in compliance with the 1934 Act Rule 15a-6. Sales of Shares in the Provinces may be made only by an Underwriter that is either registered in the appropriate category or exempt from registration under applicable Canadian Securities Laws or by its duly registered Canadian affiliate or agent. The Company and the Underwriters agree as follows: 1. Sale and Purchase. Upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the respective Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase from the Company, the number of Firm Shares set forth opposite the name of such Underwriter in Schedule A attached hereto, subject to adjustment in accordance with Section 8 hereof, in each case at a purchase price of U.S.$[___] per Share for Shares initially offered in the United States and Cdn$[__] per Share for Shares initially offered in Canada. The Company is advised that the Underwriters intend (i) to make a public offering of their respective portions of the Firm Shares as soon after the effective date of the Registration Statement as in your judgment is advisable and (ii) initially to offer the Firm Shares upon the terms set forth in the Prospectuses. The Underwriters may from time to time, after the Shares have initially been offered to the public, increase or decrease the public offering price to such extent as you may determine. In addition, the Company hereby grants to the several Underwriters the option to purchase, and upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Underwriters shall have the right to purchase, severally and not jointly, from the Company, ratably in accordance with the number of Firm Shares to be purchased by each of them, all or a portion of the Additional Shares as may be necessary to cover over-allotments made in connection with the offering of the Firm Shares, at the same purchase price per share to be paid by the Underwriters to the Company for the Firm Shares. This option may be exercised by UBS Securities LLC ("UBS Securities") on behalf of the several Underwriters at any time and from time to time on or before the thirtieth day following the date hereof, by written notice to the Company. Each such notice shall set forth the aggregate number of 3 Additional Shares as to which the option is being exercised and the date and time when the Additional Shares are to be delivered (such date and time being herein referred to as the "Additional Time of Purchase"); provided, however, that the Additional Time of Purchase shall not be earlier than the Time of Purchase (as defined below) nor earlier than the second Business Day after the date on which the option shall have been exercised nor later than the tenth Business Day after the date on which the option shall have been exercised. As used herein, "Business Day" shall mean a day on which each of the New York Stock Exchange and the Toronto Stock Exchange (the "TSX") is open for trading. The number of Additional Shares to be sold to each Underwriter shall be the number which bears the same proportion to the aggregate number of Additional Shares being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto bears to the total number of Firm Shares (subject, in each case, to such adjustment as you may determine to eliminate fractional shares), subject to adjustment in accordance with Section 8 hereof. 2. Payment and Delivery. Payment of the purchase price for the Firm Shares shall be made by UBS Securities, as Underwriter and on behalf of the other Underwriters, to the Company by Federal Funds wire transfer against delivery of the Firm Shares to you through the facilities of The Depository Trust Company ("DTC") for the respective accounts of the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York City time, on [_________], 2005 (unless another time shall be agreed to by you and the Company or unless postponed in accordance with the provisions of Section 8 hereof). The time at which such payment and delivery are to be made is hereinafter sometimes called the "Time of Purchase." Electronic transfer of the Firm Shares shall be made to you at the Time of Purchase in such names and in such denominations as you shall specify. Payment of the purchase price for the Additional Shares shall be made at the Additional Time of Purchase in the same manner and at the same office as the payment for the Firm Shares. Electronic transfer of the Additional Shares shall be made to you at the Additional Time of Purchase in such names and in such denominations as you shall specify. As compensation to the Underwriters for their obligations hereunder, at the Time of Purchase the Company will pay to UBS Securities, for the accounts of the Underwriters, a commission equal to (a) U.S.$[_____] per Share, other than Shares that Power Technology Investment Corporation ("PTIC") and the FMRC Family Trust ("FMRC") have committed to purchase, then being purchased by the Underwriters and (b) U.S.$[_____] per Share in respect of Shares PTIC and FMRC have committed to purchase and (ii) any Additional Time of Purchase the Company will pay to UBS Securities, for the accounts of the Underwriters, a commission equal to U.S. $[_____] per Share then being purchased by the Underwriters. Deliveries of the documents described in Section 6 hereof with respect to the purchase of the Shares shall be made at the offices of Davies Ward Phillips & Vineberg LLP, 1501 McGill College Avenue, Montreal, Quebec, Canada, at 9:00 A.M., New York City time, on the date of the closing of the purchase of the Firm Shares or the Additional Shares, as the case may be. 3. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters as follows (it being understood that reference to any disclosure made in the Registration Statement and Prospectus includes disclosure set forth in any of the documents incorporated by reference therein): (a) the Company is a "foreign private issuer" (as defined in Rule 405 under the 1933 Act) and meets the requirements for use of Form F-10 under the 1933 Act and is eligible for the use of a short form prospectus, the PREP procedures and the MJDS provided under the Canadian Securities Laws; a receipt has been obtained from the Canadian Commissions in respect of the Canadian Final Prospectus, and no order suspending the distribution of the Shares has been issued by the Canadian Commissions; a registration statement (Registration No. 333-122965) on Form F-10 relating to the Shares, including a U.S. Preliminary Prospectus and such amendments to such registration statement as may have been required to the date of this Agreement, has been prepared by the Company under the provisions of the 1933 Act and has been filed with the 4 Commission; copies of such registration statement and amendments and of each related preliminary prospectus have been delivered to the Underwriters; there are no reports or information that in accordance with the requirements of the Canadian Securities Laws must be filed or made publicly available in connection with the listing of the Shares on the TSX that have not been filed or made publicly available as required; there are no documents required to be filed with the Canadian Commissions in connection with the Canadian Preliminary Prospectus, the Canadian Supplemented Prospectus or the Canadian Prospectus that have not been filed as required; (b) on the Effective Date, the date the Canadian Prospectus is first filed with the Canadian Commissions and the date the U.S. Prospectus is first filed with the Commission, at all subsequent times through and including the Time of Purchase, any Additional Time of Purchase and when any post-effective amendment to the Registration Statement becomes effective or any amendment or supplement to the U.S. Prospectus is filed with the Commission or any amendment or supplement is filed with the Canadian Commissions (A) the Canadian Prospectus, together with the Supplementary Material, did and will comply with the requirements of the Canadian Securities Laws pursuant to which it has been filed and did and will provide full, true and plain disclosure of all material facts (for the purposes of the Canadian Securities Laws) relating to the Company and to the Shares and did not and will not contain any misrepresentation (for the purposes of the Canadian Securities Laws), (B) the U.S. Prospectus did and will conform to the Canadian Prospectus (and vice versa) except for such deletions therefrom and additions thereto as are permitted or required by Form F-10 and the applicable rules and regulations of the Commission relating thereto, (C) the Registration Statement (as amended or as supplemented if the Company shall have filed with the Commission any amendment or supplement thereto), including the financial statements included therein, and the Form F-X did or will comply with all applicable provisions of the 1933 Act, (D) no part of the Registration Statement or any such amendment or supplement did or will contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading and (E) the U.S. Prospectus did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided however, that the foregoing representations and warranties in this Section 3(b) do not apply to any statements or omissions made in reliance on and in conformity with information solely relating to any Underwriter and furnished in writing by or on behalf of such Underwriter to the Company specifically for inclusion in the Registration Statement, the U.S. Prospectus or the Canadian Prospectus; the Company has not distributed and will not distribute prior to the later of (i) the Time of Purchase or any Additional Time of Purchase, as the case may be, and (ii) the completion of the distribution of the Shares, any offering material in connection with the offering or sale of the Shares other than the Registration Statement, the Preliminary Prospectuses, the U.S. Prospectus, the Canadian Prospectus or other materials, if any, permitted by the 1933 Act and the Canadian Securities Laws; the documents that are incorporated by reference in the Canadian Prospectus, when they were or are filed with the Canadian Commissions, conformed or will conform, respectively, in all material respects with the requirements of the Canadian Securities Laws, and none of such documents contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company has not received, and has no notice of, any order of the Canadian Commissions or of the Commission preventing or suspending the use of any Preliminary Prospectus, or instituting proceedings for that purpose, and each of the Preliminary Prospectuses, at the time of filing thereof, conformed in all material respects to the requirements of the Canadian Securities Laws or the 1933 Act, as applicable; 5 (c) as of the date of this Agreement, the Company has an authorized and outstanding capitalization as set forth in the section of the Registration Statement and the Prospectuses entitled "Capitalization" and, as of the Time of Purchase and any additional Time of Purchase, the Company shall have an authorized and outstanding capitalization as set forth in the section of the Registration Statement and the Prospectuses entitled "Capitalization" (subject, in each case, to the issuance of Common Shares upon exercise of stock options and warrants or pursuant to rights to acquire or obligations of the Company to issue securities disclosed as outstanding or existing in the Registration Statement and the Prospectuses and grant of options under existing stock option plans described in the Registration Statement and the Prospectuses); all of the issued and outstanding share capital of the Company, including the Common Shares, has been duly authorized and validly issued and is fully paid and non-assessable, has been issued in compliance with all applicable securities laws and was not issued in violation of any preemptive right, resale right, right of first refusal or similar right; the Common Shares will not, upon issuance thereof, be foreign property for the purposes of part XI of the Income Tax Act (Canada); (d) the Company has been duly organized and is validly existing as a corporation in good standing under the Canada Business Corporations Act (the "CBCA"), with full corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and the Prospectuses, to execute and deliver this Agreement and to issue, sell and deliver the Shares as contemplated herein; (e) the Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a material adverse effect on the business, properties, financial condition, results of operation or prospects of the Company and the Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse Effect"); (f) the Company has no subsidiaries (as defined in the 1933 Act) other than as listed on Schedule B attached hereto (collectively, including the LP (as defined below), the "Subsidiaries"); other than the capital stock of the Subsidiaries or as described in the Registration Statement and the Prospectuses, the Company does not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities of any corporation or have any equity interest in any firm, partnership, joint venture, association or other entity; complete and correct copies of the articles of incorporation and by-laws or other organizational documents of each of the Company and the Subsidiaries and all amendments thereto have been made available to you, and no changes therein will be made subsequent to the date hereof and prior to the Time of Purchase or any Additional Time of Purchase; each Subsidiary has been duly organized and is validly existing as a corporation or, in the case of Neurochem Luxco I S.C.S. (the "LP"), as a limited partnership and is in good standing under the laws of the -- jurisdiction of its organization, with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectuses; each Subsidiary is duly qualified to do business as a foreign corporation or, in the case of the LP, as a limited partnership and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a Material Adverse Effect; all of the outstanding shares of capital stock or other equity interests of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, either directly or indirectly through one or more Subsidiaries, subject to no security interest, other encumbrance or adverse claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligation into 6 shares of capital stock or other equity interests in the Subsidiaries are outstanding, other than those warrants, options or other rights held by the Company or a Subsidiary; other than Neurochem (International) Limited and as disclosed in the Registration Statement and Prospectuses, none of the Subsidiaries have any material assets (other than equity interests in other Subsidiaries), material liabilities (other than to the Company or other Subsidiaries) or material operations; (g) the Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable and free of statutory and contractual preemptive rights, resale rights, rights of first refusal and similar rights granted by the Company or, to the knowledge of the Company, by any other person; (h) the share capital of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Registration Statement and the Prospectuses; the certificates for the Shares are in due and proper form and conform to the requirements of the CBCA, the articles of incorporation of the Company and applicable requirements of the TSX or have been otherwise approved by the TSX; (i) this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except to the extent that rights to indemnity may be limited by applicable law; (j) neither the Company nor any of the Subsidiaries is in breach or violation of or in default under (nor has any event occurred which with notice, lapse of time or both would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (i) its respective articles of incorporation and by-laws or other organizational documents, or (ii) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound or affected, other than, in the case of this clause (ii), (A) such breaches, defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect and (B) as disclosed in the Registration Statement and Prospectus; and the execution, delivery and performance of this Agreement, the issuance and sale of the Shares and the consummation of the transactions contemplated hereby will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under) or result in the creation or imposition of any hypothecation, lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries under, the articles of incorporation and by-laws or other organizational documents of the Company or any of the Subsidiaries, or any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound or affected, or any federal, provincial, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any of the Subsidiaries; 7 (k) no approval, authorization, consent or order of or filing with any federal, provincial, state, local or foreign governmental or regulatory commission, board, body, authority or agency is required in connection with the issuance and sale of the Shares to the public or the consummation by the Company of the transactions contemplated hereby other than (i) registration of the offer and sale of the Shares under the 1933 Act, (ii) as may be required under the Canadian Securities Laws or by the TSX, which have been effected by the Company, (iii) any notices and filings required to be given to, or made with, the TSX and The Nasdaq Stock Market, Inc., which have been or will be given or made on a timely basis by the Company and (iv) any necessary qualification under the securities or blue sky laws of the various U.S. state jurisdictions in which the Shares are being offered by the Underwriters or under the rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD") with respect to the fairness of the underwriting arrangements relating to this Agreement; (l) except as set forth in the Registration Statement and the Prospectuses, (i) no person has the right, contractual or otherwise, to cause the Company to issue or sell to it any of the Company's share capital or other equity interests of the Company, (ii) no person has any preemptive rights, resale rights, rights of first refusal or other rights to purchase any of the Company's share capital or other equity interests of the Company granted by the Company or, to the actual knowledge of the Company, by any other person, and (iii) no person has the right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale of the Shares; no person has the right, contractual or otherwise, to cause the Company to register under the 1933 Act or any Canadian Securities Laws any Common Shares or any other share capital or other equity interests of the Company, or to include any such shares or interests in the Registration Statement or Prospectuses or the offering contemplated thereby, other than those that have been waived; (m) each of the Company and the Subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any federal, provincial, state, local or foreign law, regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, in order to conduct its respective business, except where the failure to have such license, authorization, consent or approval would not, individually or in the aggregate, have a Material Adverse Effect; neither the Company nor any of the Subsidiaries is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any such license, authorization, consent or approval or any federal, provincial, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any of the Subsidiaries, except where such violation, default, revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect; (n) all contracts, licenses, agreements, leases or documents of a character required to be described in the Registration Statement or in the Prospectuses or to be filed with the Commission as an exhibit to the Registration Statement or filed with the Canadian Commissions have been so described or filed as required; (o) except as disclosed in the Registration Statement and the Prospectus, there are no actions, suits, claims, investigations or proceedings pending or threatened or, to the Company's knowledge, contemplated to which the Company or any of the Subsidiaries or any of their respective directors or officers is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, provincial, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except such as would not result in a judgment, decree or order having, individually or in the aggregate, a 8 Material Adverse Effect or materially interfering with the consummation of the transactions contemplated hereby; except as disclosed in the Registration Statement and the Prospectus, the Company has not been party to any material affiliated-party transactions or any off-balance sheet arrangement (as defined in General Instruction B.(11) of Form 40-F) during the most recent three fiscal years; (p) KPMG LLP, whose reports on the consolidated financial statements of the Company and the Subsidiaries are included as part of the Registration Statement and the Prospectuses, are independent public accountants as required by the 1933 Act and are independent within the meaning of the Canadian Securities Laws; (q) the audited consolidated financial statements included in the Registration Statement and the Prospectuses, together with the related notes and schedules, present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the periods specified and have been prepared in conformity with accounting principles generally accepted in Canada ("Canadian GAAP") applied on a consistent basis during the periods involved, together with any required reconciliation, in accordance with the 1933 Act and the Commission's rules and guidelines, to accounting principles generally accepted in the U.S. ("U.S. GAAP"); there are no financial statements (historical or pro forma) that are required to be included in the Registration Statement and the Prospectuses that are not included as required; and the Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not disclosed in the Registration Statement and the Prospectuses; (r) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectuses, there has not been (i) any material adverse change, or any development involving a prospective material adverse change, in the business, properties, management, financial condition or results of operations of the Company and the Subsidiaries taken as a whole, (ii) any transaction which is material to the Company and the Subsidiaries taken as a whole, (iii) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company or the Subsidiaries, which is material to the Company and the Subsidiaries taken as a whole, (iv) any change in the share capital or outstanding indebtedness of the Company or the Subsidiaries as a consolidated group or (v) any dividend or distribution of any kind declared, paid or made on the share capital of the Company; (s) the Company has obtained for the benefit of the Underwriters the agreement (a "Lock-Up Agreement"), in the form set forth as Exhibit A hereto, of each of its directors and officers and each shareholder named in Exhibit A-1 hereto; (t) the Company is not and will not, as a result of the offering and sale of the Shares, be (i) required to register as an "investment company" or (ii) "controlled" by an entity required to be registered as an "investment company," as such terms are defined in the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"); the disclosure in the Registration Statement and Prospectus regarding the Company's status as a "passive foreign investment company" is accurate and complete; to the Company's knowledge, the Company is not a "controlled foreign corporation"; (u) Except as disclosed in the Registration Statement and Prospectus, the Company and each of the Subsidiaries has good and marketable title to all property (real and personal) described in the Registration Statement and in the Prospectuses as being owned by each of them, 9 free and clear of all (i) material liens, (ii) claims, (iii) security interests or (iv) other encumbrances; (v) the Company and the Subsidiaries own, or have obtained valid and enforceable licenses for, or other rights to use, the inventions, patent applications, patents, trademarks (both registered and unregistered), tradenames, copyrights, trade secrets and other proprietary information described in the Registration Statement and the Prospectuses as being owned or licensed by them except where the failure to own, license or have such rights would not, individually or in the aggregate, have a Material Adverse Effect (collectively, "Intellectual Property"). The Company has no knowledge that the Company lacks or will be unable to obtain any rights or licenses to use all patents and other material intangible property and assets necessary for the commercialization of the Company's product candidates that are described in the Registration Statement and the Prospectuses. The Company has no knowledge of third parties who have rights to any Intellectual Property, except as disclosed in the Registration Statement and the Prospectuses and except for the ownership rights of the owners of the Intellectual Property which is licensed to the Company. To the Company's knowledge, there is no infringement by third parties of any Intellectual Property; except as disclosed in the Registration Statement and the Prospectuses, there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or, to the Company's knowledge, claim by others challenging the Company's rights in or to any Intellectual Property, and the Company is unaware of any facts which form a reasonable basis for any such claim; except as disclosed in the Registration Statement and the Prospectuses, there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or, to the Company's knowledge, claim by others challenging the validity or enforceability of any Intellectual Property, and the Company is unaware of any finding of unenforceability or invalidity of the Intellectual Property, except as disclosed in the Registration Statement and the Prospectuses, there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or, to the Company's knowledge , claim by others that the Company infringes or otherwise violates (or would infringe or otherwise violate upon commercialization of the Company's product candidates as described in the Registration Statement and the Prospectuses) any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any facts which form a reasonable basis for any such claim, except as disclosed in the Registration Statement and the Prospectuses; except as disclosed in the Registration Statement and Prospectus, to the Company's knowledge, there is no patent or patent application that contains claims that interfere with the issued or pending claims of any of the Intellectual Property; and to the Company's knowledge, there is no prior art that necessarily renders any patent application owned by the Company unpatentable that has not been disclosed to the U.S. Patent and Trademark Office, except as disclosed in the Registration Statement and the Prospectuses; (w) the Company and the Subsidiaries and their properties, assets and operations are in compliance with, and hold all permits, authorizations and approvals required under, Environmental Laws (as defined below), except to the extent that failure to so comply or to hold such permits, authorizations or approvals would not, individually or in the aggregate, have a Material Adverse Effect; there are no past, present or, to the Company's knowledge after due inquiry, reasonably anticipated future events, conditions, circumstances, activities, practices, actions, omissions or plans that could reasonably be expected to give rise to any material costs or liabilities to the Company or the Subsidiaries under, or to interfere with or prevent compliance by the Company or the Subsidiaries with, Environmental Laws; except as would not, individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any of the Subsidiaries (i) is the subject of any investigation, (ii) has received any notice or claim, (iii) is a party to or affected by any pending or threatened action, suit or proceeding, (iv) is bound by any judgment, 10 decree or order or (v) has entered into any agreement, in each case relating to any alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Materials (as defined below) (as used herein, "Environmental Law" means any federal, provincial, state, local or foreign law, statute, ordinance, rule, regulation, order, decree, judgment, injunction, permit, license, authorization or other binding requirement, or common law, relating to health, safety or the protection, cleanup or restoration of the environment or natural resources, including those relating to the distribution, processing, generation, treatment, storage, disposal, transportation, other handling or release or threatened release of Hazardous Materials, and "Hazardous Materials" means any material (including, without limitation, pollutants, contaminants, hazardous or toxic substances or wastes) that is regulated by or may give rise to liability under any Environmental Law); (x) all tax returns required to be filed by the Company and each of the Subsidiaries have been filed, and all taxes and other assessments of a similar nature (whether imposed directly or through withholding) including any interest, additions to tax or penalties applicable thereto due or claimed to be due from such entities have been paid, other than those being contested in good faith and for which adequate reserves have been provided; (y) except as disclosed in the Registration Statement and the Prospectuses, the Company and each of the Subsidiaries maintains insurance covering its properties, operations, personnel and businesses; such insurance insures against such losses and risks to an extent which is adequate in accordance with customary practice of the industry in which the Company operates to protect the Company and the Subsidiaries and their businesses; all such insurance is fully in force on the date hereof and will be fully in force at the Time of Purchase and any Additional Time of Purchase; (z) neither the Company nor any of the Subsidiaries has sustained since the date of the last audited financial statements included in the Registration Statement and the Prospectuses any loss or interference with its respective business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; (aa) other than in connection with the dispute described in the Registration Statement and Prospectuses under the heading "Legal Proceedings," the Company has not sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements referred to or described in the Registration Statement or the Prospectuses or required to be filed with the Commission as an exhibit to the Registration Statement or filed with the Canadian Commissions, and no such termination or non-renewal has been threatened by the Company or, to the Company's knowledge after due inquiry, any other party to any such contract or agreement; (bb) the Company and each of the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences; 11 (cc) the Company has established and maintains and evaluates "disclosure controls and procedures" (as such term is defined in Rule 13a-15 and 15d-15 under the 1934 Act) and "internal control over financial reporting" (as such term is defined in Rule 13a-15 and 15d-15 under the 1934 Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company's Chief Executive Officer and its Chief Financial Officer by others within those entities, and such disclosure controls and procedures are effective to perform the functions for which they were established; the Company's auditors and the Audit Committee of the Board of Directors of the Company have been advised of (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting; the principal executive officers (or their equivalents) and principal financial officers (or their equivalents) of the Company have made all certifications applicable to the Company required by (y) Multilateral Instrument 52-109 - Certification of Disclosure in Issuer's Annual and Interim Filings and (z) the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and any related rules and regulations promulgated by the Commission, and the statements contained in any such certification are complete and correct; the Company, the Subsidiaries and the Company's directors and officers are each in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission and the NASDAQ promulgated thereunder; (dd) since August 19, 2003, the Company has not, directly or indirectly, including through any subsidiary (i) extended credit, arranged to extend credit or renewed any extension of credit, in the form of a personal loan, to or for any director or executive officer of the Company or to or for any family member or affiliate of any director or executive officer of the Company or (ii) made any material modification, including any renewal thereof, to any term of any personal loan to any director or executive officer of the Company or any family member or affiliate of any director or executive officer; (ee) any statistical and market-related data included in the Registration Statement and the Prospectuses are based on or derived from sources that the Company believes to be reliable and accurate, and no consents were required for the use of such data from such sources; (ff) neither the Company nor any of the Subsidiaries nor, to the Company's knowledge, any employee or agent of the Company or the Subsidiaries has made any payment of funds of the Company or the Subsidiaries or received or retained any funds in violation of any law, rule or regulation, which payment, receipt or retention of funds is of a character required to be disclosed in the Registration Statement or the Prospectuses; (gg) neither the Company nor any of the Subsidiaries nor, to the Company's knowledge, any of their respective directors, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected to cause or result in, under the 1934 Act, the Canadian Securities Laws, the rules of the TSX or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (hh) to the Company's knowledge after reasonable inquiry, there are no affiliations or associations between any member of the NASD and any of the Company's officers, directors or 12 5% or greater securityholders, and the Company is not a related or connected issuer of any of the Underwriters within the meaning of the Canadian Securities Laws; (ii) there are no stamp or other issuance or transfer taxes or duties, no capital gains, income, withholding or other taxes and no other similar fees or charges under U.S. federal law or the laws of any state, or any political subdivision or taxing authority thereof, or Canadian federal law, or the laws of any province, or any political subdivision or taxing authority thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Shares to be issued and sold by it; (jj) the clinical, pre-clinical and other studies and tests conducted by or on behalf of or sponsored by the Company or any Subsidiary or in which the Company, any Subsidiary or its products or product candidates have participated that are described in the Registration Statement and the Prospectuses or the results of which are referred to in the Registration Statement and the Prospectuses were and, if still pending, are being conducted in accordance with standard medical and scientific research procedures; the Company and each Subsidiary has operated and currently is in compliance in all material respects with all applicable rules, regulations and policies of Health Canada and the U.S. Food and Drug Administration (collectively, the "Regulatory Authorities"); the Company has not received any notices or other correspondence from the Regulatory Authorities or any other governmental agency requiring the termination, suspension or modification of any clinical or pre-clinical studies or tests that are described in the Registration Statement or the Prospectuses or the results of which are referred to in the Registration Statement or the Prospectuses; (kk) the Shares have been approved, subject to customary conditions, for quotation on the Nasdaq National Market and for listing, subject to customary listing conditions, on the TSX; all acts have been taken and all documents required to be filed under the Canadian Securities Laws and TSX and Nasdaq rules (except routine post-closing matters) to enable the Shares to trade on the TSX and Nasdaq; (ll) Computershare Trust Company of Canada and its U.S. affiliate, Computershare Trust Company, Inc., have been duly appointed as registrar and transfer agent for the Common Shares; and (mm) except as disclosed in the Registration Statement and the Prospectuses, there is no agreement in force or effect which in any manner affects or will affect the voting or control of any of the Securities of the Subsidiaries or, to the knowledge of the Company, of the Company. In addition, any certificate signed by any officer on behalf of the Company or any of the Subsidiaries and delivered to the Underwriters or counsel for the Underwriters in connection with the offering of the Shares shall be deemed to be a representation and warranty by the Company or Subsidiary, as the case may be, as to matters covered thereby, to each Underwriter. 4. Certain Covenants of the Company. The Company hereby agrees: (a) to furnish such information as may be required and otherwise to cooperate in qualifying the Shares for offering and sale under the securities or blue sky laws of such states or other jurisdictions as you may designate and to maintain such qualifications in effect so long as you may request for the distribution of the Shares, provided that the Company shall not be required to qualify as a foreign corporation or to consent to the service of process under the laws of any such jurisdiction (except service of process with respect to the offering and sale of the 13 Shares); and to promptly advise you of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (b) to make available to the Underwriters in New York City, as soon as practicable after the Registration Statement becomes effective (as to the U.S. Prospectus) or after the filing thereof (as to the Canadian Prospectus), and thereafter from time to time to furnish to the Underwriters, as many copies of the Prospectuses (or of the Prospectuses as amended or supplemented if the Company shall have made any amendments or supplements thereto after the effective date of the Registration Statement) as the Underwriters may request for the purposes contemplated by the 1933 Act and the Canadian Securities Laws; in case any Underwriter is required to deliver a prospectus after the nine-month period referred to in Section 10(a)(3) of the 1933 Act in connection with the sale of the Shares, the Company will prepare, at its expense, promptly upon request such amendment or amendments to the Registration Statement and the Prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the 1933 Act; (c) not to file, either prior to the Effective Date or thereafter during such period as a prospectus required by law to be delivered in connection with sales of the Shares by the Underwriters or dealer, any amendment or supplement to the Registration Statement or the Prospectuses unless a copy thereof shall first have been submitted to the Underwriters within a reasonable period of time prior to the proposed filing thereof and the Underwriters shall not have objected thereto; (d) to comply with the requirements of the PREP Procedures and General Instructions of Form F-10 and file the Canadian Supplemented Prospectus with the Canadian Commissions no later than the day which is two Business Days following this Agreement; to use its reasonable best efforts to obtain a receipt for the Canadian Prospectus from the Canadian Commissions and to use its reasonable best efforts to cause the Commission to declare the Registration Statement effective; to notify the Representatives promptly, (i) when the Registration Statement has become effective and when any post-effective amendment thereto becomes effective, (ii) of any request by the Canadian Commissions or the Commission for amendments or supplements to the Registration Statement, the Canadian Final Prospectus, the U.S. Prospectus or the Canadian Prospectus or for additional information with respect thereto, (iii) of the issuance by the Commission or any Canadian Commission of any stop order or cease trading order suspending the effectiveness of the Registration Statement or the Canadian Prospectus, respectively, or the initiation of any proceedings for that purpose or the threat thereof, (iv) of the happening of any event during the period mentioned in Section 4(f) hereof that makes any statement made in the Registration Statement, the U.S. Prospectus or the Canadian Prospectus untrue or that requires the making of any changes in the Registration Statement, the U.S. Prospectus or the Canadian Prospectus in order to make the statements therein, in light of the circumstances in which they are made, not misleading and (v) of receipt by the Company or any representatives or attorney of the Company of any other communication from the Canadian Commissions or the Commission relating to the Company, the Registration Statement, any Preliminary Prospectus, the Canadian Final Prospectus, the U.S. Prospectus or the Canadian Prospectus; if at any time the Commission shall issue any order suspending the effectiveness of the Registration Statement or any Canadian Commission shall issue any cease trading order or any U.S. state or Blue Sky securities regulator shall issue any order suspending the distribution of the Shares, to use its best efforts to obtain the withdrawal of such order at the earliest possible moment; and to use its best efforts to prevent the issuance of any such order; 14 (e) to file promptly (i) all reports and any definitive proxy or information statement required to be filed by the Company with the Commission in order to comply with the 1934 Act, including any additional documents required to be filed if the Company ceases to be a foreign private issuer, (ii) all reports and other documents required to be filed by the Company with the Canadian Commissions to comply with Canadian Securities Laws and with the TSX and Nasdaq to procure and ensure the continued listing of the Shares thereon subsequent to the date of the Prospectuses and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; and, for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares, to provide you with a copy of such reports and statements and other documents to be filed by the Company pursuant to Section 13, 14 or 15(d) of the 1934 Act or pursuant to the Canadian Securities Laws a reasonable period of time prior to any proposed filing; (f) to advise the Underwriters promptly of the happening of any event within the time during which a prospectus relating to the Shares is required to be delivered under the 1933 Act or the Canadian Securities Laws which could require the making of any change in the Prospectuses then being used so that the Prospectuses would not include an untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, and, during such time, subject to Section 4(c) hereof, to prepare and furnish promptly to the Underwriters, at the Company's expense, such amendments or supplements to the Prospectuses as may be necessary to reflect any such change; (g) to make generally available to its security holders, and to deliver to you, an earnings statement of the Company (which will satisfy the provisions of Section 11(a) of the 1933 Act) covering a period of twelve months beginning after the effective date of the Registration Statement (as defined in Rule 158(c) under the 1933 Act) as soon as is reasonably practicable after the termination of such twelve-month period but not later than [May 15, 2006]; (h) to furnish to you such number of conformed copies of the Registration Statement, as initially filed with the Commission, and of the Canadian Preliminary Prospectus, the Canadian Amended Preliminary Prospectus, if any, and the Canadian Prospectus, and of all amendments thereto (including all exhibits thereto and documents incorporated by reference therein) and sufficient copies of the foregoing (other than exhibits) for distribution of a copy to each of the other Underwriters; (i) to furnish to you promptly and, upon request, to each of the other Underwriters for a period of three years from the date of this Agreement (i) copies of any reports, proxy statements or other communications which the Company shall send to its shareholders or shall from time to time publish or publicly disseminate, (ii) copies of all annual, quarterly and current reports filed with the Commission on Forms 20-F or 40-F and 6-K, or, if the Company ceases to be a foreign private issuer, on 10-K, 10-Q, 8-K and 14A, or such other similar forms as may be designated by the Commission, (iii) copies of documents or reports filed with any Canadian or U.S. national securities exchange or inter-dealer quotation system on which any class of securities of the Company is listed, and (iv) such other information as you may reasonably request regarding the Company or the Subsidiaries; (j) to furnish to you as early as practicable prior to the Time of Purchase and any Additional Time of Purchase, but not later than two Business Days prior thereto, a copy of the latest available unaudited interim or monthly consolidated financial statements of the Company and the Subsidiaries, which such financial statements, if any, have been read by the Company's 15 independent certified public accountants, as stated in their letter to be furnished pursuant to Section 6(f) hereof; (k) to apply the net proceeds from the sale of the Shares substantially in the manner set forth under the caption "Use of Proceeds" in the Prospectuses; (l) to pay all costs, expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, the Form F-X, the Preliminary Prospectuses, the Amended Preliminary Prospectuses, the Prospectuses and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), (ii) the registration, issue, sale and delivery of the Shares, including any stock or transfer taxes and stamp or similar duties payable upon the sale, issuance or delivery of the Shares to the Underwriters, (iii) the producing, word processing and/or printing of this Agreement, any Agreement Among Underwriters, any dealer agreements, any Powers of Attorney and any closing documents (including compilations thereof) and the reproduction and/or printing and furnishing of copies of each thereof to the Underwriters and (except closing documents) to dealers (including costs of mailing and shipment), (iv) the qualification of the Shares for offering and sale under U.S. state laws and the determination of their eligibility for investment under U.S. state laws as aforesaid (including, with respect to such qualification under U.S. state laws, the legal fees and filing fees and other disbursements of counsel for the Underwriters) and the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) any listing of the Shares on the TSX or qualification of the Shares for quotation on Nasdaq and any registration thereof under the 1934 Act, (vi) any filing for review of the public offering of the Shares by the NASD, including the legal fees and filing fees and other disbursements of counsel to the Underwriters, (vii) the fees and disbursements of any transfer agent or registrar for the Shares, (viii) the costs and expenses of the Company relating to presentations or meetings undertaken in connection with the marketing of the offering and sale of the Shares to prospective investors and the Underwriters' sales forces, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel, lodging and other expenses incurred by the officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) the performance of the Company's other obligations hereunder; (m) to comply with the 1933 Act and Canadian Securities Laws so as to permit the completion of the distribution of the Shares as contemplated by this Agreement and the Prospectuses; (n) for a period of 90 days after the date hereof (the "Lock-Up Period"), the Company will not, without the prior written consent of UBS Securities (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Common Shares or securities convertible into or exchangeable or exercisable for Common Shares or warrants or other rights to purchase Common Shares or any other securities of the Company that are substantially similar to Common Shares, (ii) file or cause to be declared effective a registration statement under the 1933 Act, or to file a prospectus under the Canadian Securities Laws, relating to the offer and sale of any Common Shares or securities convertible into or exercisable or exchangeable for Common Shares or other rights to purchase Common Shares or any other securities of the Company that are substantially similar to Common Shares, (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares or any securities convertible into or exercisable or exchangeable for Common 16 Shares, or warrants or other rights to purchase Common Shares, whether any such transaction is to be settled by delivery of Common Shares or such other securities, in cash or otherwise, or (iv) publicly announce an intention to effect any transaction specified in clause (i), (ii) or (iii) except for (A) the registration of the Shares under the 1933 Act, the filing of one or more prospectuses under the Canadian Securities Laws relating to the sale of the Shares and the sales of the Shares to the Underwriters pursuant to this Agreement, (B) issuances of Common Shares upon the exercise of options or warrants or rights of any person to acquire or obligation of the Company to issue any securities disclosed as outstanding or existing in the Registration Statement and the Prospectuses, and (C) the issuance of employee stock options not exercisable during the Lock-Up Period pursuant to stock option plans described in the Registration Statement and the Prospectuses; provided, however, if (1) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the 90-day restricted period and ends on the last day of the 90-day restricted period, the Company issues a earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90 -day period, the restrictions imposed by this section shall continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the issuance of the earnings release or the material news or material event occurs; (o) to use its reasonable best efforts to cause the Common Shares to be listed for quotation on Nasdaq; (p) to maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Shares. 5. Reimbursement of Underwriters' Expenses. If the Shares are not delivered for any reason other than the termination of this Agreement pursuant clauses (y)(i), (y)(iii), (y)(iv), (y)(v) or (z) of Section 7 of this Agreement or pursuant to the fifth paragraph of Section 8 hereof or the default by one or more of the Underwriters in its or their respective obligations hereunder, the Company shall, in addition to paying the amounts described in Section 4(l) hereof, reimburse the Underwriters for all of their out of pocket expenses, including the reasonable fees and disbursements of their counsel. 6. Conditions of Underwriters' Obligations. The several obligations of the Underwriters hereunder are subject to the accuracy of the representations and warranties on the part of the Company on the date hereof, at the Time of Purchase and, if applicable, at any Additional Time of Purchase, the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) You shall have received at the Time of Purchase and at any Additional Time of Purchase the opinion of Davies Ward Phillips & Vineberg LLP (with the opinion with respect to matters of U.S. law to be given by Davies Ward Phillips & Vineberg (New York)), counsel for the Company, addressed to the Underwriters and dated the Time of Purchase or such Additional Time of Purchase, as the case may be, with reproduced copies for each of the other Underwriters, in form and substance reasonably satisfactory to UBS Securities, in substantially the form of, and no less favorable to the Underwriters than, Annex A. (b) You shall have received at the Time of Purchase and at any Additional Time of Purchase the opinion of Burki Rechtsanwalte, special Swiss counsel to the Company, addressed to the Underwriters and dated the Time of Purchase or such Additional Time of Purchase, as the case may be, with reproduced copies for each of the other Underwriters, in form and substance 17 satisfactory to UBS Securities, in substantially the form of, and no less favorable to the Underwriters than, Annex B. (c) You shall have received at the Time of Purchase and at any Additional Time of Purchase the opinion of Loyens Winandy, special Luxembourg counsel to the Company, addressed to the Underwriters and dated the Time of Purchase or such Additional Time of Purchase, as the case may be, with reproduced copies for each of the other Underwriters, in form and substance satisfactory to UBS Securities, in substantially the form of, and no less favorable to the Underwriters than, Annex C. (d) You shall have received at the Time of Purchase and at any Additional Time of Purchase the opinion of Lahive & Cockfield LLP, counsel to the Company with respect to patents and proprietary rights, addressed to the Underwriters and dated the Time of Purchase or such Additional Time of Purchase, as the case may be, with reproduced copies for each of the other Underwriters, in form and substance satisfactory to UBS Securities, in substantially the form of, and no less favorable to the Underwriters than, Annex D. (e) You shall have received at the Time of Purchase and at any Additional Time of Purchase the opinions of Dewey Ballantine LLP, U.S. counsel for the Underwriters, and Ogilvy Renault, Canadian counsel for the Underwriters, dated the Time of Purchase or such Additional Time of Purchase, as the case may be, with reproduced copies for each of the other Underwriters, in form satisfactory to UBS Securities, with respect to the issuance and sale of the Shares by the Company, the Registration Statement, the Prospectuses and such other related matters as the Underwriters may require. (f) You shall have received from KPMG LLP letters dated, respectively, the date of this Agreement, the Time of Purchase and, if applicable, the Additional Time of Purchase, and addressed to the Underwriters (with reproduced copies for each of the Underwriters) in the forms heretofore approved by UBS Securities, including with respect to the French translation of the financial statements and other financial data derived therefrom contained and incorporated by reference in the Registration Statement and Prospectuses (the "Excluded Information"). (g) No amendment or supplement to the Registration Statement or the Prospectuses, including documents deemed to be incorporated by reference therein, shall have been filed to which you object in writing. (h) The U.S. Prospectus shall have been filed with the Commission in the manner and within the time period required by the 1933 Act. (i) The Canadian Prospectus shall have been filed with the Canadian Securities Commission and a receipt obtained therefor. (j) Prior to the Time of Purchase, and, if applicable, the Additional Time of Purchase, (i) no stop order with respect to the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings initiated under Section 8(d) or 8(e) of the 1933 Act; (ii) no cease order with respect to the Canadian Prospectus shall have been issued by the Canadian Commissions; (iii) the Registration Statement and all amendments thereto shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) the Prospectuses shall not contain an untrue statement of a material fact or omit to state a material fact required to 18 be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading. (k) Between the time of execution of this Agreement and the Time of Purchase or the Additional Time of Purchase, as the case may be, no material adverse change or any development involving a prospective material adverse change in the business, properties, management, financial condition or results of operations of the Company and the Subsidiaries taken as a whole shall occur or become known. (l) The Company will, at the Time of Purchase and, if applicable, at the Additional Time of Purchase, deliver to you a certificate of its Chief Executive Officer and its Chief Financial Officer in the form attached as Exhibit B hereto. (m) You shall have received signed Lock-up Agreements as contemplated by Section 3(s) hereof. (n) The Company shall have furnished to you such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement and the Prospectuses as of the Time of Purchase and, if applicable, the Additional Time of Purchase, as you may reasonably request. (o) The Shares shall have been approved for listing on the TSX and for quotation on Nasdaq, subject, in the case of the TSX, to the fulfillment of the usual post-closing requirements and, in the case of Nasdaq, to notice of issuance at or prior to the Time of Purchase or any Additional Time of Purchase. 7. Effective Date of Agreement; Termination. This Agreement shall become effective when the parties hereto have executed and delivered this Agreement. The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of UBS Securities or any group of Underwriters (which may include UBS Securities) which has agreed to purchase in the aggregate at least 50% of the Firm Shares, if (x) since the earlier of the time of execution of this Agreement or the respective dates as of which information is given in the Registration Statement and the Prospectuses, there has been any material adverse change or any development involving a prospective material adverse change in the business, properties, management, financial condition or results of operations of the Company and the Subsidiaries taken as a whole, which would, in the judgment of UBS Securities or of such group of Underwriters, make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Registration Statement and the Prospectuses, or (y) since the time of the execution of this Agreement, there shall have occurred: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange, the American Stock Exchange, Nasdaq or the TSX; (ii) a suspension or material limitation in trading in the Company's securities on Nasdaq; (iii) a general moratorium on commercial banking activities declared either by United States, New York State, Canadian or Quebec authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States or Canada; (iv) an outbreak or escalation of hostilities or acts of terrorism involving the United States or Canada or a declaration by the United States or Canada of a national emergency or war; or (v) any other calamity or crisis or any change in financial, political or economic conditions in the United States or Canada or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of UBS Securities or of such group of Underwriters makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Registration Statement and the Prospectuses, or (z) since the time 19 of execution of this Agreement, there shall have occurred any downgrading, or any notice or announcement shall have been given or made of (i) any intended or potential downgrading or (ii) any watch, review or possible change that does not indicate an affirmation or improvement in the rating, if any, accorded any securities of or guaranteed by the Company or any Subsidiary by any "nationally recognized statistical rating organization," as that term is defined in Rule 436(g)(2) under the Act. If UBS Securities or any group of Underwriters elects to terminate this Agreement as provided in this Section 7, the Company and each other Underwriter shall be notified promptly in writing. If the sale to the Underwriters of the Shares, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement or if such sale is not carried out because the Company shall be unable to comply with any of the terms of this Agreement, the Company shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 4(l), 5 and 9 hereof), and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the extent provided in Section 9 hereof) or to one another hereunder. Except as specifically set forth in this Agreement, the Company shall not be liable for any of the fees or disbursements of counsel to the Underwriters and shall not be liable for any out of pocket or other expenses of the Underwriters whatsoever. 8. Increase in Underwriters' Commitments. Subject to Sections 6 and 7 hereof, if any Underwriter shall default in its obligation to take up and pay for the Firm Shares to be purchased by it hereunder (otherwise than for a failure of a condition set forth in Section 6 hereof or a reason sufficient to justify the termination of this Agreement under the provisions of Section 7 hereof) and if the number of Firm Shares which all Underwriters so defaulting shall have agreed but failed to take up and pay for does not exceed 10% of the total number of Firm Shares, the non defaulting Underwriters shall take up and pay for (in addition to the aggregate number of Firm Shares they are obligated to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be purchased by all such defaulting Underwriters, as hereinafter provided. Such Shares shall be taken up and paid for by such non-defaulting Underwriters in such amount or amounts as you may designate with the consent of each Underwriter so designated or, in the event no such designation is made, such Shares shall be taken up and paid for by all non-defaulting Underwriters pro rata in proportion to the aggregate number of Firm Shares set opposite the names of such non-defaulting Underwriters in Schedule A. Without relieving any defaulting Underwriter from its obligations hereunder, the Company agrees with the non-defaulting Underwriters that it will not sell any Firm Shares hereunder unless all of the Firm Shares are purchased by the Underwriters (or by substituted Underwriters selected by you with the approval of the Company or selected by the Company with your approval). If a new Underwriter or Underwriters are substituted by the Underwriters or by the Company for a defaulting Underwriter or Underwriters in accordance with the foregoing provision, the Company or you shall have the right to postpone the Time of Purchase for a period not exceeding five Business Days in order that any necessary changes in the Registration Statement and the Prospectuses and other documents may be effected. The term Underwriter as used in this Agreement shall refer to and include any Underwriter substituted under this Section 8 with like effect as if such substituted Underwriter had originally been named in Schedule A. If the aggregate number of Firm Shares which the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the total number of Firm Shares which all Underwriters agreed to purchase hereunder, and if neither the non-defaulting Underwriters nor the Company shall make arrangements 20 within the five Business Day period stated above for the purchase of all the Firm Shares which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall terminate without further act or deed and without any liability on the part of the Company to any Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company. Nothing in this paragraph, and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 9. Indemnity and Contribution. (a) The Company agrees to indemnify, defend and hold harmless each Underwriter, its affiliates, partners, directors and officers, and any person who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or any such person may incur under the 1933 Act, the 1934 Act, the Canadian Securities Laws, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Company) or in the Prospectuses (the term Prospectuses for the purpose of this Section 9 being deemed to include any Preliminary Prospectus, the Prospectuses and the Prospectuses as amended or supplemented by the Company, as well as any Supplementary Material), or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated in either such Registration Statement or such Prospectuses or necessary to make the statements made therein not misleading, except insofar as any such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Company expressly for use in such Registration Statement or such Prospectuses or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in such Registration Statement or such Prospectuses or necessary to make such information furnished by or on behalf of the Underwriter not misleading, (ii) any untrue statement or alleged untrue statement made by the Company in Section 3 hereof or the failure by the Company to perform when and as required any agreement or covenant contained herein, or (iii) any untrue statement or alleged untrue statement of any material fact contained in any audio or visual materials provided by the Company or based upon written information furnished by or on behalf of the Company including, without limitation, slides, videos, films or tape recordings used in connection with the marketing of the Shares; provided, however, that, solely with -------- regard to clause (i), the foregoing indemnity agreement with respect to any Prospectus or Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting such losses, claims, damages or liabilities purchased Shares, or any person controlling the Underwriter, if sufficient copies of the Prospectus were timely delivered to such Underwriter pursuant to Section 4 hereof and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not given or sent to such person, if required by law to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities. If any action, suit or proceeding (each, a "Proceeding") is brought against an Underwriter or any such person in respect of which indemnity may be sought against the Company pursuant to the foregoing paragraph, such Underwriter or such person shall promptly notify the Company in 21 writing of the institution of such Proceeding and the Company shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided, however, that the omission to so notify the Company shall not relieve the Company from any liability which the Company may have to any Underwriter or any such person or otherwise unless the failure to so notify materially prejudices the Company's ability to defend such action, suit or proceeding. Such Underwriter or such person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or of such person unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such Proceeding or the Company shall not have, within a reasonable period of time in light of the circumstances, employed counsel to have charge of the defense of such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from, additional to or in conflict with those available to the Company (in which case the Company shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties, but the Company may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the Company), in any of which events such fees and expenses shall be borne by the Company and paid as incurred (it being understood, however, that the Company shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing an indemnified party who is a party to such Proceeding). The Company shall not be liable for any settlement of any Proceeding effected without its written consent, but if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless any Underwriter and any such person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 Business Days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have fully reimbursed the indemnified party for such fees and expenses in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days' prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault, culpability or a failure to act, by or on behalf of such indemnified party. (b) Each Underwriter severally agrees to indemnify, defend and hold harmless the Company, its directors and officers, and any person who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, the Company or any such person may incur under the 1933 Act, the 1934 Act, the Canadian Securities Laws, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Company expressly for use in the Registration Statement (or in the Registration Statement as amended by any post effective amendment thereof 22 by the Company) or in a Prospectus, or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in such Registration Statement or such Prospectus or necessary to make such information not misleading. If any Proceeding is brought against the Company or any such person in respect of which indemnity may be sought against any Underwriter pursuant to the foregoing paragraph, the Company or such person shall promptly notify such Underwriter in writing of the institution of such Proceeding and such Underwriter shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided, however, that the omission to so notify such Underwriter shall not relieve such Underwriter from any liability which such Underwriter may have to the Company or any such person or otherwise unless the failure to so notify materially prejudices the Company's ability to defend such action, suit or proceeding. The Company or such person shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company or such person unless the employment of such counsel shall have been authorized in writing by such Underwriter in connection with the defense of such Proceeding or such Underwriter shall not have, within a reasonable period of time in light of the circumstances, employed counsel to defend such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to or in conflict with those available to such Underwriter (in which case such Underwriter shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties, but such Underwriter may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Underwriter), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being understood, however, that such Underwriter shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing an indemnified party who is a party to such Proceeding). No Underwriter shall be liable for any settlement of any such Proceeding effected without the written consent of such Underwriter but if settled with the written consent of such Underwriter, such Underwriter agrees to indemnify and hold harmless the Company and any such person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 Business Days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days' prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding. (c) If the indemnification provided for in this Section 9 is unavailable to an indemnified party under subsections (a) and (b) of this Section 9 or insufficient to hold an indemnified party harmless in respect of any losses, damages, expenses, liabilities or claims referred to therein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, damages, expenses, liabilities or 23 claims (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, damages, expenses, liabilities or claims, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, bear to the aggregate public offering price of the Shares. The relative fault of the Company on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, damages, expenses, liabilities and claims referred to in this subsection shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any Proceeding. (d) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (c) above. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by such Underwriter and distributed to the public were offered to the public exceeds the amount of any damage which such Underwriter has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint. (e) The indemnity and contribution agreements contained in this Section 9 and the covenants, warranties and representations of the Company contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, its affiliates, partners, directors or officers or any person (including each partner, officer or director of such person) who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, or by or on behalf of the Company, its directors or officers or any person who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and shall survive any termination of this Agreement or the issuance and delivery of the Shares. The Company and each Underwriter agree promptly to notify each other of the commencement of any Proceeding against it and, in the case of the Company, against any of the Company's officers or directors in connection with the issuance and sale of the Shares, or in connection with the Registration Statement or the Prospectuses. 10. Information Furnished by the Underwriters. The statements set forth in the [last two paragraphs on the cover page of the Canadian Prospectus, the statements set forth in the last paragraph on the cover page of the U.S. Prospectus and the statements set forth in the tenth, eleventh, 24 twelfth and fourteenth paragraphs] under the caption "Underwriting" in the Prospectuses constitute the only information furnished by or on behalf of the Underwriters as such information is referred to in Sections 3 and 9 hereof. 11. Notices. Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the Underwriters, shall be sufficient in all respects if delivered or sent to UBS Securities LLC, 299 Park Avenue, New York, N.Y. 10171-0026, Attention: Syndicate Department and, if to the Company, shall be sufficient in all respects if delivered or sent to the Company at the offices of the Company at 275 Armand-Frappier Boulevard, Laval, Quebec H7V 4A7 Canada, Attention: General Counsel. 12. Governing Law; Construction. This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement ("Claim"), directly or indirectly, shall be governed by, and construed in accordance with, the laws of the State of New York. The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement. 13. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and the Company consents to the jurisdiction of such courts and personal service with respect thereto. The Company hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by any third party against UBS Securities or any indemnified party. Each of UBS Securities and the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment. The Company has filed with the Commission a Form F-X appointing CT Corporation System, 111 Eighth Avenue, New York, NY 10011 (212) 894-8400 as its agent to accept and acknowledge on its behalf service of any and all process which may be served in any action, proceeding or counterclaim in any way relating to or arising out of this Agreement. 14. Judgment Currency. The Company hereby covenants and agrees that the following provisions shall apply to conversion of currency in the case of this Agreement: (a) If for the purpose of obtaining judgment in, or enforcing the judgment of, any court in any country other than the United States, it becomes necessary to convert into any other currency (the "judgment currency") an amount due in United States Dollars, then the conversion shall be made at the rate of exchange prevailing on the Business Day before the date which judgment is given or the order of enforcement is made, as the case may be. The term "rate(s) of exchange" shall mean the rate at which the Underwriters are able or would have been able on the relevant date to purchase at such money center bank in the City of New York as you designate at such time, United States Dollars with judgment currency above and includes any premiums and costs of exchange payable. (b) The Company hereby agrees to indemnify the Underwriters and each other party related to the Underwriters for which indemnification is contemplated pursuant to Section 9 hereof against any loss incurred by any of them as a result of any judgment or order being given 25 or made for any amount due under this Agreement and such judgment or order being expressed and paid in the judgment currency and as a result of any variation as between (i) the rate of exchange at which the United States Dollar amount is converted into the judgment currency for the purpose of such judgment or order and (ii) the spot rate of exchange in the City of New York at which the Company on the date of payment of judgment or order is able to purchase United States Dollars with the amount of the judgment currency actually paid by the Company. The foregoing indemnity shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States Dollars. (c) All calculations under this Agreement based on amounts which are initially in Canadian Dollars will be converted into United States Dollars based on the rate of exchange in effect on the date of calculation and vice versa. 15. Parties at Interest. The Agreement herein set forth has been and is made solely for the benefit of the Underwriters and the Company and to the extent provided in Section 9 hereof the controlling persons, affiliates, partners, directors and officers referred to in such section, and their respective successors, assigns, heirs, personal representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement. 16. Counterparts. This Agreement may be signed by the parties in one or more counterparts which together shall constitute one and the same agreement among the parties. 17. Successors and Assigns. This Agreement shall be binding upon the Underwriters and the Company and their successors and assigns and any successor or assign of any substantial portion of the Company's and any of the Underwriters' respective businesses and/or assets. 18. Miscellaneous. UBS Securities, an indirect, wholly owned subsidiary of UBS AG, is not a bank and is separate from any affiliated bank, including any U.S. branch or agency of UBS AG. Because UBS Securities is a separately incorporated entity, it is solely responsible for its own contractual obligations and commitments, including obligations with respect to sales and purchases of securities. Securities sold, offered or recommended by UBS Securities are not deposits, are not insured by the Federal Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are not otherwise an obligation or responsibility of a branch or agency. 26 If the foregoing correctly sets forth the understanding between the Company and the several Underwriters, please so indicate in the space provided below for that purpose, whereupon this agreement and your acceptance shall constitute a binding agreement between the Company and the Underwriters, severally. Very truly yours, NEUROCHEM INC. By: -------------------------------------- Name: Title: Accepted and agreed to as of the date first above written, on behalf of themselves and the other several Underwriters named in Schedule A UBS SECURITIES LLC CIBC WORLD MARKETS CORP. PIPER JAFFRAY & CO. DESJARDINS SECURITIES INC. WELLS FARGO SECURITIES, LLC BMO NESBITT BURNS INC. FORTIS SECURITIES LLC By: UBS SECURITIES LLC By: -------------------------------------- Name: Title: By: --------------------------------------- Name: Title: 27 SCHEDULE A
Number of Underwriter Firm Shares - ----------- ----------- UBS Securities LLC....................................... CIBC World Markets Corp. ................................ Piper Jaffray & Co....................................... Desjardins Securities Inc. .............................. Wells Fargo Securities, LLC.............................. BMO Nesbitt Burns Inc.................................... Fortis Securities LLC.................................... Total............................................... 4,000,000 =========
SCHEDULE B Subsidiaries
Name Jurisdiction of Organization - ---- ---------------------------- Neurochem (International) Limited Switzerland Neurochem Holdings Limited Switzerland Neurochem Luxco I S.A.R.L. Luxembourg Neurochem Luxco II S.A.R.L. Luxembourg Neurochem Luxco I S.C.S. Luxembourg Neurochem U.S. L.L.C. Delaware
ANNEX A Opinion of Davies Ward Phillips & Vineberg LLP ---------------------------------------------- 1. The Company is validly existing as a corporation under the CBCA. The Company has all the requisite corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and the Prospectuses, to execute and deliver this Agreement and to issue, sell and deliver the Shares as contemplated herein. 2. This Agreement has been duly authorized, executed and delivered by the Company. 3. The Shares have been duly authorized and validly issued and are fully paid and non-assessable. 4. The Company has an authorized and outstanding capitalization as set forth in the Registration Statement and the Prospectuses; all of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are free of preemptive rights pursuant to the CBCA and, to such counsel's knowledge, contractual preemptive rights, resale rights, rights of first refusal and similar rights. The Shares are free of statutory preemptive rights and, to such counsel's knowledge, contractual preemptive rights, resale rights, rights of first refusal and similar rights, other than those which have been waived or in respect of which the holders of such rights have confirmed that such rights are not applicable in connection with the transactions contemplated by this Agreement. 5. The certificates for the Shares conform in all material respects to the requirements of the CBCA and the TSX, and the holders of the Shares will not be subject to personal liability solely by reason of being such holders. 6. The capital stock of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Registration Statement and the Prospectuses. 7. Except as have been obtained or made under Canadian Securities Laws and U.S. securities legislation and except for those filings with, and those approvals of, the NASD and such as may be required under U.S. state or blue sky laws, as to which we express no opinion, no approval, authorization, consent or order of or filing with any federal, provincial, state or local governmental or regulatory commission, board, body, authority or agency is required in connection with the execution and delivery by the Company of this Agreement, the issuance and sale of the Shares and consummation by the Company of the other transactions contemplated hereby. 8. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares by the Company and the consummation by the Company of the other transactions contemplated hereby do not and will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under) (a) the articles of incorporation or by-laws of the Company, (b) any of the following agreements: (i) License Agreement, dated January 1, 1994, between the Corporation and Parteq Research and Development Innovations; (ii) License Agreement, dated January 1, 1999, between the Corporation and Parteq Research and Development Innovations; Annex A - 1 (iii) License Agreement, dated May 7, 2003, between 4126335 Canada Inc. and the Corporation; (iv) Management Services Agreement, dated March 1, 2003, between Picchio International Inc. and the Corporation and Amending Agreement between such parties dated as of December 1, 2004; (v) Research Agreement, dated December 10, 1999, between the Technology Partnerships Canada and the Corporation; (vi) Collaboration and Distribution Agreement by and between Neurochem (International) Limited and Centocor, Inc. dated as of December 21, 2004; (vii) Exclusive License Agreement between PRAECIS PHARMACEUTICALS INCORPORATED and Neurochem (International) Limited dated as of January 16, 2004; (viii) Research Collaboration Agreement between the National Research Council of Canada and the Corporation dated as of December 19, 2003; and (ix) Offer of Financing from National Bank of Canada to the Corporation dated July 5, 2004 and accepted by the Corporation on July 6, 2004. (c) any Canadian federal or Quebec law, regulation or rule or U.S. federal, state or local law, regulation or rule, or (d) any decree, judgment or order applicable to the Company or any of the Subsidiaries and known to such counsel. 9. Except as set forth in the Registration Statement or Prospectuses, to such counsel's knowledge, there are no actions, suits, claims, investigations or proceedings pending, or threatened in writing to which the Company or any of the Subsidiaries or any of their respective directors or officers is or (if threatened) would be a party or to which any of their respective properties is or (if threatened) would be subject, before or by any federal, provincial, state, local or foreign governmental or regulatory commission, board, body, authority or agency which are required to be described in the Prospectuses under Canadian Securities Legislation but are not so described. 10. The Company is not and will not, as a result of the offering and sale of the Shares, be (i) required to register as an "investment company" or (ii) "controlled" by an entity required to be registered as an "investment company," as such terms are defined in the Investment Company Act. 11. Except as described in the Registration Statement or the Prospectuses, to such counsel's knowledge, no person has the right, pursuant to the terms of any contract, agreement or other instrument, to cause the Company to register under the 1933 Act or the Quebec Securities Laws any Common Shares or shares of any other share capital or other equity interest of the Company, or to include any such shares or interest in the Registration Statement, the Prospectuses or the offering contemplated thereby, except such rights which have been waived by the holders thereof or in respect of which the holders of such rights have confirmed that such rights are not applicable in connection with the transactions contemplated by this Agreement. 12. The statements set forth in the Registration Statement or the Prospectuses under the headings "Certain income tax considerations," "Enforcement of civil liabilities" and "Eligibility for investment," insofar as they purport to constitute a summary of the terms of documents, contracts or laws, constitute a fair and complete summary in all material respects. Annex A - 2 13. The TSX has conditionally approved the listing of the Shares, subject to customary listing conditions, and Nasdaq has approved, subject to customary conditions, the Shares for quotation, subject only to notice of issuance at or prior to the Time of Purchase or the Additional Time of Purchase, as the case may be. 14. The Registration Statement and the U.S. Prospectus (except for the financial statements and the notes thereto and the financial data derived therefrom included in the Registration Statement or the U.S. Prospectus, as to which such counsel need express no opinion) and the Form F-X comply as to form in all material respects with the requirements of the 1933 Act. 15. The Registration Statement has become effective under the 1933 Act, and to such counsel's knowledge no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings therefor have been initiated or threatened by the Commission; the Form F-X was filed with the SEC prior to the effectiveness of the Registration Statement; and any required filing of the U.S. Prospectus under the 1933 Act has been made in the manner and within the time period required. 16. All documents have been filed, all requisite proceedings have been taken and all approvals, permits, consents and authorizations of the Canadian Commissions have been obtained by the Company under Canadian Securities Laws to qualify the distribution of the Shares in the Provinces through investment dealers or brokers registered under the applicable laws of the relevant Province who have complied with the relevant provisions of such applicable laws. 17. The Canadian Prospectus (excluding the Excluded Information, as to which such counsel need express no opinion) complies as to form in all material respects with the requirements of Canadian Securities Laws, provided that such counsel need express no opinion as to the full, true or plain nature of the disclosure therein contained or as to whether such disclosure contains any misrepresentation (within the meaning of that term under Canadian Securities Laws). 18. The Canadian Prospectus in the French language is in all material respects a complete and proper translation of the Canadian Prospectus in the English language, exclusive of the Excluded Information as to which such counsel need express no opinion. 19. All laws in the Province of Quebec relating to the use of the French language (other than those relating to verbal communications and to which counsel will not be required to opine) will have been complied with in respect of the documents to be delivered to purchasers in such Province in connection with the sale of the Shares, when issued, to purchasers in the Province if such purchasers receive a copy of the Canadian Prospectus and forms of order and confirmation in the French language only, provided that the Canadian Prospectus in the English language and forms of order and confirmation in the English language may be delivered without delivery of the French language versions thereof to physical persons in the Province who have expressly requested them in writing. 20. Each of the Canadian Preliminary Prospectus and the Canadian Prospectus has been duly approved and executed by and on behalf of the Company, and all necessary corporate action has been taken by the Company to authorize the filing thereof with the Canadian Commissions. 21. A court of competent jurisdiction in the Province of Quebec (a "Quebec Court") would uphold the choice of the law of the State of New York ("New York law") as the proper law governing this Agreement and, subject to this paragraph 22, would apply the internal laws of the State of New York, to the extent specifically pleaded and proven, as a question of fact in any action seeking to enforce this Agreement. In the event that enforcement of this Agreement is sought in the Province of Quebec Annex A - 3 based on New York law, a Quebec Court would recognize the choice of New York law (other than for matters of procedure or laws in force in Quebec which are of mandatory application by reason of their particular object, with respect to which the laws of the Province of Quebec will be applicable), and, upon adducing appropriate evidence to establish such law, New York law would be applied by a Quebec Court, provided that (a) none of the provisions of this Agreement, including but not limited to the indemnification provisions of this Agreement or of applicable New York law, are determined to be inconsistent with public order as that term is understood in international relations, (b) a Quebec Court would retain discretion to decline to hear such action if, on application by a party, (i) another action between the same parties, based on the same facts and having the same object, is properly pending before a foreign court or a decision thereon has already been rendered by a foreign court and such decision meets the requirements for recognition by a Quebec Court, or (ii) it considers that the courts of another jurisdiction are in a better position to decide the issue, (c) the action to enforce this Agreement is commenced within three years from the cause of action, and (d) the provisions of New York law relating to prescription or of a fiscal expropriatory or penal nature would not be applied. 22. Subject to the qualifications contained in paragraphs (a) through (d) below and to the qualification that enforcement in the Province of Quebec of the indemnity provisions set forth in this Agreement may be limited by the laws of the Province of Quebec, such counsel are not aware of any reason under the current laws of the Province of Quebec for a Quebec Court to refuse recognition and enforcement of a judgment of a federal or state court of the United States of America having jurisdiction in the State of New York (a "New York Court") enforcing the performance of this Agreement or for refusing to enforce the choice of law provisions thereof upon the grounds that the outcome of such a judgment is or would be inconsistent with public order as understood in international relations. a. A judgment obtained in the State of New York of a New York Court arising out of or in relation to the obligations under this Agreement for a sum of money assessed as damages would be recognized by a Quebec Court and would be enforceable in Quebec (other than in respect of punitive or exemplary damages in connection with which such counsel express no opinion) unless (i) the New York Court which rendered the decision had no jurisdiction according to the laws of the Province of Quebec; (ii) the decision was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the decision not final or enforceable under New York law) or not final or enforceable under New York law; (iii) the decision was rendered in contravention of fundamental principles of procedure (i.e., notice of fair hearing, the right to be heard or the right to independent and impartial tribunal, rules against bias, among others); (iv) a dispute between the same parties, based on the same facts and having the same object has given rise to a decision rendered in Quebec or has been decided in a third country and the decision meets the necessary conditions for recognition in Quebec; (v) the outcome of the decision of the New York Court was manifestly inconsistent with public order as understood in international relations; (vi) the decision enforces obligations arising from the taxation or other public laws of a foreign country unless there is reciprocity between such foreign country and the Province of Quebec; (vii) such judgment was obtained contrary to an order made by the Attorney General of Canada under the Foreign Extraterritorial Measures Act (Canada) or in contravention of provisions contained in and orders made pursuant to the Competition Act (Canada); or (viii) the motion for recognition and declaration for enforcement of such judgment in the Province of Quebec has not been commenced within three years of such judgment. If any such motion for recognition and enforcement is brought before a Quebec Court, such court may only consider whether the conditions of Quebec law for the recognition and enforcement of judgments were met and may not consider the merits of the judgment. Annex A - 4 b. A decision rendered by default by any New York Court may not be recognized and enforced in Quebec unless it is established that the act of procedure initiating the proceedings was duly served on the defaulting party in accordance with New York law, subject to the ability of the defaulting party to establish that it was unable to learn of the act of procedure initiating the proceedings or that it was not given sufficient time to offer its defense. c. Damages awarded in a currency other than Canadian currency will be converted by the Quebec Court into Canadian currency at the rate of exchange prevailing on the date the judgment became enforceable at the place where it was rendered. The determination of interest payable under a foreign decision (in relation to the laws of the Province of Quebec) is governed by the law of the authority that rendered the decision until its conversion. d. In an action on a final and conclusive judgment in personam of a New York Court which is not impeachable as void or voidable under New York law, a Quebec Court would not refuse to recognize the jurisdiction of the court rendering such judgement on the basis of process having been served on the defaulting party's U.S. agent for service, provided such party has validly authorized the appointment of its U.S. agent for service as its authorized agent for the purpose of this Agreement. 23. The Shares are, as of the date hereof, qualified investments under the Income Tax Act (Canada) and the regulations thereunder for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and registered education savings plans and are not "foreign property" for the purposes of part XI of such Act. 24. Neurochem (International) Limited has filed the required declarations under An Act respecting the legal publicity of sole proprietorships, partnerships and legal persons (Quebec) to carry on its business in the Province of Quebec as presently proposed to be conducted. 25. The Neurochem U.S. L.L.C. (the "LLC") is validly existing as a limited liability company in good standing under the laws of Delaware, with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectuses. 26. All of the outstanding limited liability company interests (which are in the form of common shares) of the LLC have been duly authorized and validly issued, and are owned of record by the Company. 27. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares by the Company and the consummation by the Company of the transactions contemplated thereby, do not and will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under) the Certificate of Formation or the Operating Agreement of the LLC. In addition, such counsel shall state that, in the course of the preparation of the Registration Statement and the Prospectuses, such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company and representatives of the Underwriters at which the contents of the Registration Statement and the Prospectuses were discussed and, although such counsel has not independently verified and is not passing upon and does not assume responsibility for the accuracy, completeness or fairness of the statements contained in the Prospectuses (except as and to the extent stated in subparagraphs (4), (6) and (12) above), on the basis of the foregoing nothing has come to the attention of such counsel that causes them to believe that the Registration Statement, at the time it became effective, contained an untrue statement of a Annex A - 5 material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein not misleading, or that the Prospectuses, as of the date of the Prospectuses and as of the date of such opinion, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial data derived therefrom included in the Registration Statement and the Prospectuses). Annex A - 6 ANNEX B Opinion of Burki Rechtsanwalte ------------------------------ 1. Each of Neurochem (International) Limited and Neurochem Holdings Limited (the "Swiss Subsidiaries") has been duly organized and is validly existing as a corporation (or, in the case of the LP, as a limited partnership) in good standing under the laws of Switzerland, with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectuses. 2. All of the outstanding shares of capital stock or other equity interests of each of the Swiss Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable. The outstanding shares of capital stock or other equity interests of Neurochem Holdings Limited are held by Neurochem Luxco II S.A.R.L. and the outstanding shares of capital stock or other equity interests of Neurochem (international) Limited are held by Neurochem Holdings Limited. To such counsel's knowledge, no third party has any encumbrance or adverse claim on the outstanding shares of stock or other equity interests (if any) of each of the Swiss Subsidiaries. To such counsel's knowledge, no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligation into shares of capital stock or other equity interests in the Subsidiaries are outstanding (other than to other entities wholly-owned, directly or indirectly by the Company. 3. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under) (a) the articles of association of either of the Swiss Subsidiaries or (b) Swiss law. 4. To such counsel's knowledge, neither of the Swiss Subsidiaries is in breach or violation of or in default under (nor has any event occurred which with notice, lapse of time, or both would result in any breach or violation of, or constitute a default under or give the holder of any indebtedness (or a person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (a) its respective articles of association or (b) Swiss law; and 5. To such counsel's knowledge, there are no actions, suits, claims, investigations or proceedings pending, threatened or contemplated to which any of the Swiss Subsidiaries or any of their respective directors or officers is or would be a party or to which any of their respective properties is or would be subject at law, before or by any Swiss federal or cantonical governmental or regulatory commission, board, body, authority or agency. Annex B - 1 ANNEX C Opinion of Loyens Winandy ------------------------- 1. Each of Neurochem Luxco I S.A.R.L., Neurochem Luxco II S.A.R.L. and the LP (the "Luxembourg Subsidiaries") has been duly organized and is validly existing as a corporation (or, in the case of LP, as a limited partnership) under the laws of its jurisdiction of organization, with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectuses. 2. All of the outstanding shares of capital stock or other equity interests of each of the Luxembourg Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, either directly or indirectly through one or more Subsidiaries, in each case subject to no security interest, other encumbrance or adverse claim. To such counsel's knowledge after due inquiry, no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligation into shares of capital stock or other equity interests in the Subsidiaries are outstanding. 3. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would result in any breach or violation of or constitute a default under) (a) the articles of incorporation, by-laws or other organizational documents of any of the Luxembourg Subsidiaries, (b) applicable Luxembourg law or (c) any decree, judgment or order applicable to any of the Luxembourg Subsidiaries. Annex C - 1 ANNEX D Opinion of Lahive & Cockfield LLP --------------------------------- 1. To such counsel's knowledge, the statements (i) in the Registration Statement and Prospectuses under the captions "Risk Factors -- We may not obtain adequate protection for our products through our intellectual property," "Risk Factors -- We may infringe the intellectual property rights of others" and "Business -- Intellectual Property" and (ii) in the Company's Annual Report on Form 40-F under the caption "H-Intellectual Property", which is incorporated by reference in the Registration Statement and Prospectus, are accurate and complete statements or summaries of the matters therein set forth and handled by them as set forth in the attached Patent Schedule. Nothing has come to their attention that causes them to believe that the above-described portions of the Registration Statement at the time such Registration Statement became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectuses or any supplements thereto, at the date of such Prospectuses or such supplements and at the Time of Purchase or the Additional Time of Purchase, as the case may be, contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made, not misleading. 2. To such counsel's knowledge, except as described in the Registration Statement and Prospectuses, (a) there are no legal or governmental proceedings pending relating to patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of the Company, other than Patent and Trademark Office review of pending applications for patents, copyrights and trademarks and (b) no such proceeding are threatened or contemplated by governmental authorities or others. 3. Such counsel does not know of any contracts or other documents, relating to the Company's patents (as listed in the Patent Schedule), trade secrets, trademarks, service marks or other proprietary information or materials, of a character required to be described in the Registration Statement or the Prospectuses or to be filed as an exhibit to the Registration Statement which have not been so described or filed. 4. Except as set forth in the Registration Statement or Prospectuses, to their knowledge, (a) the Company is not infringing or otherwise violating, any patents, trade secrets, trademarks, service marks or other proprietary information or materials of others, and (b) there are no infringements by others of any of the Company's patents, trade secrets, trademarks, service marks or other proprietary information or materials which in such counsel's judgment could affect materially the use thereof by the Company. 5. Such counsel have no knowledge of any facts which would preclude the Company from having valid license rights or clear title (either by way of sole or joint ownership) to the patents referenced in the Registration Statement and the Prospectuses. Such counsel have no knowledge that the Company lacks or will be unable to obtain any rights or licenses to use all patents and other material intangible property and assets necessary to conduct the business now conducted or proposed to be conducted by the Company as described in the Registration Statement and the Prospectuses, except as described in the Registration Statement and Prospectuses. Such counsel are unaware of any finding of unenforceability or invalidity of any of the Company's patents and other material intellectual property and assets, except as described in the Registration Statement and Prospectuses. 6. Such counsel are not aware of any material fact with respect to the patent applications of the Company presently on file that (a) would preclude the issuance of patents with respect to such Annex D - 1 applications, or (b) would lead them to conclude that such patents, when issued, would not be valid and enforceable in accordance with applicable regulations. Annex D - 2 EXHIBIT A --------- Neurochem Inc. -------------- Common Shares (Without Nominal or Par Value) [Date] UBS Securities LLC Together with the other Underwriters named on Schedule A to the Underwriting Agreement referred to herein c/o UBS Securities LLC 299 Park Avenue New York, New York 10171 Ladies and Gentlemen: This Lock-Up Letter Agreement is being delivered to you in connection with the proposed Underwriting Agreement (the "Underwriting Agreement") to be entered into by Neurochem Inc. (the "Company") and you and the other Underwriters named in Schedule A to the Underwriting Agreement, with respect to the public offering (the "Offering") of Common Shares, without nominal or par value, of the Company (the "Common Shares"). In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that for a period of 90 days after the date of the Underwriting Agreement relating to the Offering the undersigned will not, without the prior written consent of UBS Securities LLC ("UBS Securities"), (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or participate in the filing of a preliminary or final prospectus with any Canadian securities administrator or a registration statement with the U.S. Securities and Exchange Commission (the "Commission") in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder with respect to, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, or warrants or other rights to purchase Common Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, or warrants or other rights to purchase Common Shares, whether any such transaction is to be settled by delivery of Common Shares or such other securities, in cash or otherwise, or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). The foregoing sentence shall not apply to (a) the registration of or sale to the Underwriters of any Common Shares pursuant to the Offering and the Underwriting Agreement, (b) bona fide gifts, provided the recipient thereof agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Exhibit A - 1 Letter Agreement or (c) dispositions to any trust for the direct or indirect benefit of the undersigned and/or the immediate family of the undersigned, provided that such trust agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Letter Agreement. In addition, if (1) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the 90-day restricted period and ends on the last day of the 90-day restricted period, the Company issues a earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions imposed by this letter shall continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the issuance of the earnings release or the material news or material event occurs. In addition, the undersigned hereby waives any rights the undersigned may have to require registration of Common Shares in connection with the filing of a preliminary or final prospectus or a registration statement relating to the Offering. The undersigned further agrees that, for a period of 90 days after the date of the Underwriting Agreement relating to the Offering, the undersigned will not, without the prior written consent of UBS Securities, make any demand for, or exercise any right with respect to, the registration of Common Shares of the Company or any securities convertible into or exercisable or exchangeable for Common Shares, or warrants or other rights to purchase Common Shares. If (i) the Company notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the Commission with respect to the Offering is withdrawn or (iii) for any reason the Underwriting Agreement shall be terminated prior to the Time of Purchase (as defined in the Underwriting Agreement), this Lock-Up Letter Agreement shall be terminated and the undersigned shall be released from its obligations hereunder. Yours very truly, ________________________________________ Name: Exhibit A - 2 EXHIBIT A-1 ----------- Shareholders to Sign Lock-up Agreements --------------------------------------- P.P. Luxco Holdings II s.a.r.l. Dr. Francesco Bellini, O.C. Dr. Colin B. Bier Mr. Jean-Guy Desjardins Mr. Peter Kruyt Mr. Francois Legault Dr. Frederick H. Lowy Mr. John P. Molloy Mr. Ronald M. Nordmann Mr. Graeme K. Rutledge Dr. Emil Skamene Dr. Andreas Orfanos Mr. Mariano Rodriguez Dr. Philippe Calais Dr. Daniel Delorme Dr. Denis Garceau Dr. Lise Hebert Ms. Christine Lennon Dr. Shona McDiarmid Mr. David Skinner Ms. Judith Paquin Exhibit A - 1 - 1 EXHIBIT B --------- Officers' Certificate --------------------- 1. I have reviewed the Registration Statement and the Prospectuses. 2. The representations and warranties of the Company as set forth in this Agreement are true and correct as of the Time of Purchase and, if applicable, the Additional Time of Purchase. 3. The Company has performed all of its obligations under this Agreement as are to be performed at or before the Time of Purchase and at or before the Additional Time of Purchase, as the case may be. 4. The conditions set forth in paragraphs (j) and (k) of Section 6 of this Agreement have been met. 5. The financial statements and other financial information included in the Registration Statement and the Prospectuses fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in the Registration Statement and the Prospectuses, as the case may be. Exhibit B - 1 EX-4.5 3 m15799a2exv4w5.txt MATERIAL CHANGE REPORT Exhibit 4.5 FORM 51-102F3 MATERIAL CHANGE REPORT ITEM 1 NAME AND ADDRESS OF COMPANY Neurochem Inc. ("Neurochem") 275 Armand-Frappier Blvd. Laval, Quebec H7V 4A7 ITEM 2 DATE OF MATERIAL CHANGE February 23, 2005 ITEM 3 NEWS RELEASE A press release was disseminated by Canada Newswire on February 23, 2005 from Montreal, Quebec. ITEM 4 SUMMARY OF MATERIAL CHANGE Neurochem announced that it has filed a short form preliminary prospectus with the Canadian securities regulators and a registration statement with the U.S. Securities and Exchange Commission in connection with an offering of its common shares (the "Offering"). ITEM 5 FULL DESCRIPTION OF MATERIAL CHANGE The Offering will consist of a new issue of 4,000,000 common shares of Neurochem. UBS Investment Bank will be acting as the sole book running underwriter in this Offering, and CIBC World Markets Inc., Piper Jaffray, BMO Nesbitt Burns Inc., Desjardins Securities Inc., Fortis Securities LLC and Wells Fargo Securities will be acting as co-managers. The net proceeds from the Offering will be used to fund Neurochem's clinical trials of its investigational product candidates, primarily Alzhemed(TM), as well as to further complete pre-clinical and research and development programs and the balance for the marketing of Fibrillex(TM), working capital and general corporate purposes. ITEM 6 RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 This report is not being filed on a confidential basis. ITEM 7 OMITTED INFORMATION N/A ITEM 8 EXECUTIVE OFFICER For further information, please contact Lise Hebert, Vice-President, Corporate Communications, at 450.680.4572. ITEM 9 DATE OF REPORT February 28, 2005 (signed) David Skinner --------------------------------------------- David Skinner General Counsel and Corporate Secretary EX-5 4 m15799a2exv5.txt CONSENT OF KPMG LLP . . . Exhibit 5 [LOGO]
KPMG LLP Chartered Accountants 2000 McGill College Avenue Telephone (514) 840-2100 Suite 1900 Telefax (514) 840-2187 Montreal (Quebec) H3A 3H8 www.kpmg.ca
AUDITORS' CONSENT We have read the short form prospectus dated March 3, 2005 relating to the issue and sale of common shares of Neurochem Inc. (the "Company"). We have compiled with Canadian generally accepted standards for an auditor's involvement with offering documents. We consent to the incorporation be reference in the above-mentioned prospectus of our report to the shareholders of the Company on the consolidated balance sheet of the Company as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for the year ended December 31, 2004, the six-month period ended December 31, 2003, the year ended June 30, 2003 and for the period from inception (June 17, 1993) to December 31, 2004. Our report is dated February 11, 2005 (except as note 22, which is as of February 14, 2005). (signed) KPMG LLP Chartered Accountants Montreal, Canada March 3, 2005 EX-7.1 5 m15799a2exv7w1.txt CONSENT OF DAVIES WARD PHILLIPS & VINEBERG LLP Exhibit 7.1 [LOGO(DAVIES)] DAVIES WARD PHILLIPS & VINEBERG LLP 26th Floor Tel 514 841 6400 1501 McGill College Avenue Fax 514 841 6499 Montreal Canada H3A 3N9 www.dwpv.com March 3, 2005 BY SEDAR British Columbia Securities Commission Alberta Securities Commission Saskatchewan Financial Services Commission, Securities Division The Manitoba Securities Commission Ontario Securities Commission Agence nationale d'encadrement du secteur financier Nova Scotia Securities Commission New Brunswick Securities Commission Prince Edward Island Securities Office Securities Commission of Newfoundland and Labrador (collectively, the "Securities Commissions") SUBJECT: Final short form base PREP prospectus of Neurochem Inc. dated March 3, 2005 ("the Prospectus") This letter is addressed to you in connection with the Prospectus. We hereby consent to the use of our name on the face page of the Prospectus and under the heading "Legal Matters" in the Prospectus and consent to the use of our name and to the reference to our opinion (the "Opinion") under the heading "Eligibility for Investment" in the Prospectus. We have read the Prospectus and we have no reason to believe that there are any misrepresentations in the information contained in the Prospectus that are derived from the Opinion or that is within our knowledge as a result of the services performed by us in connection with the Opinion. This letter is solely for the information of the Securities Commissions and is not to be referred to in whole or in part in the Prospectus or in any other similar document and is not to be relied upon for any other purposes. Yours very truly, (signed) Davies Ward Phillips & Vineberg LLP EX-7.2 6 m15799a2exv7w2.txt CONSENT OF DAVIES WARD PHILLIPS & VINEBERG LLP (NEW YORK) Exhibit 7.2 [LOGO(DAVIES)] DAVIES WARD PHILLIPS & VINEBERG LLP 12th Floor Tel. 212 308 8866 625 Madison Avenue Telec. 212 308 0132 New York, NY USA 10022 www.dwpv.com March 3, 2005 British Columbia Securities Commission Alberta Securities Commission Saskatchewan Financial Services Commission, Securities Division The Manitoba Securities Commission Ontario Securities Commission Autorite des marches financiers Nova Scotia Securities Commission Office of the Administrator - New Brunswick Prince Edward Island Securities Office Securities Commission of Newfoundland & Labrador (collectively, the "SECURITIES COMMISSIONS") SUBJECT: NEUROCHEM INC. Dear Sirs/Mesdames: This letter is addressed to you in connection with the final short form base PREP prospectus (the "PROSPECTUS") of Neurochem Inc. dated March 3, 2005. We hereby consent to the use of our name on the face page of the Prospectus and under the heading "Legal matters" in the Prospectus. We have read the Prospectus and we have no reason to believe that there are any misrepresentations in the information contained in the Prospectus that is within our knowledge as a result of the services we performed. This letter is solely for the information of the Securities Commissions and is not to be referred to in whole or in part in the Prospectus or in any other similar document and is not to be relied upon for any other purposes. Yours truly, (signed) Davies Ward Phillips & Vineberg LLP EX-8 7 m15799a2exv8.txt CONSENT OF OGILVY RENAULT LLP Exhibit 8 [LOGO (OGILVY RENAULT)] Montreal, March 3, 2005 BY SEDAR - -------- British Columbia Securities Commission Alberta Securities Commission Saskatchewan Financial Services Commission, Securities Division The Manitoba Securities Commission Ontario Securities Commission L'Autorite des marches financiers New Brunswick Securities Commission Nova Scotia Securities Commission Prince Edward Island Securities Office Securities Commission of Newfoundland and Labrador Dear Sirs/Mesdames: RE: NEUROCHEM INC. (the "ISSUER") Filing of a Final Short Form Base PREP Prospectus dated March 3, 2005 (the "PROSPECTUS") - -------------------------------------------------------------------------------- Referring to the Prospectus of the Issuer, we hereby consent to the use of our firm name on the face page of the Prospectus and under the heading "Legal Matters" as well as to the reference to our firm name and opinion under the heading "Eligibility for Investment" in the Prospectus. We confirm that we have read the Prospectus and have no reason to believe that there are any misrepresentations in the information contained in the Prospectus: (a) that are derived from our opinions, or (b) that are within our knowledge as a result of the services we performed to render such opinions. This letter is solely for the information of the securities commissions and regulators mentioned above and is not to be referred to in whole or in part in the Prospectus or in any other similar document and should not be relied upon by any other person. Yours truly, (signed) OGILVY RENAULT LLP ________________________________________________________________________________ [OGILVY - ADDRESSES] -----END PRIVACY-ENHANCED MESSAGE-----