-----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, IDU7hlZ/lyyAaPveJaNc+SAnEmTxj4gWD+XJi4dIREcenuiJ6sUgz/B0HHhP3+GM of7hJkyPssksT7GCTeDN1A== 0000909567-05-001082.txt : 20050617 0000909567-05-001082.hdr.sgml : 20050617 20050617145214 ACCESSION NUMBER: 0000909567-05-001082 CONFORMED SUBMISSION TYPE: 20FR12B PUBLIC DOCUMENT COUNT: 35 FILED AS OF DATE: 20050617 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Viventia Biotech Inc. CENTRAL INDEX KEY: 0001316606 IRS NUMBER: 000000000 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20FR12B SEC ACT: 1934 Act SEC FILE NUMBER: 001-32538 FILM NUMBER: 05902784 BUSINESS ADDRESS: STREET 1: 10 FOUR SEASONS PLACE STREET 2: SUITE 501 CITY: TORONTO STATE: A6 ZIP: M9B 6H7 BUSINESS PHONE: 416-291-1277 MAIL ADDRESS: STREET 1: 10 FOUR SEASONS PLACE STREET 2: SUITE 501 CITY: TORONTO STATE: A6 ZIP: M9B 6H7 20FR12B 1 t17062e20fr12b.txt 20FR12B UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 20-F REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number _____ VIVENTIA BIOTECH INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Ontario, Canada (JURISDICTION OF INCORPORATION OR ORGANIZATION) 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada M9B 6H7 (ADDRESSES OF PRINCIPAL EXECUTIVE OFFICES) Securities registered or to be registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH TO BE REGISTERED: Common Shares Without Par Value American Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [ ] No [X] Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 [ ] Item 18 [X] TABLE OF CONTENTS
PAGE FORWARD-LOOKING INFORMATION.......................................................................... 1 TERMS OF REFERENCE................................................................................... 3 PART I............................................................................................... 6 Item 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.................................. 6 Item 2: OFFER STATISTICS AND EXPECTED TIMETABLE................................................ 7 Item 3: KEY INFORMATION........................................................................ 7 Item 4: INFORMATION ON THE CORPORATION......................................................... 25 Item 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................................... 43 Item 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES............................................. 56 Item 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...................................... 66 Item 8: FINANCIAL INFORMATION.................................................................. 69 Item 9: THE OFFER AND LISTING.................................................................. 70 Item 10: ADDITIONAL INFORMATION................................................................. 71 Item 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................. 84 Item 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES................................. 84 PART II.............................................................................................. 85 PART III............................................................................................. 86 Item 13: FINANCIAL STATEMENTS................................................................... 86 Item 14: FINANCIAL STATEMENTS................................................................... 86 Item 15: EXHIBITS............................................................................... 86 EXHIBIT INDEX........................................................................................ 38
FORWARD-LOOKING INFORMATION This registration statement contains forward-looking statements. In some cases, you can identify forward looking statements by words such as "anticipate", "believe", "plan", "estimate", "expect", "predict", "intend", "will", "may", "could", "would", "should" and similar expressions intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect our current views and expectations concerning future results and events. These statements include, without limitation, statements regarding: - the therapeutic potential of Proxinium(TM) for the treatment of head and neck cancer and bladder cancer; - our estimates regarding the progress of clinical and pre-clinical trials for our product candidates; - our estimates regarding our capital requirements and additional financing needs; - our intention to apply to list our common shares on the American Stock Exchange and our estimates regarding the completion of our intended listing; - our estimates of the size of the market for our products and the eventual rate and degree of market acceptance of our products; - the success of our integrated technology platforms in identifying product candidates and reducing development timelines from industry averages; - the success of pre-clinical studies and the receipt of regulatory approvals to commence clinical trials in humans; -i- - our estimates of the aggregate amount of milestone payments we may be required to pay under our license agreements; - our ability to manufacture pre-clinical and clinical batches of our product candidates, and if any of our product candidates are approved for sale, our ability to retain or acquire commercial production capacity; - our ability to enter into strategic partnerships in respect of the commercial development, sales and marketing of our product candidates; - the success of other competing technologies that may become available; and - our ability to raise additional finances. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have included important factors in the cautionary statements included in this registration statement, particularly in the section entitled "Risk Factors", that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. These risks should be carefully considered and readers should not place undue reliance on our forward-looking statements. Like the forward-looking statements we make, statements in this registration statement by third parties that are forward-looking involve assumptions and limitations and you are cautioned not to give undue weight to such third party statements. Our statements of "belief" in respect of our product candidates are based primarily upon our results derived to date from our pre-clinical research and development, our research and development program with animals, and, in the case of our lead product candidate Proxinium(TM) for the treatment of head and neck cancer, our results from our Phase I clinical trials in Russia and our preliminary results from our Phase I clinical trials in Brazil. We believe we have a reasonable scientific basis to expect these particular anticipated results to occur. It is not possible, however, to predict, based upon studies in vitro and animal studies, whether a new therapeutic agent will be proved to be safe and/or effective in humans. We cannot assure you that the particular results expected by us will occur. These forward-looking statements reflect our view only as of the date of this registration statement. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this registration statement, as amended and/or supplemented, or to conform these statements to actual results or to changes in our expectations. You should rely only on the information contained in this registration statement and then only to the extent qualified by the risk factors and other qualifiers contained herein. We have not authorized anyone to provide you with information different from that contained in this registration statement. 2 TERMS OF REFERENCE The information set forth in this registration statement is as of January 1, 2005, unless another date is indicated. All references to dollars are expressed in Canadian funds, unless otherwise indicated. References in this registration statement to "Viventia", "us", "we" or "our" mean Viventia Biotech Inc., unless otherwise specified or the context otherwise requires. References in this registration statement to "United States" or "U.S." means the United States of America. AT A SPECIAL MEETING OF SHAREHOLDERS HELD ON MAY 7, 2004, OUR SHAREHOLDERS APPROVED A SPECIAL RESOLUTION AUTHORIZING THE CONSOLIDATION OF OUR ISSUED AND OUTSTANDING COMMON SHARES ON A TEN (10) OLD FOR ONE (1) NEW COMMON SHARE BASIS. ON MAY 12, 2004, OUR COMMON SHARES BEGAN TRADING ON A CONSOLIDATED BASIS ON THE TSX. UNLESS OTHERWISE INDICATED, AND OTHER THAN IN CERTAIN CASES IN THE DISCLOSURE UNDER THE HEADING "THE OFFER AND LISTING -PRICE HISTORY" AND "ADDITIONAL INFORMATION -SHARE CAPITAL" IN THIS REGISTRATION STATEMENT, ALL REFERENCES IN THIS REGISTRATION STATEMENT TO THE NUMBER OF OUR OUTSTANDING COMMON SHARES, ANY DISCLOSURE THAT IS DEPENDENT ON THE NUMBER OF OUR OUTSTANDING COMMON SHARES, AND REFERENCES TO THE NUMBER OF SECURITIES HELD BY ANY OF OUR SHAREHOLDERS, PRESENT THE INFORMATION IN RESPECT OF OUR COMMON SHARES ON A POST-CONSOLIDATION BASIS. Our trademarks Hybridomics(TM), ImmunoMine(TM), and Armed Antibodies(TM) have been registered in Canada and are pending or have been allowed in the United States. Our trademark UnLock(TM), has been registered in Canada and Germany and the application is pending in the United States. The Viventia logo has been registered in Canada as well as in Australia and Germany and application is pending in the United States. Our trademark Viventia(TM) has been registered in Canada, Australia, the European Union and the United States. We have made an application to register the trademark "Proxinium(TM)" in Canada, the United States and the European Union in respect of our lead product candidate. All other trademarks or service marks appearing in this registration statement are the trademarks or service marks of the entity that owns them. 3 GLOSSARY OF TERMS AND PROPER NAMES This glossary contains general terms used in the discussion of the biopharmaceutical industry, as well as specific technical terms used in the descriptions of our technology and business. antibody A protein molecule produced by B-cells of the immune system in response to a specific target (e.g. an antigen). All antibody molecules share in common the ability to combine with its specific antigen in a lock-and-key fashion. antigen A molecule that elicits an immune B-cell response in the body. The most common antigens are proteins and polysaccharides. B-cells Immune cells that produce antibodies when they are exposed to antigens. biologic Any antibody, protein, virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product or analogous product for prevention, treatment or cure of diseases or injuries of humans, including its use as an aid in the diagnosis of evaluation of susceptibility or immunity. biopharmaceutical A chemical or biological product made by, or with the help of, a living organism, and which affects living processes such as cell growth, metabolism, and division. cancer The uncontrolled growth of cells in the body resulting from multiple errors in the processes controlling cell growth, replication and function. Cancers arise from specific tissues in the body, and often duplicate some of the features of those tissues, but in a disorganized and chaotic manner. cGMP or current good A standard set of operating guidelines under which a manufacturing facility manufacturing practice functions such that every step in the testing and manufacturing process of a drug is documented and monitored. chimeric Comprising of cells of two or more distinct genomes (e.g. mouse and human). clinical trials A carefully designed series of ethical experiments aimed at establishing the safety and efficacy of a drug or other substance designed to treat human disease. A typical therapeutic molecule must pass through three phases of trials prior to receiving regulatory approval Phase I (safety), Phase II (initial efficacy), and Phase III (large-scale efficacy). cytotoxic Detrimental or destructive to cells. fermentation suite A classified clean room within the manufacturing facility where the cell culture system synthesizes a specific antibody or protein. HAMA response or "human Human antibodies produced during an immune response against transplanted anti-mouse antibody" response mouse antibodies, which can lead to the immune rejection of the mouse antibody. human antibody A monoclonal antibody derived from the human immune system. human immune system A network of cells, signal and effector molecules that are primarily responsible for defending the organism against foreign substances (e.g. bacteria, viruses). Theimmune system is capable of recognizing a wide diversity of foreign antigens and possesses memory against specific antigens which it previously has encountered (e.g. vaccination). hybridoma An immortalized cell culture that produces a single antibody (e.g. a monoclonal antibody).
4 immortal cell A cell that can divide in culture indefinitely. immune response The coordinated response of the human immune system to an infection, tumor, or any other signal that triggers it. in vitro In an artificial environment, test tube or culture media. murine Derived from mice. orphan drug status A designation awarded by the FDA to help facilitate the development and marketing of drugs for the treatment of rare diseases or conditions that affect fewer than 200,000 patients in the United States. payload A cancer-killing agent that is attached to a carrier (e.g. antibody). phage display A laboratory or manufacturing technique for production of antibodies by viruses (phage). pharmacokinetic The study of the processes by which a drug is absorbed, distributed, metabolized, and eliminated by the body. pre-clinical studies Studies designed to assess the effectiveness and safety of a new medication in model systems (cells and animals)prior to clinical studies in humans. radioisotope A chemical molecule that spontaneously emits radiation. Radioisotopes can be used in radiation therapy to treat cancer or as tracers in nuclear medicine scans for diagnostics. radiolabelled A radioactive atom or group of atoms attached to a molecule of interest. small molecule Chemical molecules with drug action potential.
5 PART I ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS A. DIRECTORS AND SENIOR MANAGEMENT.
DIRECTORS AND OFFICERS POSITION BUSINESS ADDRESS - ---------------------- --------------------------------- ------------------------------------------ Martin Barkin Director since June 1996 DRAXIS Health Inc. 6870 Goreway Drive, Suite 200 Mississauga, Ontario L4V 1P1 John J. Borer, III Director since June 2000 Rodman & Renshaw LLC 330 Madison Avenue, Suite 200 New York, NY 10017 Michael Byrne Chief Financial Officer and Viventia Biotech Inc. Corporate Secretary 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7 Michael Cross Chief Operating Officer Viventia Biotech Inc. 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7 Leslie L. Dan Chair of the Board of Directors c/o Viventia Biotech Inc. since July 1995 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7 Nick Glover President and Chief Executive Viventia Biotech Inc. Officer, Director since June 2004 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7 Glen MacDonald Vice President, Research Viventia Biotech Inc. 147 Hamelin St. Winnipeg, Manitoba, Canada M9B 6H7 Murray S. Palay Director since August 1997 Quadrant Asset Management 1800-360 Main Street Winnipeg, Manitoba R3C 323 Louis Siminovitch Director since March 2000 University of Toronto 1 King's College Circle Toronto, Ontario M5S 1A1 Mark Wainberg Director since August 1997 McGill University 845 Sherbrooke St. W Montreal, Quebec H3A 2T5
B. ADVISERS. Our principal bankers are Royal Bank of Canada, Life Sciences Health Care Markets, 6880 Financial Drive, Mississauga, Ontario L5N 7Y5. Our legal advisor in Canada and the United States is Torys LLP, of Toronto, Ontario and New York, New York. The registrar and transfer agent for our common shares is Computershare Trust Company of Canada at its principal offices in Toronto, Canada. 6 C. AUDITORS. Our auditors since June 22, 2001 have been Ernst & Young LLP, Ernst & Young Tower, 222 Bay Street, Toronto, Ontario, M5K 1J7. ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3: KEY INFORMATION A. SELECTED FINANCIAL DATA. The selected financial data is derived from the audited annual financial statements for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 and the unaudited financial statements for the periods ended March 31, 2005 and 2004. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles, are in Canadian dollars and are included in this registration statement under Item 18: "Financial Statements".
THREE MONTHS ENDED MARCH 31, 2005 2004 ---------------- ---------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND OUTSTANDING SHARE NUMBERS, UNAUDITED) --------------------------------------------------- Net Loss (5,446) (3,348) Basic and Diluted Loss per Share (0.19) (0.11) Total Assets 7,040 2,722 Net Assets (26,539) (7,818) Capital Stock 73,079 72,488 Bridge Financing Loans(1) 4,600 4,200 Total Long Term Debt (including current portion) 29,186 4,000 Shares outstanding 29,206 29,206
- -------------- NOTE: (1) Subsequent to March 31, 2005 we received two additional bridge financing loans in the aggregate amount of $3,000,000 bearing interest at 4.5% per annum.
YEAR ENDED DECEMBER 31, 2004 2003 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND OUTSTANDING SHARE NUMBERS) Net Loss (17,172) (12,778) (12,269) (14,770) (11,629) Basic and Diluted Loss per Share (0.59) (0.45) (0.62) (0.80) (0.71) Total Assets 6,839 2,739 11,249 7,425 16,136 Net Assets 21,255 (4,484) 3,698 6,076 14,997 Capital Stock 63,262 63,220 60,447 50,556 44,707 Bridge Financing Loans(1) - 1,500 - - - Total Long Term Debt (including current portion) 24,706 4,000 6,000 - - Shares outstanding 29,206 29,186 26,673 19,530 17,739
CANADIAN AND UNITED STATES ACCOUNTING POLICIES DIFFERENCES The financial statements have been prepared in accordance with Canadian GAAP. The principles conform in all material respects with U.S. GAAP except as described in Note 19 to the financial statements contained in this registration statement. For all the years presented, the selected financial data are prepared in accordance with Canadian GAAP. 7 CURRENCY EXCHANGE RATES All references to dollars are expressed in Canadian funds, unless otherwise indicated. On December 31, 2004 the exchange rate for the conversion of U.S. dollars into Canadian dollars was Cdn.$1.00 = U.S.$0.8310 based on the inverse of the noon rates as issued by the Bank of Canada. On May 18, 2005, the exchange rate for the conversion of U.S. dollars into Canadian dollars was Cdn.$1.00 = U.S.$0.7925 based on the inverse of the noon rates as issued by the Bank of Canada. Certain amounts stated in this registration statement reflect this more recent exchange rate. The following tables set forth the high and low rates of exchange of U.S. dollars into Canadian dollars for each month during the previous six months and the average rates for our five most recent fiscal years calculated by using the average of the exchange rates on the last day of each month during the period. These rates are based upon the inverse of the nominal noon exchange rates reported by the Bank of Canada in U.S. dollars.
PERIOD HIGH LOW - ------------- ------ ------ December 2004 0.8354 0.8295 January 2005 0.8369 0.8019 February 2005 0.8131 0.7958 March 2005 0.8320 0.8024 April 2005 0.8288 0.7925 May 2005 0.8083 0.7872
YEAR ENDED AVERAGE RATE - ------------------------- ------------ December 31, 2000 0.6734 December 31, 2001 0.6458 December 31, 2002 0.6368 December 31, 2003 0.7135 December 31, 2004 0.7683
B. CAPITALIZATION AND INDEBTEDNESS. Our authorized capital consists of an unlimited number of preferred shares, issuable in series, and an unlimited number of common shares. As of March 31, 2005, we had 29,206,115 common shares outstanding, each carrying the right to one vote per share at any meeting of our shareholders (other than at meetings at which only holders of another class or series of shares are entitled to vote), which may be given in person or by proxy, and there were no preferred shares outstanding. As of March 31, 2005, there were 1,862,792 options to purchase common shares outstanding, warrants to purchase 11,447,113 common shares outstanding and two secured convertible debentures outstanding. The two convertible debentures are held by the Dan Group and are in the principal amounts of $12,584,143 and $10,562,568, respectively, and these principal amounts are convertible into 8,389,428 and 7,041,713 common shares and common share purchase warrants to purchase another 4,194,714 and 3,520,856 common shares, respectively, at the option of the Dan Group, at any time. Any accrued interest on the convertible debentures will be convertible into units at a conversion price equal to the ten-day weighted average trading price of our common shares on the TSX for the ten consecutive trading days prior to conversion, less the maximum discount permitted by the TSX. As of March 31, 2005, we had $1,433,660 owing to Mr. Leslie Dan as a result of a loan made by Mr. Dan to us to finance capital expenditures made in respect of our Winnipeg facility. During the three months ended March 31, 2005, the Company received three bridge financing loans from Mr. Leslie Dan and an entity controlled by Mr. Dan. On February 17, 2005, the Company received a bridge financing loan in the amount of $500,000, on March 1, 2005, the Company received a bridge financing loan in the amount of $1,500,000, and on March 23, 2005, the company received a bridge financing loan in the amount of $2,600,000. These loans bear interest at 4.5% per annum and are payable upon demand. Subsequent to March 31, 2005, on April 28, 2005 and May 12, 2005 the Company received two bridge financing loans from Mr. Dan and an entity controlled by Mr. Dan in the amount of $1,500,000 each bearing interest at 4.5% per annum and are payable on demand. 8 C. REASONS FOR THE OFFER AND USE OF PROCEEDS. Not applicable. D. RISK FACTORS. An investment in our common shares involves a high degree of risk and should be considered speculative. You should carefully consider the risks and uncertainties described below, as well as other information contained in this registration statement, including under Item 5: "Operating and Financial Review and Prospects" and in our financial statements and accompanying notes, before making any investment. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may turn out to be material and may adversely affect our business. If any of the following risks occur, our business, financial condition, and results of operations could be seriously harmed and you could lose all or part of your investment. Further, if we fail to meet the expectations of the public market in any given period, the market price of our common shares could decline. RISKS RELATED TO OUR FINANCIAL CONDITION WE HAVE A "GOING CONCERN" NOTE IN OUR FINANCIAL STATEMENTS. WE MUST RAISE MONEY FROM INVESTORS TO FUND OUR OPERATIONS. IF WE ARE UNABLE TO FUND OUR OPERATIONS, WE WILL CEASE DOING BUSINESS. There is a "going concern" note in our financial statements. This note means that there is substantial doubt as to whether we can continue as an ongoing business without additional funding. As at March 31, 2005, we had cash reserves, consisting of cash and cash equivalents, of approximately $2,038,000 and a negative net working capital of approximately $6,664,000. In 2004, we incurred a net loss of $17,172,000, and in 2003 we incurred a net loss of $12,778,000. In the first three months of 2005 we incurred a net loss of $5,446,000. Without additional funding, we will have inadequate funds to continue our existing corporate, administrative, and operational functions for the remainder of 2005. We also have commitments under our license agreements to make milestone payments of $257,000 in 2005 and $100,000 in each of 2006 through 2009. We anticipate that we will need to raise approximately $22,500,000 for the remainder of 2005, and we intend to raise the necessary funds in the second quarter of 2005. Since February 17, 2005 we have funded operations by way of three bridge loans from our Chairman and principal shareholder Mr. Leslie Dan and an entity controlled by him. Subsequent to year end we have received three bridge loans in the aggregate amount of $4,600,000. The average monthly amount of cash that we are using, and expect to use over the next 12-18 months for all of our operations, is approximately $2,500,000. For a further discussion of our liquidity and capital resources, you should also refer to Item 5: "Operating and Financial Review and Prospects" in this registration statement. We expect to rely on bridge financing loans, while continuing to seek additional sources of funding to finance operations into the future, through public or private equity or debt financings, collaborative arrangements with pharmaceutical companies and/or from other sources. We cannot assure you that additional financing will be available or, even if it is available, that it will be available on terms acceptable to us. Furthermore, the "going concern" note in our financial statements could make it more difficult for us to raise additional funds, as potential financing sources could demand unreasonable terms, or be unwilling to provide funding. Furthermore, some investment funds and other investors are not authorized to invest in companies with "going concern" notes. Moreover, the convertible debentures issued to Mr. Leslie Dan and ADH Investments (1999) Inc., contain restrictive covenants requiring their approval prior to our company engaging in certain activities, including: creating security interests in company assets, entering into any merger transaction, disposing of assets outside the ordinary course of business, declaring dividends, purchasing, redeeming or retiring any of our shares, entering into any transactions outside the ordinary course of business, providing financial assistance to any person except to a subsidiary of our company, changing our company's name or the location of its chief executive offices, incurring any additional indebtedness or creating any new subsidiaries. Finally, any future financing may have a dilutive effect on the holdings of shareholders. If adequate funds are not available, we may be required to reduce the scope of, or eliminate one or more of our research and development programs, significantly scale back or even cease operations, sell or license some of our technologies under terms that are less favorable than they otherwise might have been if we were in a better financial position, or consider merging with another company or positioning ourselves to be acquired by another company. If 9 it became necessary to take one or more of these actions, this will have an adverse effect on our stock price and you may lose a substantial portion of, or your entire investment. WE HAVE NOT DERIVED ANY REVENUE TO DATE FROM THE COMMERCIAL SALE OF PRODUCTS, HAVE NEVER HAD ANY REVENUES FROM COMMERCIAL SALES AND HAVE RELIED ON EQUITY AND DEBT FINANCINGS TO SUPPORT OUR OPERATIONS. We have not derived any revenue to date from the commercial sale of products. Our future profitability will depend upon our ability to bring products to market in a timely manner, obtain regulatory approvals and enter into suitable licensing or partnering arrangements to commercialize our products. Since January 2000, the Dan Group has financed substantially all of our operations. If they cease to provide additional financing and we are unable to raise money from third parties, we will cease doing business. Since January 1, 2000, we have financed substantially all of our operations through bridge financing loans received from and the sale of equity securities and the issuance of secured convertible debentures to the Dan Group, and through an approximately $2,804,000 equity financing made by Teva in September 2003. Mr. Dan is on the board of directors of Teva's parent company, Teva Pharmaceutical Industries Limited. WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO INCUR FUTURE LOSSES. IF WE ARE UNABLE TO ACHIEVE SIGNIFICANT REVENUES IN THE FUTURE, WE WILL CEASE DOING BUSINESS. Since our inception, we have incurred significant losses each year. We expect to incur significant operating losses as we continue our product candidate research and development and continue our clinical trials. We will need to generate significant revenues in order to achieve and maintain profitability. Our ability to generate revenue in the future is dependent, in large part, on completing product development, obtaining regulatory approvals, and commercializing, or entering into agreements with third parties to commercialize, our product candidates. We cannot assure you that we will ever successfully commercialize or achieve revenues from sales of our therapeutic products if they are successfully developed or that we will ever achieve or maintain profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Until we receive regulatory approval for sales of products incorporating our licensed and/or patented technologies, we cannot sell our products and will not have revenues from sales. The research, development, production, and marketing of new products requires the application of considerable technical and financial resources. However, any revenues generated from such products, assuming they are successfully developed, marketed, and sold, may not be realized for a number of years. RISKS RELATED TO OUR BUSINESS AND INDUSTRY WE ARE IN THE EARLY STAGES OF PRODUCT DEVELOPMENT. OUR PRODUCT CANDIDATES MAY NOT BE EFFECTIVE AT A LEVEL SUFFICIENT TO SUPPORT A PROFITABLE BUSINESS VENTURE. IF THEY ARE NOT, WE WILL BE UNABLE TO CREATE MARKETABLE PRODUCTS AND WE WILL HAVE TO CEASE OPERATIONS. Our product candidates are in the preliminary development stage, have not been approved for marketing by any regulatory authority, and cannot be commercially distributed in any markets until such approval is obtained. We cannot assure you that our monoclonal antibody therapies will be effective at a level sufficient to support a profitable business venture. The science on which our technologies are based may also fail due to flaws or inaccuracies in the data, or because the data are not predictive of future results. The science upon which our business is based may prove to be totally or partially incorrect. Because our science may be flawed or incorrect, we may never be able to create a marketable product. If we are unable to do so, we will not generate revenues, we will have to cease operations, and you will lose your entire investment. In addition, it takes a significant period of time for a new therapeutic drug to be developed, to obtain the necessary regulatory approvals to permit its sale, to establish appropriate distribution channels and market acceptance, and to obtain insurer reimbursement approval. This time period is generally not less than 10 years. None of our 10 therapeutic product candidates has been commercialized and completion of the commercialization process for any of our product candidates will require significant investments of time and funds. We cannot predict either the total amount of funds that will be required, or assure you that we will be successful in obtaining the necessary funds. It is also not possible for us to predict the time required to complete the regulatory process or if there will be sufficient market demand at such time. If any of our products are approved, we cannot assure you that it will be possible to produce them in commercial quantities at reasonable cost, successfully market them, or whether any investment made by us in the commercialization of any products would be recovered through sales, license fees, or related royalties. Furthermore, the time it takes for products to reach market acceptance exposes us to significant additional risks, including the development of competing products, loss of investor interest, changing market needs, changes in personnel, and regulatory changes. Since the process of discovering and developing monoclonal antibodies is our core business, we anticipate that we will remain engaged in research and development for the foreseeable future. As one or two products advance to commercialization, we expect that other potential products will replace them as research and development candidates. For example, we estimate that Proxinium(TM) is a minimum of 4 years away from approval and commercialization and VB6-845 is a minimum of 6 years away from approval and commercialization., although the process could take much longer. WE RELY ON, AND INTEND IN THE FUTURE TO CONTINUE TO RELY ON, LICENSES FROM THIRD PARTIES AND ANY BREACH OR TERMINATION OF THESE LICENSE ARRANGEMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS. We currently hold key licenses from third parties for certain technologies, including the University of Zurich (Proxinium(TM)), McGill University (Hybridomics(TM)), Columbia University (Hybridomics(TM)), and the former shareholders of Tanox and Biovation (cytotoxic proteins). We also hold a non-exclusive license from XOMA Ireland Ltd., under which we have licensed a proprietary bacterial cell expression technology intended to facilitate increases in antibody production yields. We are also in the process of negotiating a license agreement in respect of one form of the antibody of our Proxinium(TM)) product candidate. Unless otherwise terminated in accordance with their terms, our key licenses will expire as follows:
LICENSOR EXPIRATION DATE - -------- --------------- University of Zurich The license expires on March 18, 2026, the expiration date of the longest-lived patent rights. McGill University The license expires on the earlier of (a) ten years from the date of commercialization of the first licensed product and (b) April 28, 2014. Columbia University The license expires on March 18, 2018, the expiration date of the last to expire licensed patents. Tanox The license expires (a) on a country-by-country basis in accordance with the license agreement, (b) ten years from the date of the first commercial sale of a particular licensed product in countries where there is no patent protection for that licensed product, or (c) December 21, 2025, the expiration date of the last to expire licensed patents in countries where there is available patent protection. Biovation The license is on a country-by-country and product-by-product basis, and expires on the later of (a) with respect to the rights in a particular country, ten years after the first commercial sale of a particular licensed product in that country, and (b) December 21, 2025, the expiration of the last to expire of the licensed patents. XOMA The license expires on the later of (a) May 22, 2018, the expiration of the last patent with patent rights and (b) November 30, 2011.
11 The dates reflecting the expiration date of the longest-lived patent rights listed above do not take into consideration the possibility that a failure to maintain these patents, a terminal disclaimer or other future actions may affect the actual expiration date of the patents. Pending applications may never mature into patents, which could affect the lifespan of certain licenses. Finally, future applications could result in the extension of the license term beyond the dates listed above. We cannot assure you that we will obtain any additional required licenses, that our existing licenses or new licenses, if obtained, will not terminate, or that they will be renewed. The failure to obtain, the termination of, or the failure to renew any of these licenses would have a material adverse effect on our pre-clinical and clinical programs and may cause us to suspend or cease our operations. In addition, we cannot assure you that these licenses will remain in good standing or that the technology we have licensed under these agreements has been adequately protected or is free from claims of infringement of the intellectual property rights of third parties. Pursuant to the terms of the licenses noted above and our other license agreements, and any agreements we may enter into in the future, we are and could be obligated to exercise diligence in bringing potential products to market and to make license payments and certain potential milestone payments that, in some instances, could be substantial. We are obligated and may in the future be obligated, to make royalty payments on the sales, if any, of products resulting from licensed technology and, in some instances, may be responsible for the costs of filing and prosecuting patent applications. Because we require additional funding, we may not be able to make payments under current or future license agreements, which may result in our breaching the terms of any such license agreements. Any breach or termination of any license could have a material adverse effect on our business, financial condition, and results of operations. MUCH OF OUR POTENTIAL SUCCESS AND VALUE LIES ON OUR OWNERSHIP AND USE OF INTELLECTUAL PROPERTY AND, AS A RESULT, OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD NEGATIVELY AFFECT US. Confidentiality Since some of our technology is not patented or licensed but protected by the law of trade secrets, our ability to maintain the confidentiality of our technology is crucial to our ultimate possible commercial success. In order to protect our confidential information, we have adopted the following procedures: - all of our employees must sign and are bound by confidentiality agreements; - no sensitive or confidential information is disclosed to any party unless appropriate confidential disclosure agreements are first signed; and - all confidential material that is provided to a party is marked as confidential and is requested to be returned when the user no longer has a need to have the material, or when the term of any applicable confidential disclosure agreement governing the use of the material expires. We are unaware of any violations of our confidentiality procedures, and to date we have never experienced a violation of our confidentiality procedures that has caused our company material harm. Nevertheless, we cannot assure you that our procedures to protect confidentiality are effective, that third parties will not gain access to our trade secrets or disclose our technology, or that we can meaningfully protect our rights to our trade secrets. We cannot prevent a person from violating the terms of any confidential disclosure agreement. Furthermore, by seeking patent protection in various countries, it is inevitable that important technical information will become available to our competitors, through publication of such patent applications. If we are unable to maintain the confidentiality of our technology in appropriate circumstances, this could have a material adverse impact on our business, financial condition, and results of operations. Our Patents Our success depends in part on our ability to obtain patents, operate without having third parties circumvent our rights, operate without infringing the proprietary rights of third parties, and maintain trade secret protection. As of the date of this registration statement, we had 18 patents and patent applications relating to VB6-011 in the United States, Canada, the European Union, and other countries, of which we have been granted five patents in the United 12 States, Australia, New Zealand, and Singapore. Three of these five patents expire on May 22, 2017, one expires on May 22, 2016 and one expires on October 22, 2017. One of our pending Australian patent applications, which is a Divisional application to a granted patent, has been allowed, and no notice of opposition has been received during the three month opposition period. The expiry date for this Divisional application is May 22, 2017. In order for this Divisional application to be granted, the granted patent from which this Divisional application is derived will have to be surrendered. The Divisional application will include the scope of the surrendered patent. As of the date of this registration statement, we have one provisional patent application related to VB6-008 and one provisional patent application related to VB6-050, both filed in the United States. The patent position of pharmaceutical and biotechnology companies is uncertain and involves complex legal and financial questions for which, in some cases, important legal principles are largely unresolved. Patent offices vary in their policies regarding the breadth of biopharmaceutical patent claims that they allow. In addition, the coverage claimed in a patent application can be significantly reduced during prosecution before a patent is issued. We may not be granted patents of meaningful scope based on the applications we have filed and those we intend to file. We cannot assure you that our pending patent applications will result in patents being granted, that we will develop additional proprietary products that are patentable, that patents that have already been granted to us will provide us with any competitive advantage or will not be challenged or invalidated by any third parties, or that patents of others will not have an adverse effect on our ability to do business. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as do the laws of Canada or the United States. We cannot assure you that others will not independently develop similar products or processes, duplicate any of our products or processes, or design around the products or processes we may patent. Our Licensed Patents We have exclusively licensed, on a worldwide basis, the rights to certain patents and patent applications relating to certain of our product candidates and technologies. We have an exclusive, world-wide license agreement with The University of Zurich, Switzerland, that contains a right to sublicense on six patent applications related to our lead product candidate Proxinium(TM), of which two are in the United States, one is in each of Canada, Europe and Japan and one is an international application that relates to the use of Proxinium(TM) in the treatment of head and neck cancer (squamous cell carcinomas) and bladder cancer. We also have exclusive, world-wide license agreements with each of Tanox, Inc., subsequently assigned by Tanox to the former shareholders of Tanox Pharma B.V., and with Biovation Ltd., that contain a right to sublicense on patent applications for the cytotoxic protein component of our product candidates VB6-008, VB6-011, VB6-050 and VB6-845. These licenses include 1 patent that expires on June 8, 2018 and 3 patent applications to the native form of the cytotoxic protein in the United States (one granted and one pending), Canada and Europe and 2 provisional patent applications in the United States to the modified form of the protein. Other technology for which we have obtained exclusive or non-exclusive licenses are protected by an additional 66 granted or pending patents or patent applications. We rely on these licenses to adequately protect and maintain the intellectual property that is the subject of the license agreements. In some cases, the licensors do not have the obligation to maintain this intellectual property. In other cases, provided that we maintain our license obligations, the licensor must prepare, file, prosecute, and maintain such intellectual property. If either we or the licensor fail to maintain our respective license obligations, the intellectual property may be abandoned. Third Party Patents Our commercial success also depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. From time to time, companies may possess rights to technologies in the same areas of research and development as ours, may have patents similar to ours, and may notify us that we may require licenses from them in order to avoid infringing their rights in that technology or in order to enable us to commercialize our own technology. Patent applications are, in many cases, maintained in secrecy until patents are issued. Our competitors or potential competitors may have filed applications for, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours. 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 are filed. In the event of infringement or violation of another party's patent, we may be prevented from pursuing product development or commercialization. In addition, we may be required to obtain licenses under patents or other proprietary rights of third parties. We cannot assure you that any licenses required under such patents or proprietary rights will be available on terms 13 acceptable to us. If we do not obtain such licenses, we could encounter delays in introducing one or more of our products to the market, without infringing third party patents, or we could find that the development, manufacturing or sale of products requiring these licenses could be foreclosed. Patent Litigation Patent litigation is becoming widespread in the biopharmaceutical industry and we cannot predict how this will affect our efforts to form strategic alliances, conduct clinical testing, or manufacture and market any of our product candidates that we may successfully develop. We are unaware of any potential issues related to our possible infringement or violation of another party's patent. If challenged, however, our patents may not be held to be valid. We could also become involved in interference or impeachment proceedings in connection with one or more of our patents or patent applications to determine priority of invention. If we become involved in any litigation, interference, impeachment, or other administrative proceedings, we will likely incur substantial expenses and the efforts of our technical and management personnel will be significantly diverted. We have the obligation to protect and bear the cost of defending the patent rights of the patents we own. With respect to our licensed patents: - Under the Exclusive License Agreement between Biovation Limited and our company, dated March 8, 2004, the licensor has the right and option, but not the obligation, to litigate to protect the patents. If the licensor does not initiate action, we have the right, but not the obligation to do so. The party that takes action will pay all costs associated with the litigation. - Under the Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and our company, dated June 23, 2003, the licensor has the right, but not the obligation, to litigate to protect the patents. If the licensor does not initiate action, we have the right to do so. Cost sharing and the distribution of recovery is to be determined in each case as specified in the agreement. - Under the Exclusive License Agreement between University of Zurich and our company, dated January 9, 2003, the licensor has the right and option, but not the obligation, to litigate to protect the patents. If the licensor does not initiate action, we have the right, but not the obligation to do so. The party that takes action will pay all costs associated with the litigation. Net recoveries belong to the party/parties taking action (except with respect to the amount to be paid to the licensor under the agreement if we successfully litigate). If we learn of any substantial infringement of patent rights, we must inform the licensor. We may request that the licensor take legal action against a third party for the infringement of patent rights. Recoveries from those actions will belong to the party bringing suit (with exceptions described in the agreement). - Under the Exclusive License Agreement between Tanox, Inc. and our company, dated August 20, 2002, the licensor has the right and option, but not the obligation, to litigate to protect the patents. If the licensor does not initiate action, we have the right, but not the obligation to do so. Net recoveries (if we litigate) are considered net sales and are subject to royalty payments. We cannot assure you that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. Moreover, if our products infringe the patents, trademarks, or proprietary rights of others, we could, in certain circumstances, become liable for substantial damages, which also could have a material adverse effect on our business, financial condition, and results of operations. Where there is any sharing of patent rights, either through co-ownership or different licensed "fields of use", one owner's actions could lead to the invalidity of the entire patent. OUR BUSINESS IS SUBJECT TO SIGNIFICANT TO SIGNIFICANT GOVERNMENT REGULATION AND FAILURE TO ACHIEVE REGULATORY APPROVAL OF OUR DRUG CANDIDATES WOULD SEVERELY HARM OUR BUSINESS. The FDA regulates the development, testing, manufacture, record-keeping, labeling, distribution, and promotion of pharmaceutical products in the United States pursuant to the Food, Drug, and Cosmetic Act and related regulations. We must receive premarket approval by the FDA prior to commercial sale in the U.S. of any of our product candidates. Similar regulations are enforced by Health Canada and by other regulatory agencies in each jurisdiction 14 in which we seek to do business. The regulatory review process is lengthy and expensive, and the outcome of the approval process is uncertain. Before receiving approval we must acquire and submit extensive preclinical and clinical data and supporting information for each indication to establish the safety and efficacy of our drug candidates. In addition, we must show that we can produce our drug candidates consistently at quality levels suitable for administration in humans in accordance with a complex set of regulations known as current Good Manufacturing Practices (cGMP's). Premarket approval is a lengthy and expensive process and takes several years. Future legislation or changes in FDA policy may change during the period of product development and clinical trials. We may not be able to obtain FDA approval or approval from other regulatory agencies for any commercial sale of any drug candidate. We may encounter delays or rejections in the regulatory approval process at any time. Even if approval is obtained, the FDA may determine that additional clinical trials are required after marketing has begun. Except for any potential licensing or marketing arrangements with other pharmaceutical or biotechnology companies, we will not generate any revenues in connection with our drug candidates unless and until we obtain clearance from the FDA, Health Canada or comparable agencies in each market to commercialize our products. Given the uncertainty, extensive time, and financial expenditures involved in moving a drug through the regulatory and clinical trial process in Europe, Canada, the United States, and elsewhere, we may never be able to successfully develop safe, commercially viable products. If we are unable to do so, we may have to cease operations. WE ARE DEPENDENT ON THE SUCCESSFUL OUTCOME OF PRECLINICAL TESTING AND CLINICAL TRIALS. None of our products are currently approved for sale by the FDA, by Health Canada or by any other regulatory agency in the world, and they may never receive approval for sale or become commercially viable. Before obtaining regulatory approval for sale, each of our product candidates must be subjected to extensive preclinical and clinical testing to demonstrate safety and efficacy for each proposed indication for human use. Our success will depend on the successful outcome of our preclinical testing and clinical trials. Our most advanced product candidate, Proxinium(TM) is in Phase I clinical testing in Brazil and Canada, and our second most advanced product candidate VB6-845 is in pre-clinical testing. Historically, the results from preclinical testing and from early clinical trials often have not been predictive of results obtained in later clinical trials. Frequently, drugs that have shown promising results in preclinical or early clinical trials subsequently fail to demonstrate sufficient evidence of safety or effectiveness necessary to obtain regulatory approval. Our success will depend on the success of our current clinical trials and subsequent clinical trials that have not yet begun. Moreover, regulatory agencies such as the FDA and Health Canada may impose specific standards on the evaluation of tumor response in individual patients which may differ from those of the company or its clinical advisors. These different standards may lead the regulatory agency to conclude that study subjects receiving any of the Company's product candidates have had a more modest clinical response than did the Company or its clinical advisors. There are a number of difficulties and risks associated with clinical trials. The possibility exists that: - - we may discover that our product candidates may cause, alone or in combination with another therapy, unacceptable side effects; - - we may discover that our product candidates, alone or in combination with another therapy, does not exhibit the expected therapeutic results in humans; - - results from early trials may not be predictive of results that will be obtained from large-scale, advanced clinical trials; - - we or the FDA or other regulatory agencies may suspend the clinical trials of one or more of our product candidates; - - patient recruitment may be slower than expected; and - - patients may drop out of our clinical trials. 15 Although the U.S. FDA has given Proxinium(TM) orphan drug status for its use in head and neck cancer, this status does not diminish any of the requirements for market approval. Given the uncertainty surrounding the regulatory and clinical trial process, we may not be able to develop safety, efficacy or manufacturing data necessary for approval of our product candidates. In addition, even if we receive approval, such approval may be limited in scope and affect the commercial viability of such product. If we are unable to successfully obtain approval to commercialize any product candidate, this would materially harm our business, impair our ability to generate revenues and adversely impact our stock price. DELAYS IN CLINICAL TRIALS WILL CAUSE US TO INCUR ADDITIONAL COSTS, WHICH COULD JEOPARDIZE THE TRIALS AND ADVERSELY AFFECT OUR LIQUIDITY AND FINANCIAL RESULTS. Due to the high costs of clinical trials, a delay in our trials, for any reason, will require us to spend additional funds to keep our product candidates moving through the regulatory process. If we do not have or cannot raise the necessary additional funds, the testing of our product candidates could be cancelled. If we are required to spend additional funds, it will require us to spend funds that could have been used for other purposes and could adversely affect our liquidity and financial results. WE RELY ON CLINICAL INVESTIGATORS AND CONTRACT RESEARCH ORGANIZATIONS TO CONDUCT OUR CLINICAL TRIALS. We rely, in part, on independent clinical investigators and contract research organizations to conduct our clinical trials. Contract research organizations also assist us in the collection and analysis of the data generated from these clinical trials. These investigators and contract research organizations are not our employees and we cannot control, other than by contract, the amount of resources, including time, that they devote to our product candidates and our clinical trials. If independent investigators fail to devote sufficient resources to our clinical trials, or if their performance is substandard, these factors may delay any possible approval and commercialization of our product candidates and could harm our chances of obtaining regulatory approval. Further, most national regulatory agencies require that we comply with standards, commonly referred to as "good clinical practice", for conducting, recording, and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial subjects are protected. If our independent clinical investigators and contract research organizations fail to comply with good clinical practice, the results of our clinical trials could be called into question and the clinical development of our product candidates could be delayed or halted. The failure of clinical investigators and contract research organizations to meet their obligations to us or comply with good clinical practice procedures could adversely affect the clinical development of our product candidates, and have a material adverse effect on our business, financial condition, and results of operations. OUR SIGNIFICANT INDEBTEDNESS TO THE DAN GROUP COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND LIMIT OUR FINANCIAL AND OPERATING FLEXIBILITY AND SUBJECT US TO OTHER RISKS. As of March 28, 2005, we owed $29,180,371, not including accrued interest, to the members and entities part of or associated with the Dan Group. This substantial indebtedness could have important consequences. For example, it could: - limit our ability to obtain additional financing in the future to refinance our existing debt and our working capital, capital expenditures, acquisitions and other general corporate purposes; - require us to dedicate a substantial portion of any cash flow we may have in the future to the payment of principal and interest on our debt, thereby reducing funds available for our development and operations; - hinder our ability to adjust rapidly to changing market conditions; - make us more vulnerable to economic downturns; and - limit our ability to withstand competitive pressures. If we do not have sufficient funds to repay our debt when it becomes due, we will be required to obtain additional financing, which might not be available to us on commercially reasonable terms. If we fail to obtain such financing, we might have to limit or cease our operations. 16 Our indebtedness to the Dan Group consists of the following: - On November 3, 2004, we issued to Ms. Dan-Hytman, a secured convertible debenture in the principal amount of $10,562,568 and to Mr. Dan a secured convertible debenture in the principal amount of $12,584,143. These debentures are secured by a first charge over all of our assets and bear interest at the rate of 4.5% per year, compounded annually. The convertible debentures mature on November 3, 2006. The convertible debentures are convertible, at the option of the holder, at any time into units at a price of $1.50 per unit. Each unit will be comprised of one common share and one half of a common share purchase warrant. Each whole common share purchase warrant will enable the holder to purchase an additional common share at an exercise price of $2.00 per common share at any time for a period of four years from the date of issuance. - The convertible debentures include customary representations and warranties. The convertible debentures also contain customary events of default, with the addition of an event of default for the occurrence of a material adverse effect on our operations. Covenants under the convertible debentures restrict our ability to, among other things: - create, issue, incur, assume or permit to exist any additional encumbrance on any of our property; - change the nature of the business; - merge, consolidate or dispose of our undertakings and assets; - pay dividends and make certain other distributions; - make certain alteration of capital; - enter into transactions out of the ordinary course of business; - change locations; and - incur additional indebtedness. These restrictive covenants could limit our ability to pursue our growth plan, restrict our flexibility in planning for, or reacting to, changes in our business and industry and increase our vulnerability to general adverse economic and industry conditions. - On November 3, 2004, Mr. Dan loaned us $1,600,000 in order to finance capital expenditures in respect of our Winnipeg facility. The loan bears interest at a rate of 5.0% per year and we are repaying the loan on a monthly basis. As of March 28, 2005, $1,433,660 remained outstanding under the loan. - On February 17 and March 1, 2005, we received bridge financing loans from Mr. Dan in the amounts of $500,000 and $1,500,000, respectively. The loans are payable on demand and bear interest at a rate of 4.5% per year. - On March 21, 2005, our board of directors approved an additional bridge financing loan of $2,600,000 from Clairmark Investments, an entity owned by Mr. Dan. - On March 23, 2003 we received a bridge financing loan of $2,600,000. - On May 10, 2005, our board of directors approved an additional bridge financing loan of $1,500,000 from Clairmark Investments, an entity owned by Mr. Dan. - On May 10, 2005 our board of directors approved an additional bridge financing loan of $1,500,000 from Mr. Leslie Dan. WE MAY BE DEPENDENT ON STRATEGIC PARTNERS AS PART OF OUR PRODUCT DEVELOPMENT STRATEGY, AND WE WOULD BE NEGATIVELY AFFECTED IF WE ARE NOT ABLE TO INITIATE OR MAINTAIN THOSE RELATIONSHIPS. If any of our product candidates advance to, and subsequently successfully complete, Phase II clinical trials, we intend to either finance further clinical development ourselves, or enter into strategic partnerships whereby third parties will finance further clinical development, such as Phase III clinical trials. We cannot assure you, however, that we will be able to find partners and establish such relationships on favorable terms, if at all, or that any such future arrangements will be successful. 17 Should any partner fail to develop or commercialize successfully any product candidates to which it has rights, our business, financial condition, and results of operations may be adversely affected. The failure of any collaborative partner to continue funding any particular program, for any reason, could delay or halt the development or commercialization of any products arising out of a particular program. In addition, we cannot assure you that any of our future partners would not pursue alternative technologies or develop alternative product candidates either on their own or in collaboration with others, including our competitors, as a means for developing treatments for the diseases targeted by our programs. EVEN IF OUR PRODUCT CANDIDATES RECEIVE ALL OF THE REQUIRED REGULATORY APPROVALS, WE HAVE NO GUARANTEE OF MARKET ACCEPTANCE OR COMMERCIALIZATION OF THE RESULTING PRODUCTS, WHICH WILL BE DETERMINED BY OUR SALES, MARKETING, AND DISTRIBUTION CAPABILITIES AND THE POSITIONING AND COMPETITIVENESS OF OUR PRODUCTS, COMPARED WITH ANY ALTERNATIVES. Even if our product candidates receive all necessary regulatory approvals and clearances, they may not gain market acceptance among physicians, patients, healthcare payors, and the medical community. The degree of market acceptance of any product that we may develop will depend on a number of factors, including marketing and distribution support for the products, establishment and demonstration of the cost-effectiveness of the products, and the potential advantage of our products over any alternatives. We currently do not have any sales, marketing, or distribution capabilities, and therefore must either acquire or internally develop sales, marketing, and distribution capabilities or make arrangements with third parties to perform these services. If our product candidates demonstrate sufficient clinical benefit to obtain regulatory approval for marketing, we intend to seek third parties as partners to market, sell, and distribute such products. These distribution partners may not promote our products as aggressively as we would like, may not be successful in their sales and distribution efforts, or may fail to promote our products altogether. Any of these events would have a material adverse effect on our business, financial condition, and results of operations. These events may also lead us to try to establish our own marketing and sales force. The acquisition or development of a sales and distribution infrastructure would require substantial resources, which may divert the attention of our management and key personnel, and have a negative impact on our product development efforts. Moreover, we may not be able to establish in-house sales and distribution capabilities or relationships with third parties. If successfully developed, our products will compete with a number of drugs and therapies currently manufactured and marketed by major pharmaceutical and other biotechnology companies. These products may also compete with new products currently under development by other pharmaceutical and biotechnology companies, and with products which may cost less than our products or may be more effective than our products. If our products do not achieve significant market acceptance, our business, financial condition, and results of operations will be materially adversely affected. REIMBURSEMENT PROCEDURES AND FUTURE HEALTHCARE REFORM MEASURES ARE UNCERTAIN AND MAY ADVERSELY IMPACT OUR ABILITY TO SUCCESSFULLY SELL OR LICENSE ANY PHARMACEUTICAL PRODUCT. If any of our potential products is approved for commercialization by national regulatory authorities, the extent of sales will depend upon the availability of reimbursement from third-party payors such as Medicare in the United States and similar government health administration authorities in other countries, as well as private health insurers and other organizations. Our ability to successfully sell or license any pharmaceutical product will depend in part on the extent to which government health administration authorities, private health insurers and other organizations will reimburse patients or providers for the costs of any future pharmaceutical products and related treatments. Each jurisdiction has its own regulatory scheme. Significant variation exists as to the reimbursement status of newly approved healthcare products, and we cannot assure you that adequate third party coverage will be available to establish price levels sufficient for us to realize an appropriate return on our investment in developing new products or for existing products. Increasingly, government and other third-party payors are attempting to contain health care costs by limiting both coverage and the level of reimbursement for new therapeutic products. Reimbursement levels may be related to issues of cost-effectiveness, which are evaluated differently in different jurisdictions. Inadequate coverage or reimbursement could adversely affect market acceptance of our products. Recently, the prices of medical products and services have been examined and challenged by third parties and consumers of such products and services. Successful challenges or government reform in this area could negatively affect our profitability. 18 In the United States, government and other third-party payers have sought to contain healthcare costs by limiting both coverage and the level of reimbursement for new pharmaceutical products approved for marketing by the FDA. In some cases, these payers may place conditions on the use of new products which limit their market penetration or may refuse to provide any coverage for uses of approved products to treat medical conditions even though the FDA has granted marketing approval. Healthcare reform may increase these costs containment efforts. U.S. managed care organizations and government health insurance programs may seek to restrict the use of new products, delay authorization to use new products or limit coverage. New rule making by the Center for Medicare and Medicaid Services could affect drug coverage and payments by Medicare. Internationally, where national healthcare systems are prevalent, little if any funding may be available for new products, and cost containment and cost reduction efforts can be more pronounced than in the United States. WE HAVE NO GUARANTEE THAT OUR PRESENT MANUFACTURING FACILITY WILL BE SUFFICIENT FOR OUR NEEDS IN THE FUTURE. Currently we manufacture our monoclonal antibody products in our own pilot manufacturing facility. All manufacturing of biopharmaceutical products is controlled by regulatory authorities. Methods of manufacture as well as validation of manufacturing procedures and quality control systems are reviewed by regulatory authorities, such as the FDA and Heath Canada to determine their effect on the quality, purity and potency of products. All such manufacturing procedures, validation programs and quality assessment activities must be properly documented in accordance with regulatory requirements. Both the FDA and Health Canada conduct inspections to determine compliances with "current good manufacturing practices" or "cGMP's" to ensure that products used in human testing are adequately characterized in terms of identity, potency and purity. GMP standards become more stringent as the stage of human testing increases; and material used in pivotal phase III trials is generally required to comport with standards expected of marketed drugs.. Our manufacturing facility is not currently certified as a cGMP facility. If we cannot demonstrate that our products are manufactured in accordance with cGMP requirements, we may not be able to initiate clinical studies in the United States. Comparable manufacturing requirements exist for other jurisdictions, including Canada and the European Union.. If we cannot manufacture our products under cGMP conditions in our own facility, the cost of outsourcing GMP manufacturing to third parties would have a material adverse affect on our business, financial condition and results of operations. Third party manufacturers may not be able to meet our program needs for timing , quantity or quality of materials; and we may encounter delays in the development of data required for marketing approval. Any such delays may lower our revenues and potential profitability. COMPETITIVE PRODUCTS AND TECHNOLOGIES MAY REDUCE DEMAND FOR OUR PRODUCT CANDIDATES AND TECHNOLOGIES. Our success depends upon maintaining our competitive position in the research, development, and commercialization of products and technologies in our area of expertise. Competition from pharmaceutical, chemical and biotechnology companies, and universities and research institutes is intense and expected to increase. Many of these competitors have substantially greater research and development capabilities, experience in manufacturing, marketing, financial, and managerial resources than we do and represent significant competition for us. In particular, we consider two companies, Seattle Genetics and Immunogen Inc., to be our closest competitors because they employ armed antibodies to treat various forms of cancer, although neither of them are using the armed antibodies method to treat head and neck cancer or bladder cancer. We cannot assure you that developments by others will not render our product candidates or technologies non-competitive or obsolete, or that we will be able to achieve the level of acceptance within the medical community necessary to compete successfully. We are aware of several potential competitors that are at various stages of development or that have commercial sales of products that may address similar cancer indications. The success of our competitors and their products may have a material adverse impact on our business, financial condition, and results of operations. Our Platform of Technologies Our integrated platform of technologies is based on two key features: (i) isolating the human immune response to cancer for monoclonal antibody generation; and (ii) delivering cytotoxic protein payloads to tumors. We have competitors in both of these areas as described below. 19 Monoclonal Antibody Generation Our Hybridomics(TM) technology isolates antibodies from the human immune system and is independent of the need for a known target antigen for antibody generation. Unlike our antibodies, the antibodies generated by our competitors may only be generated once an antigen target has been identified and isolated and are not obtained from humans, although some of them are commonly referred to as "human antibodies". Antibodies generated by our competitors fall into several classes: murine, mouse-human chimeric, humanized, or "human". We are not aware of any competitor companies generating fully human monoclonal antibodies. Producers of humanized antibodies that are approved for sale in the United States include Genentech, Inc. and Hoffmann-La Roche Ltd. (Herceptin(R)), Genentech, Inc. (Avastin), Wyeth Inc. (Mylotarg(R)), ImClone Systems Incorporated (Erbitux), Millennium Pharmaceuticals, Inc. and Ilex Oncology, Inc. (Campath(R)), MedImmune, Inc. (Synagis(R)), and Centocor, Inc. (Remicade(R)). Companies that develop products based on transgenic mouse antibodies include Abgenix, Inc. (ABX-EGF) and Cambridge Antibody Technology Group plc and Abbott Laboratories Limited (Humira(R)). Companies that develop products approved for sale in the United States incorporating mouse-human chimeric antibodies include Biogen IDEC Pharmaceuticals Inc., Genentech, Inc. and Hoffman-La Roche Ltd. (Rituxan(R)), Centocor Inc. (ReoPro(R)), and Novartis Pharma AG (Simulect(R)). Payload Delivery The attachment of payloads to antibodies may make them more effective. Two of our major competitors in the field of antibody payload development, Seattle Genetics, Inc. and ImmunoGen, Inc., have principal payload technology based upon small molecule cytotoxic drugs that require chemical conjugation through a linker to attach the payload to the antibody. According to the web sites of these companies, as of January 5, 2005, each of these two companies has three products in clinical development, the most advanced of which are in Phase II clinical trials. In addition, there are two radiolabelled antibodies approved for sale in the United States, Zevalin(R) (Biogen IDEC Pharmaceuticals Inc.) and Bexxar(R) (Corixa Corp. and GlaxoSmithKline plc). In contrast, our cytotoxic protein payloads are directly linked to our antibodies and we believe this production of the payload and antibody together lowers production costs and enhances the stability of the linkage. In addition, our cytotoxic protein payloads are not expected to have the problems of radioactive exposure associated with radioisotope payload delivery. OUR INDUSTRY IS CHARACTERIZED BY RAPID CHANGE AND A FAILURE BY US TO REACT TO THESE CHANGES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. The biotechnology industry is characterized by rapid and substantial technological change. Alternative forms of medical treatment may render our technologies or product candidates of lower or no value in the future. Our future success depends on our ability to adapt to this change and keep pace with new technological developments and emerging industry standards, and we cannot assure you that we will be able to do so. IF WE FAIL TO HIRE OR RETAIN NEEDED PERSONNEL, THE IMPLEMENTATION OF OUR BUSINESS PLAN COULD SLOW AND FUTURE GROWTH COULD SUFFER. Our success depends in large part upon our ability to attract and retain highly qualified scientific and management personnel. Competition to retain personnel in the biotechnology field from other companies, academic institutions, government entities, and other organizations is intense. We cannot assure you that we will retain our current personnel and will be able to continue to attract qualified personnel, and any failure to do so could slow implementation of our business plan or future growth. To date, however, we have had no difficulties attracting and retaining highly qualified scientific and management personnel. Additionally, none of our scientific or management personnel have indicated that they have plans to retire or leave our company in the foreseeable future. THE LOSS OF THE SERVICES OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. We are highly dependent on the knowledge and services of our President and Chief Executive Officer, Dr. Nick Glover. If we were to lose Dr. Glover's services, it would be difficult and costly to find a replacement, it would have a severe impact on the implementation of our business plans and our future growth would suffer. We do not 20 have "key person" insurance with respect to Dr. Glover. We and Dr. Glover have entered into an employment agreement that may be terminated by Dr. Glover on three months' written notice or by us without prior notice for reasons of just cause or disability. There are no other members of our management or scientific staff whose departure could have a material effect on our business. WE CONDUCT CERTAIN ELEMENTS OF OUR BUSINESS INTERNATIONALLY, AND THE DECISIONS OF SOVEREIGN GOVERNMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION. We conduct certain elements of our business internationally. We have conducted a clinical trial in Russia, and are conducting clinical trials in Brazil and Canada. We intend to, and may conduct clinical trials in other jurisdictions. Sovereign governments, including Canada, may establish laws or regulations that will be deleterious to our interests or that will affect our ability, as a foreign corporation, to obtain access to regulatory agencies in Russia, Brazil, Canada, and any other jurisdictions. Governments have also, from time to time, established foreign exchange controls which could have a material adverse effect on our business, financial condition, and results of operations. To date, neither our operations nor our financial condition have been materially impacted due to laws or regulations of sovereign governments. OUR OPERATING RESULTS MAY BE SUBJECT TO CURRENCY FLUCTUATIONS, AS OUR OPERATIONS ARE BASED LARGELY IN CANADA, WHILE SOME OF OUR EXPENSES ARE IN U.S. DOLLARS OR OTHER FOREIGN CURRENCIES. Our operations are based in Canada, while some of our expenses, in particular those related to clinical trials, are in U.S. dollars or currencies other than Canadian dollars. In 2004, approximately 80% of our payments made in relation to accounts payable were made in Canadian dollars, approximately 15.5% were made in U.S. dollars and approximately 4.5% were made in other foreign currencies. The exchange rates among the Canadian dollar, the U.S. dollar, and other foreign currencies are subject to daily fluctuations in the currency markets and these fluctuations in market exchange rates are expected to continue in the future. We do not engage in currency hedging activities to limit the risks of these fluctuations. We are subject to risks associated with these currency fluctuations which may, from time to time, impact our financial position and results of operations. OUR INSURANCE MAY NOT BE SUFFICIENT AND WE MAY BE EXPOSED TO LAWSUITS AND OTHER CLAIMS RELATED TO OUR PRODUCT CANDIDATES IN CLINICAL STUDIES AND PRODUCT LIABILITY WHICH COULD INCREASE OUR EXPENSES, HARM OUR REPUTATION, AND KEEP US FROM GROWING OUR BUSINESS. The sale and use of human therapeutic products, including those products we are developing, involve an inherent risk of product liability claims and adverse publicity. Clinical studies include trials on humans. These studies create a risk of liability for side effects to participants resulting from an adverse reaction to the medications being tested or resulting from negligence or misconduct. While we currently maintain limited insurance related to our ongoing clinical trials, we cannot assure you that this insurance will continue to be available to us on commercially reasonable terms. Any claims might also exceed the amounts of this coverage. If we are unable to obtain our insurance at reasonable rates or otherwise protect ourselves against potential liability proceedings, we may be required to slow down any future development of products or may even be prevented from developing the products at all. Our obligation to pay indemnities or withdraw a product candidate from clinical trials following complaints could have a material adverse effect on our business, financial condition, and results of operations. Claims against us, regardless of their merit or potential outcome, may also result in severe public relations problems that could seriously damage our reputation and business viability. In addition, certain drug retailers require minimum product liability insurance coverage as a condition of purchasing or accepting products for retail distribution. If any of our product candidates are successfully developed and approved for commercial sale, failure to satisfy these insurance requirements could impede our ability or that of any potential distributors of our products to achieve broad retail distribution of these products, which would have a material adverse effect on our business, financial condition, and results of operations. We believe that our insurance coverage is consistent with that of similar companies in our industry. Our insurance coverage limitations are: 21 - General Commercial Liability: $5,000,000 - Property All Risks: $10,000,000 - Boiler & Machinery: $10,000,000 - Directors & Officers: $7,000,000 WE USE HAZARDOUS MATERIALS THAT ARE HIGHLY REGULATED AND WE MAY BE EXPOSED TO POTENTIAL LIABILITY IN THE EVENT OF AN ACCIDENT INVOLVING THESE MATERIALS; OUR COMPLIANCE WITH ENVIRONMENTAL REGULATIONS COULD BE COSTLY IN THE FUTURE. Our discovery and development processes involve the controlled use of radioactive and hazardous materials. We are subject to Canadian federal, provincial, and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of an accident of this nature, we could be held liable for any damages that result and any liability of this kind could exceed our resources and, if so, we may have to cease operations. We have general liability insurance which may not be sufficient to cover the cost of any injuries or other damage sustained in respect of these risks. Our coverage limitations under our insurance policies are described above under "-Our insurance may not be sufficient and we may be exposed to lawsuits and other claims related to our product candidates in clinical studies and product liability which could increase our expenses, harm our reputation, and keep us from growing our business". We cannot assure you that we will not be required to incur significant costs to comply with environmental laws and regulations in the future, or that our operations, business, or assets will not be materially adversely affected by current or future environmental laws or regulations. TEVA PHARMA B.V. HAS A RIGHT OF FIRST NEGOTIATION TO OBTAIN AN EXCLUSIVE LICENSE TO DEVELOP AND DISTRIBUTE THE NEXT FIVE INDICATIONS OF PROXINIUM(TM) FOR WHICH WE WOULD OTHERWISE SEEK A LICENSEE. As of March 28, 2005 Teva holds 1,402,100 of our common shares, and warrants to acquire 1,402,100 of our common shares at a price of $2.00 per share. The warrants expire on September 10, 2008. Until September 10, 2008, or earlier if triggered by us, so long as Teva holds any of our common shares, we have granted to Teva a right of first negotiation to obtain an exclusive license to develop and distribute the next five indications of Proxinium(TM) for which we would otherwise seek a licensee. We are obligated to notify Teva in these circumstances and to negotiate the terms of a license agreement with Teva for 60 days from the date of our notice to Teva on an exclusive basis. If we fail to execute and deliver a license agreement at the end of this 60 day period, we are free to negotiate the terms of a license with any third party, provided that the terms offered to the third party are not materially more favorable than those offered to Teva. This right of first negotiation could constrain our ability to negotiate a license in respect of any of the next five indications of Proxinium(TM) for which we would otherwise seek a licensee. In addition, this right of first negotiation could discourage potential licensees from negotiating with us in respect of a license for any of these indications. AS WE ARE A CANADIAN COMPANY, THERE MAY BE LIMITATIONS ON THE ENFORCEMENT OF CERTAIN CIVIL LIABILITIES AND JUDGMENTS OBTAINED IN THE UNITED STATES AGAINST US. We are continued under the laws of the province of Ontario, Canada and our assets are located outside of the United States. Almost all of our directors and officers, as well as the expert named in this registration statement, are residents of Canada, and all or a substantial portion of our assets and the assets of these persons are located outside of the United States. As a result, it may not be possible for shareholders effect service of process within the United States upon us or those persons. Furthermore, it may not be possible for shareholders to enforce against us or them in the United States, judgments obtained in U.S. courts based upon the civil liability provisions of the U.S. federal securities laws or other laws of the U.S. Therefore, it may not be possible to enforce those actions against us, most of our directors and officers or the expert named in this registration statement. In addition, there is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon the U.S. federal securities laws. 22 RISKS RELATED TO OUR COMMON SHARES WE HAVE CONTROLLING SHAREHOLDERS WHO CAN MAKE DECISIONS RELATING TO OUR CORPORATE MATTERS, DETERMINE THE OUTCOME OF AN ELECTION OF DIRECTORS, AND MAKE FUTURE SALES OF THEIR COMMON SHARES, ANY OF WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON THE PRICE OF OUR COMMON SHARES. As at January 1, 2005, the Dan Group, which consists of Mr. Leslie Dan, his daughter, Ms. Andrea Dan-Hytman, and companies that they control: 1401798 Ontario Limited, Clairmark Investments Ltd., Dan Family Holdings Ltd. and ADH Investments (1999) Inc., collectively beneficially owned 57,372,635 common shares, or approximately 91.9% of the common shares including their presently exercisable options and other convertible securities. Consequently, the Dan Group is, and will continue to be, in a position to determine the outcome of corporate actions requiring shareholder approval, including: electing a majority of the members of our board of directors; adopting amendments to our articles of continuance and by-laws; and approving a merger or consolidation, liquidation, or sale of all or substantially all of our assets. The Dan Group may have interests that differ from yours. For example, the Dan Group may decide not to enter into a transaction in which our shareholders would receive consideration for their common shares that is much higher than the cost of their investment in our common shares or the then applicable market price of our common shares. Alternatively, the Dan Group can effectively hand pick our Directors and can ensure that, in each election, our current Directors are either re-elected or ousted, en mass. This level of control can lead to the entrenchment of our management. Any member of the Dan Group could decide to sell its common shares, subject to applicable securities laws. We do not have any control over any decision that any member of the Dan Group may make in the future regarding its continued ownership of our common shares. If any member of the Dan Group pledges its common shares as security for indebtedness, any realization on this security could result in sale of these common shares. We cannot make any prediction as to the effect, if any, a future sale of common shares of this nature may have on the market price of our common shares. However, sales of substantial amounts of common shares, or the perception that these sales could occur, could adversely affect the market price of our securities. These sales also might make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate. Mr. Dan is the Chairman of our board of directors, but no member of the Dan Group is part of the management of our company. WE HAVE NOT PAID, AND DO NOT INTEND TO PAY, ANY CASH DIVIDENDS ON OUR COMMON SHARES AND THEREFORE OUR SHAREHOLDERS MAY NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY SELL THEM. We have never paid dividends on our common shares and we do not expect to have the ability to pay dividends in the foreseeable future. If we generate earnings in the future, we expect that they will be retained to finance further growth and, when appropriate, retire debt. Our board of directors will determine if and when dividends should be declared and paid in the future based on our financial position and other factors relevant at the particular time. Until we pay dividends, which we may never do, you will not be able to receive a return on your investment in our common shares unless you sell them, which you may only be able to do at less than the price you paid for them. THE MARKET PRICE AND TRADING VOLUME OF OUR COMMON SHARES MAY BE VOLATILE. The market price and trading volume of our common shares on the TSX has experienced significant volatility and will likely continue to do so, which has been or could be in response to numerous factors, including: - quarterly variations in operating results; - market conditions in the industry; - announcements of results of testing, technological innovations or new product candidates or products by us, or the introduction of new products by our competitors; - our customers or competitors, government regulations, developments concerning proprietary rights, litigation, and public concerns as to the safety of our product candidates; - announcements of acquisitions; 23 - general fluctuations in the stock market; - revenues and results of operations below the expectations of the public market; and - the fact that most of our common shares are held by the Dan Group, which may affect the volatility and liquidity of our common shares because there is a limited number of shares available for trading by persons other than the Dan Group. Any of these factors could result in a sharp decline in the market price of our common shares. Since January 1, 2003, on a post-share consolidation basis, the trading price of our common shares has ranged from a low of $1.40 per share to a high of $4.80 per share. Price fluctuations during that period were generally in keeping with general trends in the stock price of biotech companies generally, but our stock price increased in the fall of 2004 in response to the announcement of positive Phase I clinical results for Proxinium(TM). During 2004, an average of approximately 8,236 of our shares traded per day on the TSX, although on some trading days our shares did not trade at all. In addition, stock markets have occasionally experienced extreme price and volume fluctuations. Historically, the market prices for the securities of biopharmaceutical companies, including ours, have been particularly affected by these market fluctuations, and these effects have often been unrelated to the operating performance of these particular companies. These broad market fluctuations may cause a decline in the market price of our common shares. WE MAY NOT MEET THE RELEVANT AMEX LISTING CRITERIA, OR IF WE DO, THERE COULD BE A LIMITED MARKET FOR OUR COMMON SHARES, WHICH COULD REDUCE LIQUIDITY AND INCREASE VOLATILITY IN OUR TRADING PRICE. We intend to apply to list our common shares for trading on Amex, but we cannot assure you that our application, if made, will be approved. Even in the event we are listed on Amex, we cannot assure you that an active trading market in our common shares in the U.S. will be established, or, if established, sustained. As noted in "The Offer and Price History -Price History", the market price and trading volume of our common shares on the TSX is volatile. In the event we are listed on Amex, the market price for our common shares on Amex could be subject to wide fluctuations. The following factors may have a significant impact on the market price of our common shares: - quarterly variations in operating results; - market conditions in the industry; - announcements of results of testing, technological innovations or new product candidates or products by us, or the introduction of new products by our competitors; - our customers or competitors, government regulations, developments concerning proprietary rights, litigation, and public concerns as to the safety of our product candidates; - announcements of acquisitions; - general fluctuations in the stock market; - revenues and results of operations below the expectations of the public market; and - the fact that most of our common shares are held by the Dan Group, which may affect the volatility and liquidity of our common shares because there is a limited number of shares available for trading by persons other than the Dan Group. In addition, the stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of particular companies. 24 THE SIGNIFICANT COSTS THAT WE WILL INCUR AS A RESULT OF BEING A PUBLIC COMPANY IN THE UNITED STATES AND CANADA COULD ADVERSELY AFFECT OUR BUSINESS. We intend to apply to list our common shares on Amex, and if our application is approved, we will incur significant legal, accounting and other expenses as a public company on both Amex and the TSX. These expenses include, among others, costs with respect to preparing securities regulatory filings, costs in connection with compliance with the internal control audit provisions of the Sarbanes-Oxley Act of 2002, costs in connection with other provisions of the Sarbanes-Oxley Act, Amex listing fees and potentially higher director and officer insurance premiums. We currently expect our annual compliance expenses to increase by approximately $500,000 per year upon listing on Amex. In addition, the requirements we will face by being listing on Amex will impose significant time demands on our management. Although it has not yet been a problem for us, becoming subject to the reporting obligations of the Exchange Act could make it more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. AS A FOREIGN PRIVATE ISSUER, WE ARE SUBJECT TO DIFFERENT U.S. SECURITIES LAWS AND RULES THAN A DOMESTIC ISSUER, WHICH MAY, AMONG OTHER THINGS, LIMIT THE INFORMATION AVAILABLE TO HOLDERS OF OUR SECURITIES. As a foreign private issuer, we are subject to requirements under the Securities Act and the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are different from the requirements applicable to domestic U.S. issuers. For example, our officers, directors, and principal stockholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder with respect to their purchases and sales of our common shares. The periodic disclosure required of foreign private issuers is more limited than the periodic disclosure required of U.S. issuers and therefore there may be less publicly available information about us than is regularly published by or about U.S. public companies in the United States. Also, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. ITEM 4: INFORMATION ON THE CORPORATION A. HISTORY AND DEVELOPMENT OF THE CORPORATION. Viventia Biotech Inc. was incorporated in the Province of British Columbia, Canada on November 14, 1983 under the name of Illecillewaet Exploration Ltd. From our incorporation until 1995, we underwent various name changes, reorganization transactions and continuances in various jurisdictions. On May 22, 1987, we filed articles of amendment changing the name of the corporation from Illecillewaet Exploration Ltd. to Wirlwind Resources Ltd. On December 12, 1991, we filed articles of amendment changing the name of Wirlwind Resources to Spirit Resources Ltd. On July 31, 1992, we were continued in the State of Wyoming under the name Spirit Resources Ltd. On March 3, 1993 we completed a merger between Hygeia Delaware, incorporated on July 2, 1992, and Spirit Resources Ltd., forming Hygeia Delaware. On July 12, 1995, we completed a merger between Hygeia Holdings, Inc., incorporated on April 4, 1995 in Wyoming, and Hygeia Delaware, forming Hygeia Holdings, Inc. (Wyoming). On July 18, 1995 we completed a merger between Hygeia Pharmaceuticals, Inc., incorporated on October 2, 1991 in California, and Hygeia Holdings, Inc. (Wyoming) forming Hygeia Holdings, Inc. (Wyoming). On July 21, 1995, we were continued in the Province of British Columbia under the name Novopharm Biotech Inc. On July 28, 1995, Novopharm Biotech Inc. completed a business combination with the Biotech Monoclonal Division of Novopharm Limited to acquire certain biotechnology assets of Novopharm Limited. On August 25, 1997, we completed an amalgamation with Genesys Pharma Inc. under the name Novopharm Biotech Inc. On July 9, 1998, we were continued under the Business Corporations Act (Ontario), or OBCA, under the name Novopharm Biotech Inc. Until December 31, 1999, all of our research and development activities were conducted through Novopharm Biotech Partnership I and Novopharm Biotech Partnership II. Both entities were partnerships between us and Novopharm Limited. 25 Partnership I was wound up effective July 31, 1998, and from then until December 31, 1999, all of our research and development activities were carried out through Partnership II. On the expiry of that partnership agreement, Partnership II was wound up and all remaining assets were transferred to us. Effective January 1, 2000, all of our research and development activities were carried out through Novopharm Biotech Inc. and we began reporting the results of our research and development activities and operations directly through our own financial statements. No partnership or other arrangement exists between us and Novopharm Limited. On September 11, 2000, we filed articles of amendment to change our name to Viventia Biotech Inc. The name change was required as a result of the sale of Novopharm Limited in April 2000 to Teva Pharmaceutical. Although our company was not included in this sale, ownership of the trade name "Novopharm" was transferred to Teva Pharmaceutical, prompting the need to change our name. As a result of our name change, on October 17, 2000, our common shares, which had previously traded under the symbol "NBI", began trading under the symbol "VBI" on the TSX. On May 7, 2004, our shareholders approved a special resolution authorizing the consolidation of our issued and outstanding common shares on a ten (10) for one (1) basis, and we filed articles of amendment dated May 10, 2004 to give effect to this consolidation. On May 12, 2004, our common shares began trading on a consolidated basis on the TSX. Our registered and head office is located at 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7, our phone number is (416) 291-1277, our fax number is (416) 335-9306 and our website address is www.viventia.com. The contents of our website are not incorporated by reference into this registration statement. We maintain an approximately 31,100 square foot manufacturing, laboratory, warehouse, and office facility at 147 Hamelin Street, Winnipeg, Manitoba, Canada, R3T 3Z1. Our agent for service in the United States is Torys LLP, 237 Park Avenue, New York, USA, 00137 3142. From 2000 to 2002, we were primarily focused on the development of our two prior lead product candidates, VB2-011 (formerly H11) and 4B5, while concurrently building our core platform technologies. During 2002, we moved from a strategy of developing only two lead products to a strategy based on the development of multiple product candidates. You should refer to " -Business Overview -Our Platform of Technologies" in this registration statement for a discussion of our current product candidates and strategy. Investments in capital assets totaled $2,355,000 during the last three full fiscal years and through March 31, 2005. These investments consisted primarily of plant equipment, leasehold improvements and office computer equipment.
PERIOD CAPITAL EXPENDITURES CAPITAL DISPOSITIONS - --------------------------------- -------------------- -------------------- Three Months Ended March 31, 2005 $ 1,069,000 $ 0 Year ended December 31, 2004 $ 931,000 $ 175,000 Year ended December 31, 2003 $ 223,000 $ 6,000 Year ended December 31, 2002 $ 132,000 $ 38,000
Work on the upgrading of the Winnipeg facility was completed in May 2005. There is no indication of any public takeover offers by third parties in respect of our common shares or by us in respect of other companies' common shares which have occurred during the last or current financial year. B. BUSINESS OVERVIEW. OVERVIEW We are a biopharmaceutical company specializing in the discovery and development of fully human monoclonal antibody therapies for the treatment of cancer. We currently have a lead product candidate in Phase I clinical development, Proxinium(TM), formerly VB4-845, for the treatment of head and neck cancer and bladder cancer. We also have several other product candidates, one of which, VB6-845 is in active pre-clinical development. Our platform of technologies is based upon the isolation of human monoclonal antibodies obtained from cancer patients and the development of those antibodies to deliver cytotoxic (cancer killing) "payloads" to cancer cells. We believe 26 that our platform has the potential to develop safer, more potent anti-cancer therapeutics than those that are currently available. We have a manufacturing facility that is intended to produce multiple product candidates per year, and that we believe will produce sufficient quantities of our Armed Antibodies(TM) to meet our currently anticipated pre-clinical and clinical trial needs. OUR DEVELOPMENT PLANS PROXINIUM(TM) FOR HEAD AND NECK CANCER Our second Phase I clinical trial, which we refer to as "Dosing Schedule 2", was completed in March 2005. Patient enrollment was completed in January, 2005. We intend to collate safety and efficacy data obtained from both our first Phase I clinical trial, which we refer to as "Dosing Schedule 1", and Dosing Schedule 2 in order to establish the optimal dose schedule and drug concentration for Proxinium(TM) treatment in this patient population. Refer to "Our Armed Antibodies(TM) Pipeline -Proxinium(TM) -Our Lead Product Candidate - -Proxinium(TM) for the Treatment of Head and Neck Cancer" in this registration statement for a discussion of Dosing Schedule 1 and Dosing Schedule 2. On March 29, 2005 we reported preliminary results from an exploratory Phase I efficacy trial using direct intratumoral injection of Proxinium(TM) as a monotherapy for the treatment of patients with recurrent, refractory head & neck cancer. Preliminary efficacy analysis showed that 25% of the 16 evaluable patients who expressed the therapeutic target for Proxinium(TM) had a complete response to therapy (complete disappearance of treated tumor); 63% had an objective response (significant or partial shrinkage of treated tumor); and 88% had tumor growth control (objective response or stabilization of disease). The drug was reported to have a good safety profile and was well tolerated, consistent with previous results. Given these results, and the recent granting of Orphan Drug designation by the FDA, we are advancing our plans to begin our first pivotal study for Proxinium(TM) by the end of 2005. After meeting with the FDA in March 2005, we now have clear direction as to how to advance our clinical program for Proxinium(TM) in the United States. PROXINIUM(TM) FOR BLADDER CANCER We anticipate that our Phase I clinical trial being conducted in Canada will be completed by the end of the third quarter of 2005. If the results of this trial are successful, we expect to submit a Phase II clinical trial protocol for approval to the FDA and other jurisdictions by the fourth quarter of 2005. If this application is successfully approved, we anticipate that a Phase II clinical trial could begin by the end of the fourth quarter of 2005 and we would attempt to complete enrollment in approximately 18 months. VB6-845 FOR OVARIAN CANCER We anticipate that the preclinical safety and efficacy studies for our next drug candidate, VB6-845, for the treatment of ovarian cancer, will be completed by the end of the second quarter of 2005. If these studies are successful, we intend to submit a clinical trial application for approval in the third quarter of 2005. The appropriate jurisdiction in which to conduct this clinical study, if commenced, is under consideration. OTHER PRODUCT CANDIDATES We intend to continue to advance the research and development of certain other potential product candidates in 2005, with an expectation that at least one candidate product will enter into preclinical safety and efficacy studies by the end of 2005. We intend to continue our discovery and screening research throughout 2005 with a view to continuing to add to our portfolio of monoclonal antibodies. OUR PRODUCT DEVELOPMENT STRATEGY Our product development strategy is based on building a discovery and development engine to move monoclonal antibodies from discovery through pre-clinical testing and into clinical trials. We use the immune response of cancer patients for antibody generation and target discovery. Our product development strategy is designed to meet two key needs in the pharmaceutical industry: 27 - the need to accelerate the introduction of new products that address unmet medical needs more quickly than current industry norms; and - the need to fill product development pipelines as patent protection expires. In order to meet these needs, we focus on three key strategic research and development initiatives: - Developing a Broad Antibody Portfolio. We have developed a means to obtain anti-cancer antibodies from cancer patients and select the most promising antibodies from those obtained to add to our portfolio as potential development candidates. Our integrated platforms, Hybridomics(TM), ImmunoMine(TM), and UnLock(TM), facilitate the discovery of both human monoclonal antibodies and their corresponding antigen targets. For a discussion of our platforms, refer to " -Our Platform of Technologies" in this registration statement. - Building a Promising Product Pipeline. We are building a monoclonal antibody product pipeline of Armed Antibodies(TM) that we believe has therapeutic and commercial potential for the treatment of many forms of cancer. Our approach to cancer therapy is based upon engineering our antibodies with cytotoxic protein payloads in order to develop safer, more potent cancer therapies than are currently available. For a discussion of our product candidates, refer to " -Our Armed Antibodies(TM) Pipeline" and " -Our Platform of Technologies" in this registration statement. - Leveraging our In-house Product Development and Manufacturing Capabilities. Our in-house expertise and capabilities in process development and manufacturing allow us to reduce product development timelines by manufacturing antibodies for research and preclinical testing and subsequently transferring production into our fermentation suite to manufacture material intended for use in clinical trials. This particular advantage also reduces costs compared to contracting third party process development and manufacturing. OUR BUSINESS MODEL We believe that our product development strategy identified above provides us with multiple opportunities for value creation. Our business model has two central elements that leverage our research and development initiatives, capabilities and core competencies: - ENTERING INTO SALES AND MARKETING PARTNERSHIPS. We intend to discover and develop multiple lead product candidates and advance them through to clinical trials. If any of our product candidates successfully advance to and complete Phase II clinical trials, we intend to either finance further clinical development ourselves or enter into strategic partnerships with third parties in order to finance further clinical development, such as Phase III clinical trials. Ultimately, we intend to seek third parties as partners to market, sell and distribute any of our products that may be approved. Refer to "Risk Factors" and "Major Shareholders and Related Party Transactions -Related Party Transactions -Teva Pharma B.V." in this registration statement. - OUT-LICENSING ANTIBODIES AND TECHNOLOGIES. We believe one of the benefits of our integrated platform is that we generate more antibodies than we are able to develop ourselves. We plan to license to third parties those antibodies from our portfolio which we do not intend to develop and have already entered into arrangements to do so. In addition, we intend to out-license certain of our payload technologies to third parties. ABOUT MONOCLONAL ANTIBODIES Antibodies are naturally occurring proteins produced by the B-cells of the human immune system, and serve as an important defense against disease and infection. Human B-cells produce millions of different types of antibodies, all with a unique molecular structure that cause them to attach to and neutralize specific disease targets, referred to as antigens. For example, certain antibodies seek out and attach to viruses, bacteria, or diseased cells, making them susceptible to destruction by the human immune system. A single B-cell produces only one type of antibody referred to as a monoclonal antibody, and, conceptually similar to a lock and key mechanism, each monoclonal antibody (the key) has a unique molecular structure that directs it to a specific target antigen (the lock). Researchers 28 discovered that this antibody response could be replicated for therapeutic benefit and this resulted in a number of approved antibody drugs. THE EVOLUTION OF MONOCLONAL ANTIBODY TECHNOLOGY The first generation of monoclonal antibody technology designed to replicate the human body's defense mechanism consisted of antibodies obtained from mice (murine) and later chimeric antibodies (derived from a combination of mouse and human protein sequences). These early antibodies found application in the diagnosis and treatment of certain cancers, such as non-Hodgkin's lymphoma. These antibodies contain mouse protein sequences and, as a result, the human immune system tends to recognize them as foreign. When this recognition occurs, the human body quickly neutralizes and eliminates them, necessitating frequent administration of the antibodies to have any therapeutic effect. When patients are repeatedly treated with mouse or chimeric antibodies, they begin to produce their own antibodies that effectively neutralize the therapeutic antibody, a reaction referred to as a "human anti-mouse antibody", or HAMA, response. In many cases, the HAMA response prevents the antibodies from having the desired therapeutic effect and may cause the patient to have a potentially life threatening allergic reaction known as anaphylaxis. Recognizing this limitation, over the last ten years, improvements in the technology have permitted the creation of second generation humanized antibodies, in which the mouse antibody is engineered to appear more human than mouse to the human immune system. Despite this development, these antibodies still frequently elicit a HAMA response. Most recently, so-called "human" monoclonal antibodies have been developed that may be regarded as the third generation of antibodies. These antibodies are commonly developed according to two broad technologies: phage display and transgenics. While these "human" antibodies theoretically contain a higher level of human protein sequence than their corresponding humanized, chimeric, or murine counterparts, unlike our antibodies, they are not human in origin, but have been generated through laboratory techniques using antibodies attached to the cell surfaces of bacterial viruses (phage display technology), or through artificial genetic recombination of mouse genes and human genes (transgenic technology) to produce synthetic antibodies having target recognition and other qualities similar to that of human antibodies. According to a 2002 industry survey by the Pharmaceutical Research and Manufacturers of America, or PhRMA, antibodies accounted for over 20% of all biopharmaceutical products in clinical development. There are a number of monoclonal antibody products that are currently being marketed in the United States for a wide range of medical disorders such as cancer, transplant rejection, cardiovascular disease, and infectious diseases. Combined worldwide sales of two monoclonal antibody products for the treatment of cancer, Rituxan(R) (non-Hodgkin's lymphoma) and Herceptin(R) (breast cancer), represented approximately US$2.0 billion in revenues in 2003. For a discussion of other monoclonal antibody products, refer to " -Competition" in this registration statement. OUR APPROACH TO MONOCLONAL ANTIBODIES We have developed an approach in the field of monoclonal antibodies that we believe has certain distinctive competitive advantages over other technologies and therapeutic approaches. Our integrated platform is based on two key features: - Isolating the Human Antibody Response to Cancer. In normal physiology, the human immune system recognizes cancer cells as being abnormal and produces antibodies against those cancer cells. We have developed the means to obtain anti-cancer antibodies from cancer patients and to select the most promising antibodies from those obtained to add to our portfolio as potential drug development candidates. We believe that an advantage of our fully human monoclonal antibodies is that the human body is less likely to respond to them as foreign (as may be the case with mouse, chimeric, or humanized antibodies) and, as such, it is less likely to neutralize them. In addition, our discovery and development platforms eliminate many of the steps involved in standard approaches to monoclonal antibody research, and, as a result, we believe that our development timelines from antibody discovery to the start of clinical trials may be reduced from an industry average of over six years to less than 18 months. For a description of our discovery and development platforms refer to " -Our Platform of Technologies" in this registration statement. - Delivering Potent Payloads. Our approach to cancer therapy is based upon engineering our antibodies with cytotoxic protein payloads to create our Armed Antibodies(TM). We have developed technologies in 29 cytotoxic protein delivery that have the potential to offer safer, more beneficial therapies for cancer patients. Our pre-clinical and preliminary Phase I clinical data suggest that targeted delivery of our cytotoxic payloads may lead to fewer side effects than standard chemotherapy due to less damaging toxicity to healthy, non-cancerous tissue. In addition, we are developing our payloads to be more potent than current anti-cancer drugs in order to increase their effectiveness against tumors. We believe the key advantages of our integrated platform of technologies are: - Selectivity. Our ImmunoMine(TM) process selectively identifies antibodies that react with cancerous cells. Pre-clinical data indicate that our Armed Antibodies(TM) bind preferentially to antigens expressed on the surface of cancer cells over normal, healthy cells. As part of our screening program, we specifically rule out antibodies that bind to critical normal tissues. - Tumor-Activated Potency. Pre-clinical data suggest that our cytotoxic protein is only activated once inside the cancer cell, and can be at least 10,000 times more potent than current anti-cancer drugs. - Safety. We believe that our Armed Antibodies(TM) may be safer and more tolerable for patients than existing anti-cancer drugs due to their selectivity to cancer cells and their tumor-activated potency. - Compatibility. Pre-clinical data suggest that neither our human-generated Hybridomics(TM) monoclonal antibodies nor our cytotoxic protein will be neutralized by the human immune system. - Patient Benefit. Based on these key properties and advantages, we believe that therapy using our Armed Antibodies(TM) may achieve a more beneficial therapeutic outcome for cancer patients. OUR ARMED ANTIBODIES(TM) PIPELINE The following chart illustrates our current view of the stage of development of each of our product candidates.
PRODUCT CANDIDATE INDICATION STAGE OF DEVELOPMENT STATUS - --------- -------------------- -------------------- ---------------------------------- Proxinium(TM) Head and neck cancer Phase I Clinical trial completed in Russia Head and neck cancer Phase I Clinical trial completed in Brazil Bladder cancer Phase I Actively enrolling in Canada VB6-845 Ovarian cancer Pre-clinical Preclinical efficacy and safety studies in progress VB6-050 Solid tumors Pre-clinical Research VB6-008 Solid tumors Pre-clinical Research VB6-011 Solid tumors Pre-clinical Research
The process of the development and commercialization of biopharmaceutical products is a lengthy one. Our products are at an early stage of development and we cannot assure you when, if ever, they may be commercialized. For a discussion of the regulatory process and the risks associated with the development and commercialization of our product candidates, refer to "Biopharmaceutical Regulatory Matters" and "Risk Factors" in this registration statement. PROXINIUM(TM) -OUR LEAD PRODUCT CANDIDATE Our development rationale for Proxinium(TM), formerly known as VB4-845, is based upon pre-clinical safety and efficacy studies. Data derived from our pre-clinical studies demonstrate that Proxinium(TM) binds to its cell surface target and is internalized into the cell, leading to activation of its cancer killing payload. In several mouse models, Proxinium(TM) has been shown to shrink large tumors that have been grown in the mice, and has generated complete tumor regressions in a significant number of these mice. Pre-clinical safety studies conducted on 27 animals 30 suggested that Proxinium(TM) therapy should be safe and well tolerated in humans. We are currently developing Proxinium(TM) for the treatment of two clinical indications: head and neck cancer and bladder cancer. Proxinium(TM) for the Treatment of Head and Neck Cancer We have chosen to develop our lead product candidate Proxinium(TM) initially for the treatment of locally recurrent head and neck cancer. Head and neck cancer consists of soft tissue tumors of the larynx, tongue, mouth, oral cavity, and pharynx. Globally, head and neck cancer is the sixth most common form of cancer. In the United States, the American Cancer Society estimated that there would be approximately 28,260 new cases of head and neck cancer diagnosed in 2004. Only a small number of advanced head and neck tumors can be treated by surgery or radiation therapy, and medical literature provides that single agent chemotherapy has demonstrated a less than 10% success rate to date. Our Phase I clinical development strategy for Proxinium(TM) for the treatment of head and neck cancer is to test two dosing schedules, each one in a separate clinical trial. One of these trials has already been completed in Russia and one has completed enrollment in Brazil. These clinical trials were primarily designed to establish the safety profile and tolerability of Proxinium(TM) in patients with locally recurrent head and neck cancer. In addition, these studies were intended to provide a preliminary assessment of the effectiveness of the drug over an escalating dose range. We intend to employ a dosing schedule based on the most effective of these two dosing schedules in a subsequent Phase II clinical trial, which we intend to hold in North America, subject to regulatory approval. Our two dosing schedules are as follows: - Dosing Schedule 1. We have recently completed the enrollment of patients in an open-label Phase I clinical trial. This study was performed in Russia, a country in which there is a high incidence of head and neck cancer and was completed in just over eight months duration. The clinical research organization we used in Russia to conduct this clinical trial has advised us that it has previously supervised clinical trials for other companies and the data generated from those trials have been used to support certain New Drug Applications, or NDAs, in the United States. Patients enrolled in this study had advanced head and neck cancer and continuing disease progression, and the majority had failed previous courses of surgery, chemotherapy and/or radiotherapy. The study demonstrated the safety and tolerability of Proxinium(TM) monotherapy over an escalating dose range. Proxinium(TM) treatment resulted in several independently verified clinical responses. Of the 24 patients that were dosed in the study, 17 patients expressed the therapeutic target for Proxinium(TM), from which 14 patients were evaluated for their response to treatment. Of those 14 patients, two patients experienced significant tumour regressions of their treated lesions and four other patients experienced minor tumour regressions, yielding an objective response rate of 43%. Four other patients had stable disease following Proxinium(TM) treatment. Tumour growth control (objective responses plus stable disease) was therefore achieved in 71% of treated lesions. - Dosing Schedule 2. We are currently testing the second dosing schedule for Proxinium(TM)for the treatment of head and neck cancer in a second Phase I clinical trial being carried out in five clinical centers in Brazil, a country in which there is also a high incidence of head and neck cancer. The clinical research organization we are using in Brazil to conduct this clinical trial has advised us that it has previously supervised clinical trials for other companies in Brazil and the data generated from those trials have been used to support certain NDAs in the United States. 20 patients have been dosed in this clinical trial and enrollment is completed. On March 29, 2005 we reported preliminary results from an exploratory Phase I efficacy trial using direct intratumoral injection of Proxinium(TM) as a monotherapy for the treatment of patients with recurrent, refractory head & neck cancer. Preliminary efficacy analysis showed that 25% of the 16 evaluable patients who expressed the therapeutic target for Proxinium(TM) had a complete response to therapy (complete disappearance of treated tumor); 63% had an objective response (significant or partial shrinkage of treated tumor); and 88% had tumor growth control (objective response or stabilization of disease). The drug was reported to have a good safety profile and was well tolerated, consistent with previous results. Given these results, and the recent granting of Orphan Drug designation by the FDA, we are advancing our plans to begin our first pivotal study for Proxinium(TM) by the end of 2005. After meeting with the FDA in March 2005, we now have clear direction as to how to advance our clinical program for Proxinium(TM) in the United States. 31 We received orphan drug designation from the FDA on February 3, 2005 for Proxinium(TM) for the treatment of advanced, recurrent head and neck cancer. The U.S. Orphan Drug Act provides financial, regulatory and marketing incentives to companies to help facilitate the development and marketing of drugs for the treatment of rare diseases or conditions that affect fewer than 200,000 patients in the United States. Orphan drug designation entitles Viventia to various incentives, including seven years of market exclusivity in the United States if Proxinium(TM) receives marketing approval by the FDA. Orphan drug status is granted to a company for a specific drug product for a specific indication. Other drug products may receive orphan drug status for a similar or perhaps identical indication. If this were to happen, Proxinium(TM) would compete in the marketplace on equal terms with all drug products granted orphan drug status for the treatment of head and neck cancer. As with all drug products, the success of Proxinium(TM) would be based on certain factors including: price, effectiveness and ease of administration. If we were to be faced with this competition, particularly from other products with orphan drug status, we believe that the economic advantages of having orphan drug status would be reduced or eliminated. Proxinium(TM) for the Treatment of Bladder Cancer The American Cancer Society estimated that over 60,000 new cases of urinary bladder cancer would be diagnosed in the United States during 2004. Based on pre-clinical testing of Proxinium(TM) in various in vitro models of bladder cancer, a disease in which the antigen target for Proxinium(TM) has been amplified, we have determined that Proxinium(TM) has extremely low reactivity with normal bladder tissue at clinically relevant doses, and, based on this data, we believe it should be safe and well tolerated in humans. If our Phase I clinical data are positive, we intend to develop Proxinium(TM) for the treatment of bladder cancer patients who have failed prior standard therapies, and for whom surgery to remove the bladder is frequently the only recommended therapeutic option. We are not aware of any products currently approved in North America for the treatment of this class of patient. We have received approval from Health Canada to commence a Phase I clinical trial for the treatment of bladder cancer, and are actively enrolling patients to this study. In the fourth quarter of 2004, we received approval of a protocol amendment submitted to Health Canada to increase the dose administered and we expect to enroll up to 40 patients in this study. OUR NEXT PRODUCT CANDIDATES VB6-845, VB6-050, VB6-008, VB6-011 for the Treatment of Solid Tumors These pre-clinical Armed Antibodies(TM) consist of monoclonal antibodies from our portfolio engineered with our proprietary cytotoxic protein. In our pre-clinical testing, these antibodies have been shown to bind to distinct antigens found on a variety of solid tumors, such as ovarian, breast, prostate, and lung cancers. We have demonstrated that VB6-845 has effective cancer cell killing properties in pre-clinical tests. We are currently producing pre-clinical batches of VB6-845 in our manufacturing facility. We have initiated animal efficacy studies and safety studies for VB6-845 for the treatment of ovarian cancer. VB6-050, VB6-008 and VB6-011 are currently in early stage research testing. OUR PLATFORM OF TECHNOLOGIES Our approach to the field of antibody therapeutics is to use the human immune response to cancer which generates human monoclonal antibodies in response to exposure to a corresponding antigen target on the surface of the cancer cell. This is in contrast to the industry standard approach in the field of monoclonal antibody research, which involves first identifying an antigen and validating its relevance as a cancer target, and then generating antibodies against that antigen through a variety of means. Subsequent development may involve improving upon the properties of the antibody to enable clinical development. Our discovery and development approach eliminates these stages and, as a result, we believe that our development timelines from antibody discovery to the start of clinical trials may be reduced from an industry average of over six years to less than 18 months. This anticipated reduction in development timelines is based on the successful integration of our technology platforms: Hybridomics(TM), ImmunoMine(TM), UnLock(TM), and Armed Antibodies(TM). 32 Hybridomics(TM) We have developed an antibody discovery platform that employs the human immune response to cancer. Hybridomics(TM) is based on technology used to isolate human antibodies obtained from cancer patients. The first step in this process is the acquisition of clinical samples from cancer patients, from which we isolate immune cells. These clinical samples are used to create an antibody-producing "hybridoma" cell, formed by fusing the cancer patient's immune cells with a second, immortalized cell. These hybridoma cells act as antibody producing "factories" from which we isolate the human antibodies which enter our screening process, ImmunoMine(TM). ImmunoMine(TM) ImmunoMine(TM) is a high-throughput screening platform that we have built to characterize the monoclonal antibodies we have obtained from cancer patients in order to select the most promising antibodies for their ability to deliver cell-killing payloads selectively to cancer cells. ImmunoMine(TM) consists of a rapid screening "funnel" that distinguishes human antibodies that react specifically with cancer cells and not normal tissues from those that do not have those properties. Antibodies that successfully complete our ImmunoMine(TM) screening process are then added to our portfolio of tumor selective monoclonal antibodies. UnLock(TM) We begin the UnLock(TM) antigen identification research program when a promising antibody reaches an advanced stage of the ImmunoMine(TM) screening process. UnLock(TM) is our protein characterization platform that we have built to identify the antigen targets of our monoclonal antibodies and is based upon leading-edge protein identification tools and techniques. Using the immune response to cancer as a drug discovery approach provides us with an opportunity to isolate antibodies that target specific antigens only found on the surface of cancer cells. Our approach is in contrast to the industry standard approach in monoclonal antibody research, which involves first identifying an antigen and determining its relevance as a cancer target, and then generating antibodies through a variety of means. The integration of our Hybridomics(TM), ImmunoMine(TM), and UnLock(TM) platforms provides us the potential to discover unique human monoclonal antibodies and their corresponding novel antigen targets. Armed Antibodies(TM) Used alone, antibodies have the potential to recognize tumor cells but are frequently not potent enough to provide a significant medical benefit to the patient. An alternative use of antibodies that makes them more effective therapeutics is to link them with cancer killing payloads. Potential payloads include radioisotopes or small molecule cytotoxic drugs. We believe that our Armed Antibodies(TM) platform, which is based upon engineering our antibodies with potent, cytotoxic proteins, represents an evolution in both payload delivery technology and protein drug manufacturing. The human body typically recognizes cytotoxic proteins as foreign and neutralizes them, limiting their therapeutic potential. To alleviate this constraint, we have modified a cytotoxic protein we had previously licensed by identifying and removing various regions of the cytotoxic protein that the human immune system could have potentially recognized and subsequently neutralized. Pre-clinical data indicate that this modified cytotoxic protein retains all of its cancer killing activity but will not be recognized or neutralized by the human immune system. We intend to engineer this protein with our monoclonal antibodies to generate Armed Antibodies(TM) for development as potent anti-cancer therapeutics. OUR MANUFACTURING CAPABILITIES According to a number of biopharmaceutical industry sources, as cited in articles published in Red Herring, ContractPharma, Betterhumans, BusinessWeek, Hum-Molgen and a research report published by UBS Warburg, a worldwide shortage of biologics manufacturing facilities currently exists and is expected to persist for some time, which has the potential to have a negative impact on the movement of new biopharmaceutical products, both into clinical development and into commercial sales. This is why we believe that our in-house manufacturing capability is a valuable asset for us. 33 The biopharmaceutical manufacturing infrastructure at our 31,100 square foot facility in Winnipeg, Manitoba consists of a classified fermentation suite and post-production processing capabilities currently dedicated to producing our Phase I clinical trial batches and clinical trial batches for any future Phase II clinical trials. We have fully integrated research, process development, and manufacturing facilities, which we believe have the potential to reduce product development timelines and increase the probability of successful scale-up for commercialization. Our capabilities span all phases of the antibody production process, including the production of whole antibodies, antibody fragments, cytotoxic proteins, and Armed Antibodies(TM). Our manufacturing facility is intended to produce multiple product candidates per year and we believe it will produce sufficient quantities of our drug candidates to meet our currently anticipated clinical trial needs. In addition, we believe that our in-house production capabilities will allow us to supply our pre-clinical, quality, and product archiving requirements. We are currently manufacturing Proxinium(TM) in our manufacturing facility to supply materials for our clinical trials. INTELLECTUAL PROPERTY Our success depends, in part, on our ability to obtain and enforce patent and other intellectual property rights in respect of our antibody discoveries, cytotoxic proteins, and elements of, and improvements to, our technology platform and processes. We pursue patent coverage for our intellectual property in countries where we believe a substantial market for our product candidates exists. As described below, certain of our product candidates are the subject of patents and patent applications that we have licensed from third parties. Typically, license agreements expire on the expiration of the last patent licensed pursuant to the agreement. Our know-how and technology may not be patentable or we may, for strategic business reasons, elect not to patent our know-how and technology, though they may constitute trade secrets. To help protect our intellectual property rights, we require all of our employees to enter into a standard confidentiality and business ethics agreement which includes non-competition obligations. In addition, each employee is required to sign an acknowledgement that the employee has read and agrees to comply with our code of conduct including an acknowledgement that all research information and inventions remain our sole and exclusive property. Our consultants, advisors and collaborators are required to enter into non-disclosure agreements. We cannot assure you, however, that any of these agreements will provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use or disclosure. For a further discussion of this risk, refer to "Risk Factors" in this registration statement. INTELLECTUAL PROPERTY RELATING TO OUR PRODUCT CANDIDATES Proxinium(TM), VB6-845, VB6-050, VB6-008, and VB6-011 In January 2003, we exclusively licensed, on a worldwide basis, the rights to certain patent applications relating to the antibody used in Proxinium(TM) and VB6-845 from The University of Zurich, Switzerland. We are currently in the process of negotiating a license agreement in respect of one form of the antibody of our Proxinium(TM) product candidate. The payload used for VB6-845 is discussed below under "-Intellectual Property Relating to Our Platform of Technologies -Armed Antibodies(TM)". Pursuant to the Zurich license, we have exclusively licensed, on a world-wide basis, the rights to six patent applications related to our lead product candidate Proxinium(TM), of which two are in the United States, one is in each of Canada, Europe and Japan and one is an international application that relates to the use of Proxinium(TM) in the treatment of head and neck cancer (squamous cell carcinomas) and bladder cancer. The Zurich license provides that we make certain milestone payments to The University of Zurich in respect of certain stages of regulatory approval reached by a product candidate based on this antibody. In addition, we are obligated to pay royalties to The University of Zurich in respect of net sales of any product generated using this antibody, less certain amounts payable to third parties. 34 We have the obligations: - to make the records related to the agreement available to The University of Zurich for inspection and audit; - to diligently proceed with the development, manufacture and sale of licensed products; - to use reasonable efforts to promote the sale of licensed products; - to obtain all necessary government approvals for the manufacture, use and sale of licensed products; and - to submit reports to The University of Zurich on a regular basis. The University of Zurich must prosecute and maintain the patents and applications in patent rights, provided that we reimburse it for patent costs (preparation, filing, prosecution, and maintenance). The University of Zurich must provide us with drafts of all applications and papers it plans to file with any patent office at least 30 days before filing, and copies of all communications from patent offices promptly after receipt of them. We must apply for an extension of the term of any patent in patent rights if appropriate under the U.S. Drug Price Competition and Patent Term Restoration Act and/or European, Japanese and other counterparts of them. In 1994, we exclusively licensed, on a worldwide basis, the technology that we used to generate our VB6-050, VB6-008, and VB6-011 product candidates from McGill University. This license provides us with a fusion partner cell line that can be used to generate hybridomas from human immune cells. We pay an annual maintenance fee, and are obligated to pay milestone payments in respect of certain regulatory approvals and royalties on commercialization of any products. We intend to seek patent protection in respect of the composition of matter and therapeutic uses of these product candidates. As of the date of this registration statement, we had 18 patents and patent applications relating to VB6-011 in the United States, Canada, the European Union, and other countries, of which we have been granted five patents in the United States, Australia, New Zealand, and Singapore. Three of these five patents expire on May 22, 2017, one expires on May 22, 2016 and one expires on October 22, 2017. One of our pending Australian patent applications, which is a Divisional application to a granted patent, has been allowed, and no notice of opposition has been received during the three month opposition period. The expiry date for this Divisional application is May 22, 2017. In order for this Divisional application to be granted, the granted patent from which this Divisional application is derived will have to be surrendered. The Divisional application will include the scope of the surrendered patent. We have the obligation to protect and bear the cost of defending the patent rights of the patents we own. As of the date of this registration statement, we have one provisional patent application related to VB6-008 and one provisional patent application related to VB6-050, both filed in the United States. INTELLECTUAL PROPERTY RELATING TO OUR PLATFORM OF TECHNOLOGIES Hybridomics(TM) The intellectual property in our Hybridomics(TM) platform is protected by the law relating to trade secrets. We have licensed three technologies which we use as tools to assist us in implementing this platform. In addition to the McGill license, in June 2003 we licensed technology from The Trustees of Columbia University in the City of New York on an exclusive basis. This technology enables us to isolate human antibody-producing B-cells generated by an immune response from cancer patients, and fuse them with immortal human myeloma cells, creating antibody-producing human hybridoma cells capable of growing continuously in culture. Consistent with industry practice, we must make milestone payments in respect of certain stages of regulatory approval reached by a product candidate generated by this technology, as well as royalties calculated with respect to net sales of these products, less certain amounts payable to third parties. 35 We have the obligations: - to make the records related to the agreement available to the University of Columbia for inspection and audit; - to diligently proceed with the research and development of the licensed products; - to submit reports to the University of Columbia on a regular basis; and - not to use the name, insignia or symbols of the University of Columbia without its prior written consent. The University of Columbia must prepare, file, prosecute and maintain all licensed patents in its name (and in our name in the case of joint inventorship) under the agreement in countries designated by us. We reimburse the University of Columbia for some expenses incurred in filing, prosecuting and maintaining the licensed patents, and in some cases the expenses are shared equally by us and third parties. If we do not wish to have a licensed patent application filed or prosecuted in a particular country, the University of Columbia may file the application or continue prosecution at its own expense. ImmunoMine(TM) and UnLock(TM) Our processes in respect of the ImmunoMine(TM) and Unlock(TM) technologies are protected by the law relating to trade secrets and we anticipate seeking intellectual property protection, to the extent possible, in respect of any product candidates generated by these processes. Armed Antibodies(TM) The intellectual property rights in our Armed Antibodies(TM) platform consist of trade secrets and third party licenses. In August of 2002, we entered into a license agreement with Tanox, Inc., subsequently assigned by Tanox to the former shareholders of Tanox Pharma B.V., a subsidiary of Tanox, granting us an exclusive license to certain Tanox patents and know-how related to a patented cytotoxic protein. We have the obligations: - to make the records related to the agreement available to Tanox for inspection and audit; - to submit reports to Tanox on a regular basis; and - to not use the name of Tanox in any commercial or advertising activity without written permission. Tanox must prepare, file, prosecute, and maintain licensed patents during the term of the agreement and will pay all associated patent costs. We reimburse Tanox for all reasonable patent costs within 30 days after receiving a written invoice for the costs. All licensed patents must be filed, prosecuted and maintained in Tanox's name, and all patents on improvements must be filed, prosecuted, and maintained in our name. We must maintain control over the patents in a manner that preserves Tanox's rights to improvements. In October 2002, we entered into a research agreement with Biovation Ltd. (Merck KgaA) to further develop the cytotoxic protein licensed from Tanox. This collaboration identified and removed regions of this cytotoxic protein to which the human immune system would otherwise have responded. This research resulted in a cytotoxic protein that is less likely to be neutralized by the human immune system. In March 2004, as a result of the successful conclusion of the collaboration, we entered into an exclusive worldwide license with Biovation dated March 8, 2004, with respect to technology relating to methods of modifying regions of the cytotoxic protein. Under the Biovation license, we must make milestone payments in respect of certain stages of regulatory approval reached by a product candidate generated by this technology, as well as royalties calculated with respect to net sales of these products, less certain amounts payable to third parties. We have the obligations: - to make records related to the agreement available to Biovation for inspection and audit; 36 - to promote the sale of licensed products and use reasonable efforts to meet the market demand for the licensed products; - to submit reports to Biovation on a regular basis; and - to maintain comprehensive general liability insurance and product liability insurance, naming Biovation as an additional insured under our insurance policies. The licensor has the right, but not the obligation, to prosecute, file and maintain any patent applications or patents relating to any licensed patent rights under the agreement. We have the right, but not the obligation, to prosecute, file and maintain any patent applications or patents relating to any licensed patent rights under the agreement that claim or are otherwise directed to certain licensed products. These licenses include one patent that expires on June 8, 2018 and five patent applications or provisional patent applications relating to this cytotoxic protein, its use with antibodies or targeting agents and its therapeutic compositions. Specifically, the license includes one patent and three patent applications to the native form of the cytotoxic protein in the United States (one granted and one pending), Canada and Europe, and two provisional applications in the United States relating to modified, largely non-immunogenic forms of the cytotoxic protein. With respect to our licensed patent, the licensor has the right and option, but not the obligation, to litigate to protect the patent. If the licensor does not initiate an action, we have the right, but not the obligation, to do so. If we litigate, net recoveries are considered net sales and subject to royalty payments. Unless otherwise terminated in accordance with their terms, our key licenses will expire as follows:
LICENSOR EXPIRATION DATE - -------- --------------- University of Zurich The license expires on March 18, 2026, the expiration date of the longest-lived patent rights. McGill University The license expires on the earlier of (a) ten years from the date of commercialization of the first licensed product and (b) April 28, 2014. Columbia University The license expires on March 18, 2018, the expiration date of the last to expire licensed patents. Tanox The license expires (a) on a country-by-country basis in accordance with the license agreement, (b) ten years from the date of the first commercial sale of a particular licensed product in countries where there is no patent protection for that licensed product, or (c) December 21, 2025, the expiration date of the last to expire licensed patents in countries where there is available patent protection. Biovation The license is on a country-by-country and product-by-product basis, and expires on the later of (a) with respect to the rights in a particular country, ten years after the first commercial sale of a particular licensed product in that country, and (b) December 21, 2025, the expiration of the last to expire of the licensed patents.
The dates reflecting the expiration date of the longest-lived patent rights listed above do not take into consideration the possibility that a failure to maintain these patents, a terminal disclaimer or other future actions may affect the actual expiration date of the patents. Pending applications may never mature into patents, which could affect the lifespan of certain licenses. Finally, future applications could result in the extension of the license term beyond the dates listed above. Each of these licenses required us to make an upfront payment to the licensor. In addition, based on certain criteria and events, in the future, we may be required to make milestone payments to the licensors. The chart below indicates the amount of these upfront payments, the amount we have already paid to each licensor in the form of milestone payments, and the aggregate amount we could be responsible to pay to each licensor in the future. 37 McGill Up-Front Payment CDN $10,000 Milestone and Annual Payments to Date CDN $150,000 Aggregate of future Annual Payments and of possible future milestone payments (1) CDN $300,000 University of Zurich Up-Front Payment US$50,000 Milestone Payments to Date US$0 Aggregate of possible future milestone payments US$1,000,000 Columbia University Up-Front Payment US$50,000 Milestone Payments to Date US$0 Aggregate of possible future milestone payments US$575,000 Tanox Up-Front Payment US$250,000 Milestone Payments to Date US$150,000 Aggregate of possible future milestone payments US$7,300,000 Biovation Up-Front Payment US$25,000 Milestone Payments to Date US$25,000 Aggregate of possible future milestone payments US$8,500,000
- ---------------- (1) Some of these payments will be made regardless of whether milestones are met. INTELLECTUAL PROPERTY RELATING TO OUR MANUFACTURING Consistent with industry practice, our manufacturing processes are protected by the law relating to trade secrets. In November 2001, we entered into a non-exclusive license agreement with XOMA Ireland Ltd., under which we have licensed a proprietary bacterial cell expression technology intended to facilitate increases in antibody production yields. The XOMA license provides that we pay certain milestone payments, as well as royalties in respect of net sales of products only produced using this technology. We have the obligation to make records related to the agreement available to XOMA for inspection. The XOMA license expires on the later of (a) the expiration of the last patent with patent rights and (b) November 30, 2011. RESEARCH AND DEVELOPMENT COLLABORATIONS In the ordinary course of business, we enter into research and development arrangements with third parties to provide services to augment our discovery and development research. These third party developers are typically compensated on the basis of a fee for service, milestone payments, or royalty payments from the future sale of the products under development, or some combination of these factors. In May 2003, we entered into an exclusive monoclonal antibody discovery and screening collaboration with Affitech AS of Norway which originally expired in September 2004 but has been extended to expire on June 30, 2005. The goal of this research collaboration is to exploit the human immune response to cancer, generate human antibodies suitable for development as cancer therapeutics, and to identify the corresponding antigens for these antibodies. COMPETITION Product Development Candidates The biopharmaceutical industry is intensely competitive. Many companies are actively engaged in activities similar to ours, including the research and development of drugs for the treatment of cancer. In particular, we consider two companies, Seattle Genetics and Immunogen Inc., to be our closest competitors because they employ the armed antibodies method to treat various forms of cancer, although neither of them are using the armed antibodies method to treat head and neck cancer or bladder cancer. A 2003 survey by PhRMA listed over 180 companies in North America performing clinical studies for the treatment of cancer. Many of these companies are developing drugs that 38 fight the disease in new ways, while some involve research on new ways to use existing medicines. The PhRMA survey detailed nearly 400 cancer clinical trials, including 70 for lung cancer, 49 for breast cancer, 48 for colon cancer, and 44 for prostate cancer. According to this survey, there were only five drugs in development for the treatment of bladder cancer and 18 drugs in development for the treatment of head and neck cancer, including our own. Our Platform of Technologies Our integrated platform of technologies is based on two key features: (i) isolating the human immune response to cancer for monoclonal antibody generation; and (ii) delivering cytotoxic protein payloads to tumors. We have competitors in both of these areas as described below. Monoclonal Antibody Generation Our Hybridomics(TM) technology isolates antibodies from the human immune system and is independent of the need for a known target antigen for antibody generation. Unlike our antibodies, the antibodies generated by our competitors may only be generated once an antigen target has been identified and isolated and are not obtained from humans, although some of them are commonly referred to as "human antibodies". Antibodies generated by our competitors fall into several classes: murine, mouse-human chimeric, humanized, or "human". We are not aware of any competitor companies generating fully human monoclonal antibodies. Producers of humanized antibodies that are approved for sale in the United States include Genentech, Inc. and Hoffmann-La Roche Ltd. (Herceptin(R)), Genentech, Inc. (Avastin), Wyeth Inc. (Mylotarg(R)), ImClone Systems Incorporated (Erbitux), Millennium Pharmaceuticals, Inc. and Ilex Oncology, Inc. (Campath(R)), MedImmune, Inc. (Synagis(R)), and Centocor, Inc. (Remicade(R)). Companies that develop products based on transgenic mouse antibodies include Abgenix, Inc. (ABX-EGF) and Cambridge Antibody Technology Group plc and Abbott Laboratories Limited (Humira(R)). Companies that develop products approved for sale in the United States incorporating mouse-human chimeric antibodies include Biogen IDEC Pharmaceuticals Inc., Genentech, Inc. and Hoffman-La Roche Ltd. (Rituxan(R)), Centocor Inc. (ReoPro(R)), and Novartis Pharma AG (Simulect(R)). Payload Delivery The attachment of payloads to antibodies may make them more effective. Two of our major competitors in the field of antibody payload development, Seattle Genetics, Inc. and ImmunoGen, Inc., have principal payload technology based upon small molecule cytotoxic drugs that require chemical conjugation through a linker to attach the payload to the antibody. According to the web sites of these companies, as of January 5, 2005, each of these two companies has three products in clinical development, the most advanced of which are in Phase II clinical trials. In addition, there are two radiolabelled antibodies approved for sale in the United States, Zevalin(R)) (Biogen IDEC Pharmaceuticals Inc.) and Bexxar(R)) (Corixa Corp. and GlaxoSmithKline plc). In contrast, our cytotoxic protein payloads are directly linked to our antibodies and we believe this production of the payload and antibody together lowers production costs and enhances the stability of the linkage. In addition, our cytotoxic protein payloads are not expected to have the problems of radioactive exposure associated with radioisotope payload delivery. CURRENT APPROACHES TO CANCER THERAPY The term "cancer" encompasses a large group of diseases whose common feature is the uncontrolled division and growth of abnormally functioning cells. These abnormal cells can form malignant tumors that may metastasize, or spread to adjacent tissues, by entering the blood or surrounding lymph systems to form secondary tumors in distant parts of the body. These latter forms of metastatic cancer are often fatal. Cancer is a major health care problem worldwide as an estimated 10,000,000 people are diagnosed with some type of cancer annually. Despite some improvement in survival due to advances in cancer diagnosis and therapy, cancer remains the second leading cause of death in the United States and is predicted to surpass heart disease as the leading cause of death by 2010. The American Cancer Society estimates that more than 550,000 people in the United States will die from cancer in 2004 and over 1,300,000 are expected to be diagnosed with the disease. The 39 Canadian Cancer Society estimates that in Canada there will be approximately 140,000 new cases of cancer and more than 65,000 deaths due to cancer in 2004. Actual 2004 figures are not yet available. The National Institutes of Health in the United States, or NIH, estimate the annual direct medical costs of cancer treatment in the United States to exceed US$64 billion. Revenues in the global oncology market for chemotherapeutic approaches to treatment are reported to be in excess of US$20 billion, and are expected to increase to over US$45 billion by 2011. The NIH also predicts that the overall aging in the North American population will double the prevalence of cancer by 2050. North America, Europe and Japan are the principal markets for cancer therapies because of their public and private healthcare payor systems. Surgery, radiation, and chemotherapy remain the principal effective treatments for cancer. Surgical resection can be an effective treatment for tumors that have not spread, but many patients treated with surgery have the disease recur at some later point. Radiation therapy is useful for the treatment of a number of early-stage tumors, but generally has limited effectiveness for established tumors or tumors that have spread. Chemotherapy has evolved in recent years and in some cases has proven effective in the short-term palliation of disease as well as in the prolongation of survival. The major limitation of chemotherapy is the indiscriminate nature with which it can kill normal cells as well as cancer cells. This frequently leads to a number of undesirable side effects, including severe nausea, alopecia (hair loss), and a dramatic weakening of the immune system. Thus, the overall clinical benefit to the patient, as measured by the drug's effect on the cancer, must be weighed against the general and specific toxicity that the therapy has caused. We believe that the future of cancer therapy is in the development of therapies that act potently to attack the tumor, but are safe and tolerable for the patient. We believe that our Armed Antibodies(TM) approach is unique and has the potential to develop safer, more potent anti-cancer therapeutics than those that are currently available. BIOPHARMACEUTICAL REGULATORY MATTERS The FDA, Health Canada and comparable regulatory agencies in foreign countries impose substantial requirements upon the research, development, manufacture and marketing of pharmaceutical products. Approval is required in each jurisdiction prior to commercialization. Therapeutic monoclonal antibody products are considered biological products and are subject to review in the United States by the FDA's Center for Drug Evaluation and Research. We expect that Proxinium(TM), VB6-845 and other of our human monoclonal product candidates are likely to be reviewed for investigational study and marketing in the United States by the Division of Monoclonal Antibodies of the newly established Office of Biotechnology Products in the Center for Drug Evaluation and Research. The process required by the FDA before our product candidates may be marketed in the United States typically involves the following: - Development of test procedures and product acceptance criteria which meet current standards for monoclonal antibody products (ICH Q6B) including a potency assay and adequate physicochemical characterization of the antibody; - Performance of preclinical laboratory and animal tests using material substantially similar to that which we anticipate will be used in human studies; - Development of a manufacturing process which meets current good manufacturing practice (cGMP) standards as appropriate for each phase of the investigation; - Submission of an investigational new drug application, or IND, which must become effective before clinical trials may begin; - Completion of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for its intended use; - Submission of a new drug application, or NDA; and - Regulatory approval of the NDA, including approval of all product labeling and advertising. The process in other countries, including Canada, is similar. 40 Preclinical testing includes laboratory evaluation of each proposed product and development of the chemistry, manufacturing and control of each product candidate, as well as animal studies to assess the potential safety and effectiveness of each product candidate. Preclinical safety tests must be conducted in compliance with FDA good laboratory practices regulations, or GLPs, or with similar standards in other jurisdictions. The results of the preclinical tests, including information abut the method by which the product candidate is believed to work in the human body, any toxic effects of the compound found in the animal studies and how the product candidate is manufactured are submitted to the FDA as part of an IND, or to Health Canada as part of a Clinical Trial Application (CTA), to be reviewed prior to the commencement of human clinical trials. The IND or CTA must also include information about how, where and by whom the clinical studies will be conducted. If the FDA or Health Canada does not object, an IND or CTA will become effective after 30 days, but if the regulatory agency raises concerns, the IND/CTA sponsor and the regulatory agency must resolve these concerns before the clinical trials can begin. Further, an independent institutional review board, or IRB, at each medical center at which a clinical trial will be performed must review and approve the plan for any clinical trial before it begins. Human clinical trials are usually conducted in three sequential phases that may overlap. In Phase I, the drug is typically introduced into healthy human subjects or patients to determine the initial safety profile, identify side effects and evaluate dosage tolerance, distribution and metabolism. In Phase II, the drug is studied in a limited patient population with the target disease to determine preliminary efficacy and optimal dosages and to expand the safety profile. In Phase III, larger-scale controlled trials are conducted in patients with the target disease to provide sufficient data for the proof of efficacy and safety required by regulatory agencies. In the case of drugs for treatment of cancer and other life-threatening diseases, the initial human testing is often conducted in patients rather than in healthy volunteers. Because these patients already have the target disease, these studies may provide initial evidence of efficacy traditionally obtained in Phase II trials, and thus these trials are frequently referred to as Phase I/II trials. We may not successfully complete testing of our product candidates within any specific time period, if at all. Regulatory agencies such as the FDA and Health Canada may impose specific standards on the evaluation of tumor response in individual patients which may differ from those of the company or its clinical advisors. These different standards may lead the regulatory agency to conclude that study subjects receiving any of the Company's product candidates have had a more modest clinical response than did the Company or its clinical advisors. Furthermore, the FDA, Health Canada, an IRB, or we may suspend a clinical trial at any time for various reasons, including a finding that the subjects or patients are being exposed to an unacceptable health risk. If successful, the results of product development, manufacturing validation, preclinical studies and clinical studies are submitted to regulatory agencies in each country or region as a premarketing application. The FDA may disapprove an NDA and Health Canada may disapprove an NDS if the applicable regulatory criteria are not satisfied or each agency may require additional clinical data. Even if such data is submitted, each regulatory agency may ultimately decide that the marketing application does not satisfy the criteria for approval. Once marketing approval is granted, any regulatory agency may withdraw a product approval if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur after the product reaches the market. The FDA has the power to prevent or limit further marketing of a product based on the results of its ongoing assessment of product manufacturing compliance with cGMP's. Post-marketing studies may be required by regulators. In addition, each regulatory agency may require testing and surveillance programs to monitor the safety of approved products which have been commercialized. We intend to conduct clinical trials not only in accordance with FDA Regulations and Health Canada regulations, but also in accordance with guidelines established by the International Committee on Harmonization (ICH). Approval of a product by the regulatory authorities of foreign countries must be obtained prior to the marketing of that product in those countries regardless of the regulatory status of the product in the United States or Canada and vice versa. Regulatory approval in Europe is obtained through the European Medicines Evaluation Agency, but regulations governing pharmaceutical sales may vary from country to country. The testing and approval process requires substantial time, effort, and financial resources. Review times depend on a number of factors including, but not limited to, the severity of the disease being treated, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. 41 Under the FDA Modernization Act, the FDA may facilitate the development and expedite the review of a drug if it is intended for the treatment of a serious or life-threatening condition and it demonstrates the potential to address unmet medical needs for that condition. Under this "fast track" program, the FDA can, for example, review sections of an NDA on a rolling basis before the entire application is complete, thus beginning the review process at an earlier time. The sponsor of a product approved under this accelerated mechanism may be required to perform post-approval studies of clinical safety and effectiveness. We believe that our product candidates should be qualified for fast track status; however, we cannot guarantee that the FDA will grant any of our requests for fast track designation, that any fast track designation would affect the time of review, or that the FDA will approve the NDA submitted for any of our product candidates, whether or not fast track designation is granted. Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a disease or condition that affects fewer than 200,000 individuals in the United States. An orphan drug designation must be requested before submitting a NDA, but if granted does not convey any advantage in or shorten the duration of the regulatory review and approval process. However, a drug that receives an orphan drug designation and is the first product of its kind to receive FDA approval for a particular indication will be entitled to a seven-year exclusive marketing period in the United States for that indication. We have obtained orphan drug designation in the United States for our Proxinium(TM) product candidate. Although obtaining FDA approval to market a product with orphan drug exclusivity can be advantageous, it does not prevent the marketing of another different drug for the same clinical purpose and it may not provide us with a material commercial advantage. Satisfaction of FDA requirements or similar requirements of other regulatory agencies typically takes several years and the actual time required may vary substantially, based upon the type, complexity and novelty of the product or disease. Government regulation may delay or prevent marketing of our product candidates for a considerable period of time and impose costly procedural requirements upon our activities. We cannot be certain that the FDA or any other regulatory agency will grant approvals for our product candidates on a timely basis, if at all. Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Any products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including record keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and are subject to periodic inspections for compliance with regulations and guidelines including those relating to good manufacturing practices, or GMPs. We cannot be certain that we or our suppliers will be able to comply with the GMPs and other FDA or other agency regulatory requirements. The policies of the FDA, Health Canada and other regulatory agencies may change, and additional government regulations may be enacted which could prevent or delay approval of our product candidates. We cannot predict the likelihood, nature or extent of adverse governmental regulation which might arise from future legislative or administrative action, either in the United States, in Canada or in other countries. C. ORGANIZATIONAL STRUCTURE. We currently have no significant subsidiaries. D. PROPERTY, PLANTS AND EQUIPMENT. FACILITIES Our registered and head office, located at 10 Four Seasons Place, Suite 501, Toronto, Ontario, consists of approximately 8,300 square feet of office space at an estimated net annual rent of $103,575 for 2005. The lease expires on December 31, 2005. 42 We also lease an approximately 31,100 square foot manufacturing, laboratory, and office facility at 147 Hamelin Street in Winnipeg, Manitoba at an estimated net annual rent of $189,225 for 2005. The Winnipeg facility is leased from an affiliate of Mr. Leslie Dan. The lease expires on June 30, 2008. EQUIPMENT AND OTHER PROPERTY As at December 31, 2004, we owned tangible fixed assets with a net book value of approximately $3,053,000 and gross book value of approximately $8,497,000, consisting primarily of research equipment, leasehold improvements computer hardware and software and office equipment and fixtures. ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT'S DISCUSSION AND ANALYSIS The following is Management's Discussion and Analysis ("MD&A") of Viventia Biotech Inc.'s financial condition, results of operations, and changes in cash flow for the three months ended March 31, 2005 and for the fiscal years ended December 31, 2004 and 2003. This discussion should be read in conjunction with our audited annual financial statements and the related notes included, the three months ended March 31, 2004 and for the years ended December 31, 2004 and 2003. The financial statements have been prepared by management in accordance with Canadian GAAP. These accounting principles differ in certain respects from U.S. GAAP. The differences as they affect our financial statements are set out in Note 20 to the financial statements. OVERVIEW We are a biopharmaceutical company specializing in the discovery and development of fully human monoclonal antibody therapies for the treatment of cancer. We currently have a lead product candidate in Phase I clinical development, Proxinium(TM), formerly VB4-845, for the treatment of head and neck cancer, and for bladder cancer. We also have several other product candidates, one of which, VB6-845 is in active pre-clinical development. Our platform of technologies is based upon the isolation of human monoclonal antibodies obtained from cancer patients and the development of those antibodies to deliver cytotoxic (cancer killing) "payloads" to cancer cells. We believe that our platform has the potential to develop safer, more potent anti-cancer therapeutics than those that are currently available. We have a manufacturing facility that is intended to produce multiple product candidates per year, and that we believe will produce sufficient quantities of our Armed Antibodies(TM) to meet our currently anticipated pre-clinical and clinical trial needs. We have not derived any revenues to date from the sale of products. Future profitability will depend on our ability to bring products to market in a timely manner, obtaining necessary regulatory approvals and entering into suitable licensing or partnering arrangements to commercialize our products. From 2000 to 2002 we were primarily focused on the development of our two prior lead product candidates, VB2-011 (formerly H11) and 4B5, while concurrently building our core platform technologies. During 2002, we moved from a strategy of developing two lead products to a strategy based on the development of multiple product candidates by utilizing our target discovery, identification and antibody development programs Hybridomics(TM), UnLock(TM), ImmunoMine(TM), and Armed Antibodies(TM). During the three months ended March 31, 2005, we received three bridge financing loans from one of our principal shareholders, Mr. Leslie Dan. On February 17, 2005, we received a bridge financing loan from Mr. Dan in the amount of $500,000, on March 1, 2005, we received a bridge financing loan from Mr. Dan in the amount of $1,500,000,and on March 23, 2005 we received a bridge financing loan from Mr. Dan in the amount of $2,600,000. Subsequent to March 31, 2005, on April 28, 2005 we received a bridge loan from Mr. Dan in the amount of $1,500,000. These loans bear interest at 4.5% per annum and are payable on demand. For additional information with respect to the financial assistance we have received, see notes 1, 6, 7, 8 and 19 to the 2004 Audited Annual Financial Statements. The Company has significant losses over the past five years, and accumulated losses at March 31, 2005 were $99,618,000. We had a negative working capital at March 31, 2005 of approximately $6,664,000 and at December 31, 2004 negative net working capital of approximately $364,000. Without an additional source of financing we will 43 have inadequate funds to continue our existing corporate, administrative and operational functions. There is substantial doubt about our ability to continue as a going concern. At December 31, 2004 and December 31, 2003, we had a negative net working capital of approximately $364,000 and $1,054,000, respectively. Without an additional source of funding we will have inadequate funds to continue our existing corporate, administrative and operational functions for the coming year. There is substantial doubt about our ability to continue as a going concern. At December 31, 2004 we had cash reserves of $2,715,000 compared to $247,000 at December 31, 2003. Substantially all of the financing we have received during the past two years has been received from the Dan Group. During the year ended December 31, 2003, we received three bridge financing loans from an entity affiliated with one of our principal shareholders, Mr. Leslie Dan. On September 2, 2003, we received a bridge financing loan from an entity affiliated with Mr. Dan in the amount of $500,000, which was non-interest bearing and was repaid in October 2003. On November 27 and December 15, 2003, we also received bridge financing loans from the same entity in the amounts of $500,000, and $1,000,000, respectively. During the year ended December 31, 2004, we received thirteen bridge finance loans amounting to $11,900,000. These loans bear interest at 4.5% per annum and are payable upon demand. On November 3, 2004 we closed a private placement of secured convertible debentures with the Dan Group. Under the terms of the agreement the Dan Group converted $8,900,000 plus accrued interest of $246,711 on the bridge loans into secured convertible debentures and invested an additional $14,000,000 in secured convertible debentures. The resulting convertible debentures in an aggregate principal amount of $23,146,711 are secured by a first charge over all assets of the Company and will bear interest at the rate of 4.5% per annum compounded annually. Subsequent to December 31, 2004 we received five bridge financing loans from Mr. Leslie Dan and an entity entirely owned by him in the aggregate amount of $7,600,000. These loans bear interest at 4.5% per annum and are payable upon demand. For details see Notes 6, 7 and 19 of the financial statements and note 9 to the first quarter 2005 financial statements. A. RESULTS OF OPERATIONS We have incurred operating losses since inception. We have not derived any revenues to date from the sale of products. Future profitability will depend on our ability to obtain sufficient financing, obtain necessary regulatory approvals, enter into suitable licensing or partnership agreements to commercialize our product candidates, and bring products to market in a timely manner. We had 29,206,115 common shares issued and outstanding on December 31, 2004. COMPARISON OF PERIODS ENDED MARCH 31, 2005 AND 2004 Our total research and development and operating expenditures for the quarter ended March 31, 2005 increased by $1,142,000 or 41.3% to $3,908,000 compared to expenditures of $2,766,000 in the quarter ended March 31, 2004. Research activities were $1,767,000 for the quarter ended March 31, 2005 compared to $1,256,000 for the quarter ended March 31, 2004. Costs associated with the clinical trials amounted to $573,000 in the quarter an increase of 83.7% from the $312,000 in 2004. The increase is a result of continuation of Phase I Clinical Trials on Proxinium(TM) for the treatment of head and neck cancer in Brazil in 2004 and the start up Phase I clinical trials in Canada using Proxinium(TM) for the treatment of bladder cancer. Contracted research costs with Affitech AS, Biovation and a number of university research agreements, decreased by $390,000. Preclinical costs decreased $224,000 as more product candidates advanced into clinical studies. Material costs increased $458,000 as a result of increased production and manufacturing costs related to processing higher volumes of product for clinical and research purposes. Salaries and benefits costs increased by $354,000 or 31.1% from $1,137,000 for the quarter ended March 31, 2004, compared to $1,491,000 for the quarter ended March 31, 2005. This is primarily attributable to increased numbers of personnel by 35%. Salaries increased by $348,000 and employee health benefits increased by $45,000. Occupancy costs were $240,000 for the quarter ended March 31, 2005 compared to $207,000 for the quarter ended March 31, 2004, an increase of 15.9%. This increase is attributable to increased maintenance and operating costs due to the expansion of our operations at our Winnipeg facility. 44 Other operating costs amounted to $388,000 for the quarter ended March 31, 2005 compared to $144,000 for the quarter ended March 31, 2004, an increase of 169.4%. This increase is primarily related to increased travel costs to monitor the clinical trials in Russia and Brazil and travel to our Winnipeg facility and increased operating costs related to higher production and manufacturing activities for processing higher volumes of product for clinical and research purposes Our general and administrative expenditures amounted to $858,000 for the quarter ended March 31, 2005 compared to $335,000 for the quarter ended March 31, 2004, an increase of $523,000 or 156.1%. The increase in general and administrative expenditure is primarily related to additional professional costs due to regulatory requirements in connection with our intention to seek a U.S. listing. Recruiting costs and other administrative operating costs increased $39,000 as a result of the increased staff levels. Increases also were incurred in training $61,000, reference materials $33,000 and office supplies $16,000. Amortization of deferred financing expense amounted to $28,000 for the quarter ended March 31, 2005, compared to $12,000 for the quarter ended March 31, 2004. Stock based compensation amounted to $162,000 for the quarter ended March 31, 2005, compared to $13,000 for the quarter ended March 31, 2004 as a result of the granting of options in August 2004 and March 2005. For the purpose of measuring and expensing compensation cost, the fair value of the option is amortized to income over the option's vesting period on a straight-line basis. Interest expense to related parties amounted to $287,000 for the quarter ended March 31, 2005 compared to $137,000 for the quarter ended March 31, 2004. The increase in interest expense is attributable to the receipt of the bridge financing loans and to the convertible debentures issued in November 2004. For the three months ended March 31, 2005, miscellaneous income consisted of the $16,000 representing a proportionate share of a U.S. $100,000 one time access fee paid as part of an agreement whereby exclusive rights were provided to a third party to evaluate a specific collection of the Company's anti cancer monoclonal antibodies. The $100,000 is being amortized over the two year period of exclusivity. SUMMARY OF QUARTERLY RESULTS QUARTERLY INFORMATION
QUARTER ENDED ------------------------------------------------- ------------------------- 2005 2004 2003 MAR-31 DEC-31 SEP-30 JUN-30 MAR-31 DEC-31 SEP-30 JUN-30 ------ ------ ------ ------ ------ ------ ------ ------ Net Loss................................. (5,446) (5,716) (3,792) (4,316) (3,348) (3,426) (3,455) (2,970) Loss per share (1)................... (0.19) (0.20) (0.13) (0.15) (0.12) (0.12) (0.12) (0.11) Total Assets............................. 7,040 6,839 3,025 3,708 2,722 2,739 4,425 4,662 Bridge Financing Loans................... 4,600 _ 12,400 7,900 4,200 1,500 500 _ Total long-term financial liabilities (including current portion thereof)..... 29,186 24,706 4,000 4,000 4,000 4,000 4,000 4,000
Notes: (1) Quarterly loss per share may not, in the aggregate, equal annual loss per share numbers due to rounding. (2) Loss per share amounts prior to May 7, 2004 have been retroactively adjusted to give effect to the consolidation of the Company's issued and outstanding shares. (3) Subsequent to March 31, 2005 we received two separate $1,500,000 bridge financings loan from Mr. Leslie Dan and an entity controlled by Mr. Dan. 45 COMPARISON OF YEARS ENDED DECEMBER 31, 2004 AND 2003 We reported a net loss of $17,172,000 or $0.59 for the year ended December 31, 2004 compared to a net loss of $12,778,000 or $0.45 per share for the year ended December 31, 2003. Our total research and development and operating expenditures for 2004 increased by $2,069,000 or 19.3% to $12,777,000 compared to expenditures of $10,708,000 in 2003. Research related activities were $5,522,000 for the year ended December 31, 2004 compared to $4,752,000 for the year ended December 31, 2003. Costs associated with the clinical trials amounted to $1,953,000 in 2004 an increase of 580% from the $337,000 in 2003. The increase is a result of commencement of Phase I Clinical Trials on Proxinium(TM) for the treatment of Head and Neck cancer in Russia and Brazil in 2004 and the costs associated with the start up Phase I clinical trials in Canada using Proxinium(TM) for the treatment of bladder cancer. Contracted research costs with Affitech AS, Biovation and a number of university research agreements, decreased by $1,667,000. Preclinical costs increased $142,000 as more product candidates advanced into preclinical studies. Material costs and legal fees for patents increased $524,000 and $61,000 respectively, as expected with the increased clinical and preclinical costs. License costs were reduced by an amount of $133,000. The increase in salaries and benefits of $1,025,000 or 22.5% from $4,551,000 for the year ended December 31, 2003, compared to $5,576,000 for the year ended December 31, 2004, is attributable to $813,000 in severance costs related to the reorganization in January, 2004. Dr. Anthony Schincariol our former President and CEO resigned from his position on January 7, 2005. A total of $528,100 of the severance costs was payable to Dr. Schincariol pursuant to the terms of his resignation agreement. Salary increases of $49,900, related employee health benefits increases of $62,000, and incentive bonus accruals increases of $158,000 accounted for the remainder of the overall increase in salaries and benefits. Occupancy costs were $805,000 for the year ended December 31, 2004 compared to $789,000 for the year ended December 31, 2003, an increase of 2.0%. This increase is attributable to the leasing of additional space at our Winnipeg manufacturing facility along with additional maintenance costs. Other operating costs amounted to $787,000 for the year ended December 31, 2004 compared to $529,000 for the year ended December 31, 2003 an increase of $258,000 or 48.8%. This increase is primarily related to increased travel costs to monitor the Phase I clinical trials in Russia and Brazil and travel to our Winnipeg facility, as well as travel costs related to our proposed public offering, which was withdrawn in August of 2004. To a lesser extent operating costs also increased because of higher production and manufacturing costs related to processing higher volumes of product for clinical and research purposes Our general and administrative expenditures amounted to $1,498,000 for the year ended December 31, 2004 compared to $1,079,000 for the year ended December 31, 2003, an increase of $419,000 or 38.8%. Professional legal fees increased by $134,000 primarily as a result of the cost of two Special Shareholders' meetings held in 2004 and costs associated with professional and legal services. Recruiting costs and other administrative operating costs increased $56,000 as a result of the increased staff levels. Costs associated with Investor Relations increased $52,000 as a result of a Special Meeting of Shareholders related to the consolidation of shares in May 2004 and the approval of the convertible debenture in October, 2004. Freight and courier costs also increased in the amount of $101,000, primarily as a result of the cost of shipping clinical supplies to sites in Russia and Brazil. Training and conferences expenditures decreased by $94,000 when compared to 2003. Amortization of deferred financing expense decreased by $40,000 for the year, representing the final amortization related to the deferred costs pertaining to the convertible debenture in 2002. Interest expense to related parties amounted to $801,000 for the year ended December 31, 2004 compared to $435,000 for the year ended December 31, 2003. The increase is attributable to interest on the bridge financing loans in 2004. 46 For the year ended December 31, 2004, miscellaneous income consisted of the $61,000 gain on the disposition of capital assets, interest income of $19,000 and a proportionate share of a U.S. $100,000 one time access fee paid as part of an agreement whereby exclusive rights were provided to a third party to evaluate a specific collection of the Company's anti cancer monoclonal antibodies. The $100,000 is being amortized over the two year period of exclusivity. COMPARISON OF YEARS ENDED DECEMBER 31, 2003 AND 2002 We reported a net loss of $12,778,000 or $0.45 for the year ended December 31, 2003 compared to a net loss of $12,269,000 or $0.62 for the year ended December 31, 2002. Our total research and development and operating expenditures for 2003 increased by $816,000 or 8.2% to $10,708,000 compared to expenditures of $9,892,000 in 2002. Research related activities were $4,752,000 for the year ended December 31, 2003 compared to $4,307,000 for the year ended December 31, 2002. Contracted research costs with Affitech AS, Biovation and a number of university research agreements, along with clinical trial agreements and preclinical studies accounted for the increase in research costs. These increases were partially offset by reduced intellectual property legal costs and reduced license fees. Overall research costs are expected to increase in the future as more product candidates are moved through pre-clinical and clinical testing. The increase in salaries and benefits amounting to $285,000 or 6.7% from $4,266,000 for the year ended December 31, 2002, compared to $4,551,000 for the year ended December 31, 2003, is attributable to addition of a Manager, Regulatory Affairs and the payout of severance costs. Annual salary increments, corresponding increased costs for employee health benefits also accounted for a portion of the increase. Occupancy costs were $789,000 for the year ended December 31, 2003 compared to $664,000 for the year ended December 31, 2002, an increase of $125,000 or 18.8%. This increase is attributable to the leasing of additional space at our Winnipeg manufacturing facility along with additional utility and maintenance costs. Utility costs decreased $6,000 as a result of reduced common area costs from the landlord. Other operating costs were $529,000 for the year ended December 31, 2003 compared to $607,000 for the year ended December 31, 2002. The decrease was the result of reduced equipment lease costs, equipment maintenance costs and insurance costs amounting to $185,000. This reduction was partially offset by increased clinical and research activities. Our general and administrative expenditures amounted to $1,079,000 for the year ended December 31, 2003 compared to $1,408,000 for the year ended December 31, 2002, a reduction of $329,000 or 23.4%. Decreases in investor relations costs, legal and audit costs, capital taxes and foreign exchange gains accounted for the overall reduction. Amortization of deferred financing expense increased by $47,000 for the year, representing a full year of amortization, whereas the previous year accounted for only a portion of the year. Interest expense amounted to $435,000 for the year ended December 31, 2003 compared to $338,000 for the year ended December 31, 2002. The increase is attributable to a full year of interest expense relating to the convertible debentures we issued in June 2002, whereas the debenture interest expense for 2002 was incurred for only a portion of the year. Miscellaneous income consists of interest income of $78,000 for the year ended December 31, 2003 compared to $55,000 for the year ended December 31, 2002. The increase in interest income is a result of higher average cash balances on hand in 2003. During the year ended December 31, 2003, the Canadian Institute of Chartered Accountants amended its pronouncement relating to stock-based compensation, requiring companies to measure and expense all equity instruments awarded to employees. In accordance with this pronouncement, we prospectively adopted the new recommendation. Consequently, we applied a fair value based method to expense employee stock options awarded 47 since January 1, 2003. We did not issue any stock options during the year ended December 31, 2002 to require the presentation of pro forma net loss for that year. For additional information, refer to Notes 3 and 12[b] to the financial statements. B. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2005, we had cash and cash equivalents of approximately $2,038,000. Without additional funding, the Company will have inadequate funds to continue its existing corporate, administrative and operational functions for the remainder of the year. Since January 1, 2000, we have financed substantially all of our operations through the sale of equity securities, bridge loan financing from Mr. Leslie Dan or entities affiliated with Mr. Dan, and the issuance of secured convertible debentures to Mr. Leslie Dan and Ms. Andrea Dan-Hytman, our two principal shareholders. Mr. Leslie Dan and Ms. Andrea Dan-Hytman who own or control other companies that collectively own 82.8% of our outstanding common shares at December 31, 2004. Mr. Dan is also the Chair of our board of directors. During the three months ended March 31, 2005, the Company received three bridge financing loans from Mr. Dan. On February 17, 2005 the Company received a bridge financing loan in the amount of $500,000 on March 1, 2005, the Company received a bridge financing loan in the amount of $1,500,000 and on March 23, 2005 the Company received a bridge financing loan in the amount of $2,600,000. Subsequent to March 31, 2005 on April 28, and May 15, 2005 we received two bridge loans from Mr. Dan and an entity controlled by Mr. Dan, in the amount of $1,500,000, each bearing interest at 4.5% per annum and are payable on demand. The Company continues to seek additional sources of funding to finance operations into the future. In the event that the Company is unable to secure additional financing, there would be doubt about the ability of the Company to continue as a going concern. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, the Company may be required to reduce the scope of, or eliminate one or more of its research and development programs, or may be required to significantly scale back or cease operations. At December 31, 2004, we had cash and cash equivalents of approximately $2,715,000. Since January 1, 2000, we have financed substantially all of our operations through the sale of equity securities to the Dan Group, bridge loan financing from the Dan Group and the issuance of secured convertible debentures to the Dan Group and through the approximately $2,657,000 equity financing made by Teva in 2003. Our two principal shareholders are Mr. Leslie Dan and Ms. Andrea Dan-Hytman who own or control other companies that collectively beneficially owned or controlled 82.8% of our common shares at December 31, 2004. Mr. Dan is also the Chair of our board of directors. From January 16, 2004 to October 4, 2004, we have received bridge-financing loans in the aggregate of $11,900,000 from the Dan Group. The loans bear interest at 4.5% per annum and were repayable on demand. On November 3, 2004 we closed a private placement of secured convertible debentures with the Dan Group . Under the terms of the agreement the Dan Group converted $8,900,000 plus accrued interest of $246,711 on the bridge loans into secured convertible debentures and invested an additional $14,000,000 in secured convertible debentures. The resulting convertible debentures in an aggregate principal amount of $23,146,711 are secured by a first charge over all assets of the Company and will bear interest at the rate of 4.5% per annum compounded annually. The remaining principal amount of $4,500,000 plus accrued interest of $40,007 hereon was repaid with the proceeds of the private placement, discussed above. Subsequent to December 31, 2004 we received three bridge financing loans from Mr. Leslie Dan and an entity owned by him in the aggregate amount of $4,600,000. These loans bear an interest rate of 4.5% per annum and are payable upon demand. For additional information with respect to the financial assistance we have received, refer to Notes 6, 7, 8, and 19 and to the financial statements in the financial statements. Financing activities in 2004 provided net cash of $18,973,000 by means of the bridge-financing loans described above and cash proceeds from the issuance of a convertible debenture in November 2004 compared to $4,085,000 in 2003 and $15,750,000 in 2002. Cash provided from an equity financing in December of 2002 combined with funds from the equity financing in September 2003 were sufficient to fund operations through out 2003. Cash used in operating activities increased to $15,847,000 in 2004 compared to $12,005,000 in 2003 and $11,319,000 in 2002.The increases in both years is attributable to increased research activities and to the commencement of Phase I Clinical Trials on Proxinium for the treatment of Head and Neck cancer in Russia and Brazil. Cash used in investing activities increased to $658,000 from $218,000 in 2003 as a result of capital equipment and leasehold expenditures necessary to expand and upgrade the manufacturing infrastructure at our manufacturing and research facility in Winnipeg. 48 On August 16, 2004, we withdrew our previously announced Canadian public offering of units due to market conditions and entered into a non-binding term sheet with the Dan Group in respect of a private placement financing. Under the terms of the agreement, the Dan Group agreed to convert $8,900,000 (plus accrued interest) of then outstanding unsecured demand bridge financing loans into secured convertible debentures and to invest an additional $14,000,000 in secured convertible debentures. This private placement closed on November 3, 2004. For additional information in respect of the private placement, refer to Note 7 to the financial statements. We continue to seek additional sources of funding to finance operations into the future. In the event that we are unable to secure additional financing, there would be substantial doubt about our ability to continue as a going concern. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to reduce the scope of, or eliminate one or more of our research and development programs, or may be required to significantly scale back or cease operations. We enter into research, development and license arrangements with various parties in the ordinary course of business. These arrangements are in respect of various research services that are being provided to us and that enable us to utilize know-how and technology. The arrangements require compensation to be paid by us, typically by a combination of the following methods: fees comprising amounts due initially upon entering into the arrangements as well as additional amounts due either on specified timelines or for defined services to be provided; milestone payments that are dependent on products developed under the arrangements proceeding towards specified plans of clinical trials and commercial development; and royalty payments calculated as a percentage of net sales commencing upon commercial sales of any product candidates developed as a result of such know-how or technology. As at December 31, 2004, our commitments under the above arrangements for the next five years and thereafter were as follows:
COMMITMENTS YEAR ------------------------- - ---- (in thousands of dollars) 2005 257 2006 100 2007 100 2008 100 2009 and annually thereafter 100 --- 657 ===
The amounts above are principally comprised of fee-related committed research and license payments and potential milestone payments due in 2004. Other milestone and royalty-related amounts that may become due under the various arrangements are dependent on, among other factors, products identified as investigational new drugs, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which are uncertain. Amounts due pursuant to the various agreements for milestone payments will be accrued once the occurrence of a milestone is likely. Amounts due, as royalty payments will be accrued as commercial revenues from the product are earned. Certain potential milestone payments related to the commencement or completion of Phase II and Phase III clinical studies as well as the submission and receipt of regulatory approval for the various products employing the technologies are described in aggregate below. These potential payments are based on the achievement of the various milestones and as such the timing of the achievement of the milestones is contingent on many factors. The obligation to pay various milestones will depend on our ability to complete the required clinical programs, obtain necessary regulatory approvals and enter into suitable licensing or partnering arrangements to commercialize our products as well as our ability to obtain sufficient funding. 49 To date we have paid an aggregate total of approximately US $ 680,000 in upfront and maintenance fees for our key licenses. Potential aggregate milestones payable up to and upon receipt of regulatory approval are as follows: University of Zurich US $1,000,000. McGill University CDN $300,000. Columbia University US $575,000. Tanox US $7,300,000. Biovation US $8,500,000.
The Company periodically enters into research agreements or strategic alliances with third parties that include indemnification provisions that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims or damages arising from these transactions. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions is unlimited. These indemnification provisions generally survive termination of the underlying agreement. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the accompanying financial statements with respect to these indemnification obligations. As at December 31, 2004, the Company's future minimum commitments under operating leases for premises for the next four years are as follows:
COMMITMENTS YEAR ------------------------- - ---- (in thousands of dollars) 2005 292 2006 196 2007 203 2008 102 --- 793 ===
Certain premises, the commitments for which are included in the above table, are leased from an affiliate of Leslie Dan at an annual rent of $185,100 for 2005. For the years 2006 to 2008 all amounts are due to an affiliate of Leslie Dan. The lease expires on June 30, 2008 The following is a schedule of minimum payments for assets under capital lease.
COMMITMENTS YEAR ------------------------- - ---- (in thousands of dollars) 2005 71 2006 65 2007 35 --- 171 Less: interest 19 Less: current portion 59 --- Long term portion 93 ===
50 The capital lease for computer equipment expires May, 2006; and interest is paid on the outstanding balance at 9.125% per annum. The capital lease for the protein fractional system expires June, 2007, and interest is paid on the outstanding balance at 8.859% per annum. The capital lease for the motorized microscope September, 2007 and interest is paid on the outstanding balance at 10.422% per annum. The commitments for these capital leases are included in the above table. On January 7, 2004, our former President and Chief Executive Officer resigned. Pursuant to the resignation agreement with us, the total severance benefits that are to be paid out in 2005 totals $137,500. As at December 31, 2004, a total amount of approximately $390,600 has been paid pursuant to this agreement. On November 3, 2004, Leslie Dan in his personal capacity obtained $1,600,000 in financing which was provided to the Company to further expand its Winnipeg research facility. The loan bears interest at a rate of 5.0% per annum, repayable in blended monthly payments of $41,165 and matures in November 2007. The Company has agreed to repay this amount directly to the third party lending institution. At December 31, 2004, the Company's commitments under the above arrangements for the next three years are as follows:
COMMITMENTS YEAR ------------------------- - ---- (in thousands of dollars) 2005 509 2006 535 2007 515 ----- 1,559 =====
CAPITAL RESOURCES During the quarter ended March 31, 2005, we increased capital assets and leaseholds in our Winnipeg facility by $1,069,000. On November 3, 2004 we completed the private placement whereby the Dan Group invested $14,000,000 in secured convertible debentures and converted $8,900,000 (plus accrued interest of $246,711 as of November 3, 2004) of the outstanding unsecured demand bridge financing loans into secured convertible debentures. The resulting convertible debentures in an aggregate principal amount of $23,146,711 were secured by a first charge over all of our assets and bear interest at the rate of 4.5% per annum, compounded annually. The debentures mature two years from the date of issuance, when both interest and principal will be payable. The principal amount of the debentures is convertible at the option of the holder at any time into units at a price of $1.50 per unit. Each unit will be comprised of one common share and one half of a common share purchase warrant. Each whole common share purchase warrant will enable the holder to purchase an additional common share at an exercise price of $2.00 per common share at any time for a period of four years from the date of issuance. We used the proceeds of the private placement to repay the following indebtedness together with accrued interest thereon: (a) existing convertible secured debentures issued to members of the Dan Group on June 20, 2002 (with an aggregate principal amount of $4,000,000 and accrued interest of $241,251 as of November 3, 2004), and (b) other unsecured demand bridge financing loans made by members of the Dan Group (with an aggregate principal amount of $4,500,000 and accrued interest of $40,007 as of November 3, 2004) for net proceeds of $5,218,742. On October 4, 2004, we received an additional bridge financing loan in the amount of $1,000,000 from the Dan Group. The loan bears interest at 4.5% per annum and is repayable on demand. On September 10, 2003, we completed a private equity placement with Teva for approximately $2,804,000 less issuance costs of $147,000. Under the terms of this transaction, Teva purchased 1,402,100 units issued by us at a 51 price of $2.00 per unit. The unit price was based on the closing price of our common shares on the TSX on August 21, 2003. Each unit consists of one of our common shares and one common share purchase warrant at an exercise price of $2.00. The warrants expire on September 10, 2008. On February 10, 2003, we repaid, to a company controlled by Mr. Dan, $2,000,000 plus accrued interest of $24,000 of the convertible debentures previously issued on June 20, 2002. In connection with this repayment, Mr. Dan reinvested $2,000,000 less issue costs of $89,000 in the form of a private equity placement for 1,111,111 units, with each unit consisting of one of our common shares and one common share purchase warrant at an exercise price of $1.80 per common share. On December 17, 2002, we completed a private equity placement with Mr. Dan and 1533686 Ontario Limited, a company related to Mr. Dan, for $10,000,000, less issue costs of $109,147. Under the terms of the transaction, we issued 7,142,857 units at a price of $1.40 per unit. Each unit is comprised of one of our common shares and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at an exercise price of $1.40 per common share until December 17, 2007. On June 20, 2002, we completed a private placement and issued three secured convertible debentures for gross aggregate proceeds of $6,000,000, less issue costs of $141,288. The debentures were issued to companies within the Dan Group and to a party related to Mr. Dan. The debentures were collateralized by a charge over all of our assets, bore interest at 10% per annum compounded and payable quarterly, and were to mature on May 31, 2004. During 2003 we repaid $2,000,000 plus accrued interest of $24,000 of the $6,000,000 convertible debentures. The remaining debentures were convertible in the aggregate into 1,538,461 units at the option of the holder at any time or automatically upon the completion of equity financing of $10,000,000 or greater. Each unit was comprised of one of our common shares and one purchase warrant. Each common share purchase warrant entitled the holder to purchase one common share at an exercise price of $2.60 per common share, at any time prior to June 20, 2007. The debentures were repaid following completion of our November 3, 2004 private placement. RESEARCH AND DEVELOPMENT BUDGET Our Research and Development programs are described in the "Our Armed Antibodies Pipeline" on page 29 of this 20F. It provides a status of our various projects. The following provides financial analysis to be read in conjunction with "Our Development Plans Section". PROXINIUM(TM) FOR THE TREATMENT OF HEAD AND NECK CANCER: Our Phase I clinical trial program commenced in 2003 at a cost of $1,153,000. In 2004, the first dosing schedule using Proxinium was completed in Russia and the second, more aggressive dosing schedule commenced in Brazil. Costs related to these programs were $2,274,000 in 2004 and are estimated to be $5,350,000 in 2005, $6,120,000 in 2006 and estimated to be $4,750,000 in order to advance the program to completion of Phase II clinical trials in North America by the end of 2007. It is not possible to predict the outcomes of these trials or to estimate costs or time to complete Phase III clinical trials until the outcome of this program is known. PROXINIUM(TM) FOR THE TREATMENT OF BLADDER CANCER: We commenced our project with Proxinium(TM) for the treatment of bladder cancer in 2004 at a cost of $625,000. By the fourth quarter of 2004 we received approval of an amended protocol from Health Canada to commence a Phase I clinical trial on up to 40 patients in Canada. Enrolment has commenced and the study is expected to complete enrolment by the end of 2005 at an estimated cost of $2,300,000. Once Phase I data is analyzed and if found to be appropriate we estimate that it will cost at least an additional $5,000,000 in 2006 and at least an additional $5,150,000 n 2007 to advance Proxinium(TM) for the treatment of bladder cancer through Phase II clinical trials in that time period. OUR NEXT PRODUCT CANDIDATE: Our Hybridomics(TM) and ImmunoMine(TM) development and screening program were designed to identify potential Armed Antibodies(TM) drug candidates. We commenced this process in 2003 at a cost of $1,690,000. In 2004 we continued to screen and identify multiple antibodies selected by our program and selected a number of candidates to enter preclinical testing as possible Armed Antibodies(TM). The program has identified VB6-845 and three other candidates, which have all entered into various levels of preclinical testing in 2004. The costs associated with this 52 program in 2004 were $1,595,000. Animal efficacy studies and safety studies for VB6-845 for the treatment of ovarian cancer have commenced, we estimate that the cost to advance VB6-845 through these studies and if appropriate into Phase I studies as well as advancing the other Armed Antibodies(TM) candidates through the various early stages of research and testing is estimated to be $6,145,000 in 2005 and $7,100,000 in 2006 and $5,800,000 in 2008. The chart below details our total Research and Development costs for 2003 and 2004:
2003 2004 DESCRIPTION: EXPENDITURES EXPENDITURES Proxinium for the treatment of H&N cancer $ 1,153 $ 2,274 Proxinium for the treatment of Bladder cancer $ 0 $ 625 Our next product candidate $ 1,690 $ 1,595 All other research expenditures $ 1,909 $ 1,028 ------------ ------------ Total R&D expenditures as per Financial Statements $ 4,752 $ 5,522 ============ ============ All figures in $000's CDN
RESEARCH AND DEVELOPMENT ACTIVITIES BY THEIR NATURE, PRECLUDE DEFINITIVE STATEMENTS AS TO THE TIME REQUIRED AND COST INVOLVED IN REACHING CERTAIN OBJECTIVES, THEREFORE THE ACTUAL COSTS MAY VARY SIGNIFICANTLY FROM THE ESTIMATES SET FORTH ABOVE. DESCRIPTION OF SHARE CAPITAL We are authorized to issue an unlimited number of preferred shares, issuable in series, and an unlimited number of common shares. As of March 31, 2005, we had 29,206,115 common shares and no preferred shares issued or outstanding. In addition, as at March 31, 2005, we had 11,447,113 common share purchase warrants and 1,862,792 options to purchase common shares outstanding, each of which entitles the holder to acquire one of our common shares at varying exercise prices. As at December 31, 2004, we had 29,206,115 common shares and no preferred shares issued or outstanding. In addition, as at December 31, 2004, we had 11,447,113 common share purchase warrants and 1,455,737 options to purchase common shares outstanding, each of which entitles the holder to acquire one of our common shares at varying exercise prices. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. A change in facts or circumstances could significantly affect the results of operations and financial position. Discussed below are those policies that we believe are critical and require the use of judgment in their application. INTANGIBLE ASSETS - LICENSED TECHNOLOGY In the year ended December 2001, we acquired a non-exclusive license from a third party, to use its technology to reduce future development costs in return for total payments of $396,000. We are amortizing this technology over its estimated useful life of five years. We test the intangible assets for impairment on an ongoing basis, to verify that the carrying value is appropriate. 53 CAPITAL ASSETS Property, plant, equipment and other assets are stated at cost. Amortization is determined using methods and annual rates which are expected to reflect their economic and useful life. Assets are tested for impairment each time changes of events or situation indicate that the carrying value of an asset may not be recoverable. COMMITMENTS We enter into research, development and license arrangements with various parties in the ordinary course of business. The arrangements require compensation to be paid typically by combination of initial up front payments, milestone payments dependent on the certain advancements and royalty payments, commencing upon commercial sales of any products developed as a result of the license or technology. Amounts included in our financial statements are principally comprised of fee-related committed research and license payments, and potential milestone payments in 2004. Other milestone and royalty related amounts that may become due under the various arrangements are dependent on other factors, including clinical trials, regulatory approvals and the successful development of a new product, the outcome and timing of which is uncertain. STOCK BASED COMPENSATION In December 2003, the amended CICA Handbook, section 3870 - Stock Based Compensation and Other Stock Based Payments required companies to measure and expense all equity instruments awarded to employees. We adopted the new recommendation prospectively. Consequently, we have applied fair value based method to expense stock options awarded since January 1, 2003 using the Black-Scholes option pricing model. The model estimates the fair value of fully transferable options, without vesting restrictions, which significantly differs from our stock option awards. These models also require four highly subjective assumptions including future stock price volatility and expected time until exercise, which greatly affects the calculated values. RECENT ACCOUNTING DEVELOPMENTS ACCOUNTING GUIDELINE 15, CONSOLIDATION OF VARIABLE INTEREST ENTITIES This guideline comes into effect for interim periods beginning on or after November 1, 2004. The purpose of the guideline is to provide guidance for determining when an enterprise includes the assets, liabilities and results of activities of a variable interest entity in its consolidated financial statements. We believe the adoption of this guideline will not have a significant impact on our financial statements. CICA 1530, COMPREHENSIVE INCOME This new section will set the standards for the reporting and display of comprehensive income. Comprehensive income is defined as the change in equity (net assets) of an enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners. A statement of comprehensive income would be included in a full set of financial statements for both interim and annual periods. The new statement would present net income and each component to be recognized in other comprehensive income. These components would include, for example, exchange gains and losses arising on translation of the financial statements of self-sustaining foreign operations, which are currently included in a separate component of shareholders' equity. We believe the adoption of this guideline will not have a significant impact on our financial statements. CICA SECTION 3865, HEDGES CICA 3865 sets standards on when and how hedge accounting may be applied. As compared with AcG-13, Hedging Relationships, this new Section further restricts which hedging relationships qualify for hedge accounting. For perfectly effective hedges, all three treatments result in the recognition of offsetting changes in earnings in the same 54 period. For hedges that are not perfectly effective, the ineffective portion of the change in fair value of derivatives would be included in earnings in the period of the change. The accounting treatments proposed in this Re-Exposure Draft are expected to result in changes from current practice under Canadian GAAP. We believe the adoption of this guideline will not have a significant impact on our financial statements. CICA SECTION 3855, FINANCIAL INSTRUMENTS - RECOGNITION AND MEASUREMENT This section was approved by the Accounting Standard Board in December 2004 and is subject to written ballot. This section introduces requirements to recognize and measure all financial instruments on a basis similar to that in the FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. An entity would recognize a financial asset or financial liability only when the entity becomes a party to the contractual provisions of the financial instrument. Financial assets and financial liabilities would, with certain exceptions, be initially measured at fair value. For financial assets and financial liabilities not classified as held for trading, the initial value recorded would include transaction costs that are directly attributable to the acquisition or issuance of the financial asset or liability. After initial recognition, the measurement of financial assets would vary depending on the category of the asset: financial assets held for trading, held-to-maturity investments, loans and receivables, and available-for-sale financial assets. We believe the adoption of this guideline will not have a significant impact on our financial statements. RISKS AND UNCERTAINTIES The following describe certain risks, events and uncertainties that we face as a biopharmaceutical company. For a more comprehensive discussion of these and other risks, refer to the Company's most recent filed Annual Information Form available at www.sedar.com. We are a biopharmaceutical company specializing in the discovery and development of fully monoclonal antibody therapies for the treatment of cancer. It is not expected that these product development efforts will generate significant revenues for several years. We face a number of challenges in successfully developing our products to the commercialization stage. All are in pre-clinical or early Phase I/II clinical testing. Some biotech products do not successfully complete Phase I testing; some products complete Phase I testing but do not successfully complete Phase II level testing. At this stage, it is impossible to establish whether completion of the clinical trials process and ultimate commercialization is truly feasible. We are also dependent on outside suppliers for source materials and clinical testing. An inherent business risk for all biotechnology companies without products in the market is the availability of funding for continuing and future product development activities. To date, we have been able to obtain sufficient funding to support operations. Substantial additional financing will be required to fund operations over the long term and take our products candidates through to full commercialization. We are pursuing additional funding sources, but can offer no assurance that we will be successful. There is a going concern note in our financial statements. We must raise money from investors to fund our operations. If we are unable to fund our operations, we will cease doing business. Since January 2000, our principal shareholder Mr. Leslie Dan and entities affiliated with him have financed substantially all of our operations. If he ceases to provide additional financing and we are unable to raise money from third parties, we will cease operations. Other potentially significant factors that may affect the ultimate commercial success of our products include: the impact of an increasingly changing and competitive environment in the market place; the ability to obtain and protect our patents and intellectual property for our products and technologies and that our patents will not be challenged; the ability to secure and maintain corporate partnerships and alliances necessary for the development and commercialization of our products an technologies; the ability to obtain regulatory approvals for our products in numerous international jurisdictions; the availability of product liability insurance; the performance of key personnel; and the impact of foreign currency fluctuations on our operating results as some of our expenses are paid in $US and other foreign currencies. 55 FORWARD LOOKING STATEMENTS Certain statements included in this management's discussion and analysis constitute forward looking statements. When we use the words "anticipate", "believe", "plan", "estimate", "expect", "intend", "will", "may", "should" and similar expressions, as they relate to us or our management, they are intended to identify forward looking statements. These forward looking statements are not historical facts but reflect our current expectations concerning future results and events. We caution readers that these forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Certain of the risks and uncertainties are discussed above. The risk factors described herein are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in our forward looking statements. ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
NAME POSITION PERIOD SERVED AGE - ---------------------------- -------------------------------------------------- ---------------- --- Martin Barkin(1)(2)(3) Director Since June 1996 58 John J. Borer, III(2)(4) Director Since June 2000 47 Michael Byrne(5) Chief Financial Officer and Corporate Secretary - 54 Michael Cross Chief Operating Officer - 40 Leslie L. Dan(1) Chair of the Board of Directors Since July 1995 75 Dimitri Fitsialos Executive Director, Clinical Development - 40 Nick Glover(1) President and Chief Executive Officer and Director Since June 2004 36 Glen MacDonald Vice President, Research - 46 Murray S. Palay(2)(4))(6) Director Since August 1997 50 Louis Siminovitch Director Since March 2000 84 Mark Wainberg(3) Director Since August 1997 59
- ------------ NOTES: (1) Current member of the Executive Committee. (2) Current member of the Audit Committee. (3) Current member of the Compensation Committee. (4) Current member of the Corporate Governance Committee. (5) Mr. Michael Byrne was the Chief Financial Officer of Hyal Pharmaceutical Corporation in August 1999 at the time a receiver and manager was appointed to hold its assets. (6) Mr. Murray Palay was named as a defendant in a civil suit as a director of a privately owned Canadian company Westsun International Inc. by a terminated employee of a subsidiary who brought an action against the parent company and its former officers and directors, alleging breach of fiduciary duty to him as an employee, breach of trust and conversion of his earned commission. On November 5, 2003, the Ontario Superior Court of Justice dismissed all claims of wrongdoing by the directors but found liability against the directors for unpaid wages. The judgment is currently under appeal. Except as disclosed below, each of our directors, officers and other employees listed above has been engaged for more than five years in his present principal occupation or in other capacities with the company or organization (or predecessor thereof) in which he currently holds his principal occupation. The information provided below has been provided to us by the individuals themselves and has not been independently verified by us. BACKGROUND OF DIRECTORS, OFFICERS AND EMPLOYEES Martin Barkin, MD, FRCSC, MA. Dr. Martin Barkin is a director of our company. Dr. Barkin has been President and Chief Executive Officer and a Director of Draxis Health Inc., a pharmaceutical company, since May 1992. He has been a practicing physician, Professor and Chief of Urologic Surgery, and Chief Executive Officer of Sunnybrook Health Sciences Center. He has also been Deputy Minister of Health for the Province of Ontario, Head 56 of Health Care Consulting for KPMG Canada, Chair of the board of directors of the Sunnybrook and Women's College Health Sciences Center. John J. Borer, III, BA, JD. Mr. John Borer is a director of our company. Mr. Borer has been President and Senior Managing Director of Rodman & Renshaw LLC, an investment bank, since 1998. Prior to his positions with Rodman & Renshaw, Mr. Borer was Senior Vice President and Investment Manager in the New Business Development office of Security Pacific Business Credit Inc. Michael A. Byrne, BA, CGA. Mr. Michael Byrne has been our Chief Financial Officer and Corporate Secretary since January 2000. Mr. Byrne has over twenty years of senior management and executive experience in the biotechnology and pharmaceutical industries. Prior to joining us, Mr. Byrne was the Vice President, Finance and Chief Financial Officer of Hyal Pharmaceutical Corporation. Michael Cross, Ph.D., MBA, M.Sc. Dr. Michael Cross has been our Chief Operating Officer since February 2004. Prior to joining us, he was Managing Director of Southpaw B.I., a large cGMP contract manufacturing organization, from January 2003 to January 2004. Prior to this, Dr. Cross was with MDS Proteomics Inc. from January 2000 to January 2003, most recently as Vice President, where he was responsible for various financial, operational, and business development activities. From May 1996 until January 2000, he was a partner with MDS Capital Corp., an international venture capital fund which invests in the health and sciences industries, where he was responsible for new investment, operations and merger and acquisition activities. Leslie L. Dan, CM, B.Sc.Phm., MBA. Mr. Leslie Dan is the Chair of our board of directors. Mr. Dan is also the Chair of the board of directors and founder of Novopharm Limited which is now a wholly-owned subsidiary of Teva Pharmaceuticals. Mr. Dan has been the Chair of Novopharm since January 1990. Mr. Dan sits on the Board of Governors of Mount Sinai Hospital, Toronto. Mr. Dan is a director of Teva Pharmaceuticals and Draxis and the Chair of the board of directors of Human Serum Production and Medicine Manufacturing Co. Ltd. in Hungary. Dimitri Fitsialos, B.Sc. Mr. Dimitri Fitsialos is our Executive Director, Clinical Development. Mr. Fitsialos has been our Executive Director, Clinical Development since July 2004. He joined our company as Director of Clinical Development in January 2003. Prior to that time, Mr. Fitsialos was Director Clinical Development and Regulatory Affairs at Lorus Therapeutics from 1998-2001. He has been responsible for over 20 clinical trials in various therapeutic areas including oncology, hematology, transplantation, infectious disease, CNS, psychiatry and dermatology. Nick Glover, Ph.D. Dr. Nick Glover is our President and Chief Executive Officer and a director of our company. Prior to his appointment as President and Chief Executive Officer in January 2004, Dr. Glover had served as our Vice President, Corporate Development and Product Operations since September 2001. Dr. Glover joined us in September 2000 and has had responsibility for all aspects of our business development, including financing, corporate partnering, and strategic orientation. Prior to joining us, Dr. Glover was with MDS Capital Corp. as an Investment Manager, where his responsibilities included sourcing, negotiating, and completing venture capital investments in the biotechnology sector. Glen MacDonald, Ph.D. Dr. Glen MacDonald joined us in July 1997 and has been our Vice President, Research since January 2004. Dr. MacDonald was a Senior Research Scientist from 1997 until April 2002 and our Director of Research from May 2002 until December 2003. Prior to joining us, Dr. MacDonald held a Manitoba Cancer Treatment Research Foundation Fellowship and served as a Post-Doctoral Fellow at the University of Manitoba Cancer Treatment Research Foundation. Dr. MacDonald holds a Ph.D. in the field of immunology from the University of Manitoba. Dr. MacDonald's scientific background is extensive having published in the areas of monoclonal antibodies, graft-versus-host disease, lupus, and apoptosis. Murray S. Palay, B. Comm., LL.B., T.E.P. Mr. Murray Palay is a director of our company. Mr. Palay is the Managing Director of Quadrant Asset Management,, and was Managing Director, Assante Asset Management Ltd., an investment management firm, from July 2000 through December 2004. Mr. Palay's previous role from 1993 to June 2000, was Vice President, Corporate Finance, coordinating the Wealth Planning Group for Loring Ward Investment Counsel Ltd. (now Assante Asset Management Ltd.) in providing business consulting, succession, estate planning, and international tax and estate planning. He currently sits on the boards of directors of public and private 57 companies, including CCI Entertainment Ltd., Optima Strategy Master Limited Partnership, and Sun Mortgage Corporation. Louis Siminovitch, B.Sc., Ph.D., D.Sc. Dr. Louis Siminovitch is a director of our company. Dr. Siminovitch has been University Professor Emeritus at the University of Toronto since 1985. Since 1994, Dr. Siminovitch has also been Director Emeritus of the Samuel Lunenfeld Research Institute, an organization that he has been involved in since its creation in 1983. Dr. Siminovitch is an advisor and genomics consultant to numerous cancer centers and research institutes in Canada and the United States, as well as to the Province of Ontario. He was made both an Officer, in 1980, and Companion, in 1989, of the Order of Canada. In 1999, Dr. Siminovitch was elected as a Foreign Member of the National Academy of Sciences of the United States. Mark Wainberg, B.Sc., Ph.D. Dr. Mark Wainberg is a director of our company. Dr. Wainberg has served as Professor and Director of the McGill University AIDS Center since 1989. He has been Director of Research at the Jewish General Hospital in Montreal since 2000, as well as Professor of Medicine and of Microbiology and Immunology at McGill University in Montreal, Canada, since 1987. Dr. Wainberg is a past-President of the International AIDS Society and is an internationally recognized scientist in the field of HIV/AIDS. B. COMPENSATION. COMPENSATION OF DIRECTORS Outside directors (i.e., directors who are not officers and are not associated or affiliated with the Dan Group) are paid an annual fee of $15,000, a fee of $500 per meeting by telephone, and $1,000 per meeting attended in person. The Chair is paid an annual fee of $50,000. Committee chairs are paid $1,500 per meeting. Directors are entitled to receive stock option grants pursuant to our 2001 stock option plan and are entitled to be reimbursed for expenses incurred to attend meetings. During the fiscal year ended December 31, 2003, there were a total of 9,000 stock options granted to directors. Those options have an exercise price of $2.00 and expire on June 19, 2010. For a description of all of the options held by directors as of January 1, 2005, refer to "-Share Ownership of Directors and Executive Officers -Stock Options Outstanding" in this registration statement. As of January 1, 2005, our directors had been granted a total of 678,000 options to acquire common shares, representing 46.6% of the total outstanding options. As of January 1, 2005, only 552,000 of these options remain outstanding, representing 38.2% of the total outstanding options. These numbers exclude the 170,000 options granted to Dr. Schincariol related to his performance as President and Chief Executive Officer. As at January 1, 2005 the number of options held by our non-executive directors, including our Chairman, is 222,000, and our President and Chief Executive Officer held 330,000 options. COMPENSATION OF EXECUTIVE OFFICERS SUMMARY OF COMPENSATION Compensation of our executive officers and senior management for the year ended December 31, 2003 consisted of three elements: (i) base salaries, (ii) bonuses, and (iii) share options under our stock option plan. During the year ended December 31, 2004, the aggregate cash compensation paid or payable by us to our executive officers was $841,524. The following table provides all compensation earned during each of the last three fiscal years by our Chief Executive Officer, our former Chief Executive Officer and our other most highly compensated executive officers who served as executive officers at the end of the fiscal year ended December 31, 2004, which we refer to collectively, as the "Named Executive Officers". 58 SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------------------- AWARDS ANNUAL COMPENSATION SECURITIES PAYOUTS -------------------------------------- UNDER ---------------------- OTHER ANNUAL OPTIONS/SARS LTIP ALL OTHER SALARY BONUS COMPENSATION(5) GRANTED PAYOUTS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($) - --------------------------- ---- ------- ------ --------------- ------------ ------- ------------ Nick Glover 2004 282,307 48,800 - 300,000 - - President and Chief 2003 190,000 50,160 - 5,000 - - Executive Officer(1) 2002 167,200 47,340 - - - - Anthony Schincariol 2004 - - - - - 390,600 Former President and 2003 275,000 75,000 - 20,000 - - Chief Executive Officer(2) 2002 225,000 67,500 - - - - Michael Byrne 2004 181,730 25,000 - 100,000 - - Chief Financial Officer 2003 165,000 46,260 - 5,000 - - and Corporate Secretary 2002 154,200 45,840 - - - - Michael Cross 2004 162,692 - - 100,000 - - Chief Operating Officer(3) 2003 - - - - - - 2002 - - - - - - Glen MacDonald 2004 132,595 8,400 - 75,000 - - Vice President, Research(4) 2003 105,000 21,375 - 4,917 - - 2002 95,000 19,750 - - - -
- ------------ NOTES: (1) Nick Glover was appointed President and Chief Executive Officer on January 7, 2004. His salary for 2002 and 2003 reflects compensation for his role as Vice President, Corporate Development during that time. (2) Anthony Schincariol resigned as our President and Chief Executive Officer on January 7, 2004. The figure under "All Other Compensation" for 2004 represents compensation paid to Dr. Schincariol in 2004 pursuant to his resignation agreement. For additional details, refer to "-Termination of Employment, Change in Responsibilities, and Employment Contracts" in this registration statement. (3) Michael Cross has been our Chief Operating Officer since February 2004. As a result, his compensation for fiscal 2004 reflects approximately 11 months salary. (4) Glen MacDonald was not appointed as an executive officer until January 2004. As a result, his compensation disclosed in this chart was not earned as an executive officer, but was earned during fiscal 2003 as our Director of Research and during fiscal 2002 as Director of Research for nine months and Senior Research Scientist for three months. (5) Perquisites and other personal benefits do not exceed $20,000. 59 STOCK OPTION INCENTIVE COMPENSATION The following tables provide details of stock options granted to the Named Executive Officers during the year ended December 31, 2004 pursuant to our stock option plan. OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
MARKET VALUE OF % OF TOTAL SECURITIES OPTIONS UNDERLYING GRANTED TO OPTIONS ON THE SECURITIES UNDER EMPLOYEES IN EXERCISE OR DATE OPTIONS/SARS FINANCIAL BASE OF THE EXPIRATION NAME GRANTED YEAR PRICE(1) GRANT DATE - ----------------------------- ---------------- ------------ ------------ --------------- ------------- (#) (%) ($/SECURITY) ($/SECURITY) Nick Glover.................. 300,000 24.0% 1.56 1.56 Aug. 12, 2014 Anthony Schincariol.......... - - - - - Michael Byrne................ 100,000 8.0% 1.56 1.56 Aug. 12, 2014 Michael Cross................ 100,000 8.0% 1.56 1.56 Aug. 12, 2014 Glen MacDonald............... 75,000 6.0% 1.56 1.56 Aug. 12, 2014
- ------------ NOTE: (1) The exercise price of these options is the closing price of our common shares on the TSX on the day immediately preceding their issuance. AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES The following table provides details of stock options exercised by the Named Executive Officers during the year ended December 31, 2004.
SECURITIES UNEXERCISED VALUE OF UNEXERCISED IN- ACQUIRED AGGREGATE OPTIONS/SARS AT FY - THE-MONEY OPTIONS/SARS ON VALUE END AT FY - END ($) NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ------------------------------ ---------- --------- ------------------------- ------------------------- (#) ($) (#) ($)/($) Nick Glover................... 0 0 57,500 272,500 56,450 364,050 Anthony Schincariol........... 0 0 0 0 0 0 Michael Byrne................. 0 0 42,500 92,500 49,650 122,850 Michael Cross 0 0 10,000 90,000 13,400 120,600 Glen MacDonald................ 0 0 21,958 69,959 20,663 92,663
EQUITY COMPENSATION PLANS The following table provides the number of common shares authorized for issuance under all compensation plans as of December 31, 2004. SHARES AUTHORIZED UNDER STOCK OPTION PLANS AS OF DECEMBER 31, 2004
NUMBER OF NUMBER OF COMMON COMMON SHARES SHARES REMAINING TO BE ISSUED UPON WEIGHTED AVERAGE AVAILABLE FOR EXERCISE OF EXERCISE PRICE OF ISSUANCE UNDER OUTSTANDING OUTSTANDING EQUITY PLAN CATEGORY OPTIONS OPTIONS COMPENSATION PLANS - ------------------------------------------------------------ ----------------- ----------------- ------------------ (#) ($) (#) Equity compensation plans approved by shareholders.......... 1,455,767 1.82 1,178,833 Equity compensation plans not approved by shareholders...... __ __ __
60 TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES, AND EMPLOYMENT CONTRACTS As a result of Dr. Glover's appointment as President and Chief Executive Officer on January 7, 2004, we entered into a revised employment agreement with him. Dr. Glover's agreement provides for the payment of a signing bonus of $20,000, salary of $275,000 per year and a car allowance, as well as a bonus to be paid and up to 300,000 stock options to be granted at the discretion of the board of directors. Among other terms and subject to certain conditions, Dr. Glover's employment may be terminated by Dr. Glover on three months' written notice or by us without prior notice for reasons of just cause or disability. We may also terminate the agreement without cause. If we terminate the agreement without cause, we will pay to Dr. Glover an amount equal to the salary that he was being paid for a severance period of eighteen months, plus a pro rata portion of any bonus to which he was entitled payable at the board's discretion. The amount of the salary and bonus payable to Dr. Glover will be reduced in the last six months of the severance period by any amounts he earns from another employer or business activity. Dr. Glover will also be entitled to receive up to $10,000 to cover costs associated with career relocation and outplacement services. The agreement includes confidentiality, assignment of intellectual property, and non-competition and non-solicitation provisions. In January 2000, Mr. Michael Byrne entered into an agreement of employment with us. On October 14, 2004, we entered into a revised employment agreement with him. Mr. Byrne's agreement provides for the payment of a salary of $175,000 per year and a car allowance, as well as a bonus to be paid and stock options to be granted at the discretion of the board of directors. Among other terms and subject to certain conditions, Mr. Byrne's employment may be terminated by him on one month's written notice or by us without prior notice for reasons of just cause or disability. We may also terminate the agreement without cause. If we terminate the agreement without cause, we will pay to Mr. Byrne an amount equal to the salary that he was being paid for a severance period of twelve months, plus a pro rata portion of any bonus to which he was entitled, payable at the board's discretion. In addition, the severance period will be extended by one month for each additional year of employment completed commencing January 1, 2004. Mr. Byrne will also be entitled to receive up to $10,000 to cover costs associated with career relocation and outplacement services. The agreement includes confidentiality, assignment of intellectual property, and non-competition and non-solicitation provisions. On February 9, 2004, we entered into an employment agreement with Dr. Michael Cross in his role as Chief Operating Officer. We entered into a revised employment agreement with him effective December 13, 2004. Dr. Cross' agreement provides for the payment of a salary of $180,000 per year and a car allowance, as well as a bonus to be paid, and stock options to be granted at the discretion of the board of directors. Among other terms and subject to certain conditions, Dr. Cross' employment may be terminated by him on three months' written notice or by us without prior notice for reasons of just cause or disability. We may also terminate the agreement without cause. If we terminate the agreement without cause, we will pay to Dr. Cross an amount equal to the salary that he was being paid for a severance period of twelve months, plus a pro rata portion of any bonus to which he was entitled, payable at the board's discretion. In addition, the severance period will be extended by one month for each additional year of employment completed commencing February 9, 2004. Dr. Cross will also be entitled to receive up to $10,000 to cover costs associated with career relocation and outplacement services. The agreement includes confidentiality, assignment of intellectual property, and non-competition and non-solicitation provisions. On October 12, 2004, we entered into an employment agreement with Dr. Glen MacDonald. The agreement provides for the payment of a salary of $130,000 per year and a car allowance, as well as a bonus to be paid, and stock options to be granted at the discretion of the board of directors. Among other terms and subject to certain conditions, Dr. MacDonald's employment may be terminated by him on three month's written notice or by us without prior notice for reasons of just cause or disability. We may also terminate the agreement without cause. If we terminate the agreement without cause, we will pay to Dr. MacDonald an amount equal to the salary that he was being paid for a severance period of twelve months, plus a pro rata portion of any bonus to which he was entitled, payable at the board's discretion. In addition, the severance period will be extended by one month for each additional year of employment completed commencing January 1, 2004. Dr. MacDonald will also be entitled to receive up to $10,000 to cover costs associated with career relocation and outplacement services. The agreement includes confidentiality, assignment of intellectual property, and non-competition and non-solicitation provisions. 61 On November 17, 2004, we entered into an employment agreement with Mr. Dimitri Fitsialos. The agreement provides for the payment of a salary of $125,000 per year, as well as a bonus to be paid, and stock options to be granted at the discretion of the board of directors. Among other terms and subject to certain conditions, Mr. Fitsialos's employment may be terminated by him on three month's written notice or by us without prior notice for reasons of just cause or disability. We may also terminate the agreement without cause. If we terminate the agreement without cause, we will pay to Mr. Fitsialos an amount equal to the salary that he was being paid for a severance period of six months plus a pro rata portion of any bonus to which he was entitled, payable at the board's discretion. In addition the severance period will be extended by one month for each additional year of employment completed commencing January 1, 2004. Mr. Fitsialos will also be entitled to receive up to $10,000 to cover costs associated with career relocation and outplacement services. The agreement includes confidentiality, assignment of intellectual property, and non-competition and non-solicitation provisions. Dr. Anthony Schincariol resigned from his position as President and Chief Executive Officer on January 7, 2004. As part of Dr. Schincariol's resignation agreement, he will receive $412,500, less any amounts he receives in respect of any employment or other business income he earns in the period from January 7, 2005 to July 6, 2005, plus $80,000 and certain other benefits. C. BOARD PRACTICES. All directors hold office until the next annual general meeting of our shareholders or until they resign or are removed from office in accordance with our articles of continuation. No director has a service contract with us other than Dr. Nick Glover, who has an employment contract with us in respect of his position as President and Chief Executive Officer. Each director has formally consented to serve as a director and has signed a confidentially agreement with us. From time to time our board appoints, and empowers, committees to carry out specific functions on behalf of the board. The following describes the current committees of the board and their members. AUDIT COMMITTEE Our audit committee supervises the audit of our financial records and the adequacy and effectiveness of our policies and procedures concerning our financial reporting, internal accounting, financial controls, management information and risk management. Our audit committee: - evaluates the qualifications, independence and performance of the independent auditors; - determines the engagement of the independent auditors; - monitors the rotation of partners of the independent auditors on our engagement team as required by law; - oversees selection and changes to accounting policies and establishes policies; - reviews our financial statements and Management's Discussion and Analysis contained in all reports to the Canadian securities regulatory authorities and the SEC; - reviews our critical accounting policies and estimates; - review all related-party transactions; - reviews any written communications between our independent auditors and management; - discusses with management and our independent auditors the results of the annual audit and the review of our quarterly financial statements; and - pre-approves the retention of the independent auditors to perform any proposed permissible non-audit services. The audit committee is currently composed of three directors (Messrs. Barkin, Borer, and Palay). 62 COMPENSATION COMMITTEE Our compensation committee reviews and recommends policy relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objective relevant to compensation of our Chief Executive Officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives, and setting compensation of these officers based on these evaluations. The compensation committee also administers the issuance of stock options and other awards under our stock plan. The compensation committee is currently composed of two directors (Messrs. Barkin and Wainberg). CORPORATE GOVERNANCE COMMITTEE Our corporate governance committee provides our board with advice and recommendations relating to corporate governance in general, including all matters relating to the stewardship role of the board in respect of the management of the corporation, the board's size and composition, the board's compensation and any procedures that may be necessary to allow the board to function independently of management. The corporate governance committee is currently composed of two directors (Messrs. Borer and Palay). EXECUTIVE COMMITTEE During the intervals between meetings of the board of directors, the executive committee exercises all the powers of the board of directors in respect of the management and direction of our business and affairs, except for those powers specified in our articles or by statute to be exercised by the full board of directors. The executive committee is currently composed of three directors (Messrs. Barkin, Dan, and Glover). D. EMPLOYEES. As of December 31, 2004, we had 68 staff members. Of our total employees, approximately 27% are engaged in antibody discovery and development, approximately 44% are engaged in clinical, manufacturing and quality operations, and the balance is engaged in other activities such as finance, intellectual property, administration, and investor relations. None of our employees are covered by a collective bargaining agreement, we have not experienced any work stoppages, and we consider our relationship with our employees to be good. As of December 31, 2003 and 2002, we had 59 and 58 staff members, respectively. E. SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. The following chart provides the common share and option ownership of our executive officers and directors as of May 17, 2005.
NUMBER OF SHARES NAME OF OFFICER OR BENEFICIALLY PERCENTAGE OF NUMBER OF DIRECTOR OWNED(1) COMMON SHARES OPTIONS EXERCISE PRICE EXPIRY DATE - ------------------ ---------------- ------------- --------- -------------- ----------- (#) (%) (#) ($) Martin Barkin 5,375 0.02% 30,000 1.56 Aug 12-11 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 John J. Borer, III 11,875 0.05% 30,000 1.56 Aug 12-11 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 6,500 3.30 Jun 17-06 Leslie Dan 35,002,413(2) 56.1% 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 Murray S. Palay 17,375(3) 0.07% 30,000 1.56 Aug 12-11
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NUMBER OF SHARES NAME OF OFFICER OR BENEFICIALLY PERCENTAGE OF NUMBER OF DIRECTOR OWNED(1) COMMON SHARES OPTIONS EXERCISE PRICE EXPIRY DATE - ------------------ ---------------- ------------- --------- -------------- ----------- (#) (%) (#) ($) 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 Louis Siminovitch 5,375 0.02% 30,000 1.56 Aug 12-11 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 Mark Wainberg 5,375 0.02% 30,000 1.56 Aug 12-11 1,500 2.00 Jun 19-10 4,500 2.20 Nov 20-08 Michael Byrne 32,917 0.21% 25,000 3.310 Mar 21-12 100,000 1.56 Aug 12-14 5,000 2.00 Jun 19-10 20,000 2.20 Nov 20-08 Michael Cross 10,000 0.04% 30,000 3.31 Mar 21-12 100,000 1.56 Aug 12-14 Nick Glover 57,917 0.22% 100,000 3.31 Mar 21-12 300,000 1.56 Aug 12-14 5,000 2.00 Jun 19-10 20,000 2.20 Nov 20-08 5,000 4.0 Nov 15-05 Glen MacDonald 22,868(4) 0.09% 30,000 3.31 Mar 21-12 75,000 1.56 Aug 12-14 4,917 2.00 Jun 19-10 12,000 2.20 Nov 20-08
- ------------ NOTES: (1) Beneficial ownership is determined as required in Form 20-F including common shares subject to presently exercisable options or options exercisable within 60 days of March 13, 2005. (2) Includes 18,580,115 common shares which Mr. Dan or entities controlled by him have a right to acquire on the conversion of outstanding convertible securities and exercise of all outstanding warrants, other than options, and 5,375 common shares that Mr. Dan has a right to acquire pursuant to the exercise of options presently exercisable. Mr Dan's holdings include 944,001 shares held by 1401798 Ont. Ltd. and 1,111,111 shares held by Clairmark Investments Ltd. Mr. Dan controls 1401798 Ont. Ltd. and Clairmark Investments LTD. (3) Includes 5,375 common shares that Mr. Palay has a right to acquire pursuant to the exercise of options presently exercisable. (4) Includes 22,368 common shares that Mr. MacDonald has a right to acquire pursuant to the exercise of options presently exercisable. STOCK OPTION PLAN EQUITY COMPENSATION PLANS Our 1996 share option plan was approved by shareholders on December 16, 1996 with 493,337 common shares reserved for issuance. We issued options under the 1996 plan until June 2001, but no further grants of options may be made under the 1996 plan. The term of options granted under the 1996 plan were generally five years but do not exceed ten years. The vesting period for these options is generally three years with 1/3 vesting at the end of each year, subject to the discretion of our board of directors. Options that have been granted pursuant to the 1996 plan will continue to be governed by the 1996 plan until they are exercised, cancelled, forfeited, and/or expired. Options that have been granted pursuant to the 1996 plan are non-transferable. As of May 17, there were 11,500 options to purchase common shares outstanding under the 1996 plan. During the fiscal year ended December 31, 2001, our shareholders approved the establishment of our 2001 stock option plan. At our special meeting of shareholders held on May 7, 2004 in addition to our shareholders approving 64 our share consolidation, our shareholders approved an increase in the number of common shares reserved for issuance pursuant to the 2001 plan from 600,000 to 2,600,000, an increase of 2,000,000 common shares. As of May 17, 2005, 2,092,100 options have been granted under the 2001 plan and 1,808,542 of the issued options remain outstanding. Under the 2001 plan: (i) the number of common shares reserved for issuance to employees and directors will not exceed 10% of the number of common shares issued and outstanding at any time; (ii) the number of common shares that may be issued to any one employee and/or director and their associates, within a one-year period, cannot exceed 5% of the shares issued and outstanding; and (iii) the number of common shares reserved for issuance to any one person cannot exceed 5% of the number of common shares issued and outstanding. Options can be granted to any person who is a director, officer, or employee of us or any subsidiary or affiliate, or any person who has been engaged to provide services to us or our affiliates. Options granted pursuant to the 2001 plan are non-transferable. The term of any options may not exceed 10 years. The vesting period for options granted pursuant to the 2001 plan is determined by our board of directors but is generally three years with 1/12 vesting at the end of each quarter. The exercise price for the common shares is based on the trading price for the common shares on the last trading day before the date of grant of the options. Although the number of common shares initially reserved for issuance pursuant to the 1996 plan was 493,337, the number of options to acquire shares that have been exercised to date is 17,282. As of May 17, 2005, the number of outstanding options to acquire common shares pursuant to the 1996 plan was 11,500 and as indicated above, no further grants of options may be made pursuant to this plan. If these options expire, are cancelled, or are otherwise forfeited, they will not be available for reissuance. As of May 17, 2005, the aggregate number of common shares issued pursuant to the 1996 plan, the number of common shares reserved for issuance pursuant to stock options currently outstanding under the 1996 plan, plus the 2,600,000 common shares reserved for issuance under the 2001 plan equals 2,628,782 common shares representing 9.0% of the total number of common shares issued and outstanding as of January 1, 2005. STOCK OPTIONS OUTSTANDING The following chart provides, as at May 17, 2005, information regarding outstanding options to purchase our common shares issued pursuant to our 2001 plan and our 1996 plan. For a discussion of our outstanding warrants and other convertible securities, refer to Item 7: "Major Shareholders and Related Party Transactions" in this registration statement.
DESIGNATION AND NUMBER OF MARKET PRICE SECURITIES UNDER EXERCISE AT DATE OF EXPIRY CLASS OF OPTIONEE OPTION PRICE GRANT DATE - ---------------------------------------------------------------- ---------------- ------------ ------------ -------- (#) ($/SECURITY) ($/SECURITY) All of our executive officers and past executive officers (4 individuals in the aggregate)................................. 575,000 1.56 1.56 08/12/14 14,917 2.00 2.00 06/19/10 52,000 2.20 2.20 11/20/08 5,000 4.00 4.00 11/15/05 185,000 3.31 3.31 03/21/12 All of our directors and past directors who are not also executive officers (6 individuals in the aggregate)........... 150,000 1.56 1.56 08/12/11 9,000 2.00 2.00 06/19/10 27,000 2.20 2.20 11/20/08 6,500 3.30 3.30 06/17/06 All of our other employees or past employees.................... 453,000 1.56 1.56 08/12/11
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DESIGNATION AND NUMBER OF MARKET PRICE SECURITIES UNDER EXERCISE AT DATE OF EXPIRY CLASS OF OPTIONEE OPTION PRICE GRANT DATE - ---------------------------------------------------------------- ---------------- ------------ ------------ -------- (#) ($/SECURITY) ($/SECURITY) 30,975 2.00 2.00 06/19/10 8,000 2.00 2.00 08/27/10 42,650 2.20 2.20 11/20/08 261,000 3.31 3.31 03/21/12 Total Options................................................... 1,820,042
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS. We are controlled by Leslie Dan and Andrea Dan-Hytman who, through securities beneficially owned by the Dan Group, control or exercise control over 91.9% of our common shares including their presently exercisable options and other convertible securities. The Dan Group consists of Mr. Dan, Ms. Dan-Hytman and companies that they control: 1401798 Ontario Limited, Clairmark Investments Ltd., Dan Family Holdings Ltd. and ADH Investments (1999) Inc. To the knowledge of our directors and senior officers, as at May 17, 2005 the only persons or corporations that beneficially owned, directly or indirectly, or exercised control or direction over shares carrying more than 5% of the voting rights attached to our outstanding shares are provided in the table below.
NAME OF BENEFICIAL NUMBER OF COMMON SHARES SHAREHOLDER BENEFICIALLY OWNED PERCENTAGE OF COMMON SHARES(3) - -------------------------------------- ----------------------- ------------------------------ Leslie Dan............................ 35,002,413(1) 56.1% Andrea Dan-Hytman..................... 22,370,346(2) 35.8% TOTAL................................. 57,372,759 91.9%
- ------------ NOTES: (1) Includes 18,580,115 common shares which Mr. Dan or entities controlled by him have a right to acquire on the conversion of outstanding convertible securities other than options, and 5,250 common shares that Mr. Dan has a right to acquire pursuant to the exercise of options presently exercisable; These 18,580,115 common shares include 944,001 common shares held by 1401798 Ont. Ltd. and 1,111,111 common shares held by Clairmark Investments Ltd. and 1,111,111 common shares that Clairmark has the right to acquire on the exercise of outstanding warrants. Mr. Dan controls 1401798 Ont. Ltd. and Clairmark Investments Ltd. (2) Includes: 4,187,308 common shares held by ADH Investments (1999) Inc. and 10,562,569 common shares that ADH Investments (1999) Inc. has the right to acquire on the conversion of outstanding convertible debentures; and 3,571,429 common shares held by 1533686 Ontario Limited and 4,049,040 common shares that 1533686 Ontario Limited has the right to acquire on the exercise of outstanding warrants. Ms. Dan-Hytman controls ADH Investments (1999) Inc. and 1533686 Ontario Limited. (3) Including the Dan Group's presently exercisable options and other convertible securities. For a summary of the Dan Group's equity and debt interests in our company and a discussion of the changes in those interests over the past three fiscal years, refer to "-Related Party Transactions" in this registration statement. Our major shareholders do not have different voting rights than the other shareholders. As of February 28, 2005, 704,104 of our common shares were held in the United States by 85 shareholders of record. 66 B. RELATED PARTY TRANSACTIONS. THE DAN GROUP As of January 1, 2005, through securities beneficially owned by the Dan Group, Mr. Dan and Ms. Dan-Hytman control or exercise control approximately 91.9% of our common shares including their presently exercisable options and other convertible securities. Refer to "-Major Shareholders" in this registration statement for more detailed information. Our total indebtedness to the Dan Group as of May 17, 2005 was $30,746,711, not including accrued interest. On August 24, 2001, we completed a private equity placement with our then significant shareholder DFH, which was controlled by Mr. Dan, for net proceeds of $5,848,767. Under the terms of the transaction, DFH purchased 1,791,045 units issued by us at a price of $3.35 per unit. Each unit consisted of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder thereof to purchase one common share at an exercise price of $3.35 per common share until August 24, 2006. These warrants are beneficially owned by Leslie Dan. On June 20, 2002, we completed a private placement and issued three secured convertible debentures for gross aggregate proceeds of $6,000,000, less issue costs of $141,288. The debentures were issued to companies within the Dan Group and to a party related to Mr. Dan, and were repaid in part on February 10, 2003. The remainder was repaid following the completion of the November 3, 2004 private placement. On May 13 and October 31, 2002, we received bridge financing loans from an entity affiliated with Mr. Dan in the amounts of $800,000 and $2,000,000, respectively. The $800,000 loan was non-interest bearing and the $2,000,000 loan bore interest at a rate of 4.5% per annum. These loans were repaid during the year 2002 and the total interest paid on these loans was $11,589. On December 17, 2002, we completed a private equity placement with Mr. Dan and 1533686 Ontario Limited, a company related to Mr. Dan, for $10,000,000, less issue costs of $109,147. Under the terms of the transaction, we issued 7,142,857 units at a price of $1.40 per unit. Each unit is comprised of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at an exercise price of $1.40 per common share until December 17, 2007. On February 10, 2003, we repaid, to a company controlled by Mr. Dan, the $2,000,000 principal amount, plus accrued interest of $24,000 of one of the convertible debentures previously issued on June 20, 2002. In connection with this repayment, Mr. Dan reinvested $2,000,000, less issue costs of $89,000, in the form of a private equity placement for 1,111,111 units, with each unit consisting of one common share and one common share purchase warrant at an exercise price of $1.80 per share. The warrants expire on February 10, 2008. On September 2, 2003, we received a bridge financing loan from an entity affiliated with Mr. Dan in the amount of $500,000, which was non-interest bearing and was repaid in October 2003. From November 27, 2003 until November 3, 2004, we received bridge financing loans in the total principal amount of $13,400,000 from the Dan Group. A total principal amount of $8,900,000 of these loans, plus accrued interest of $246,711 thereon, were converted into convertible debentures as part of the private placement with the Dan Group that closed on November 3, 2004. The remaining principal amount of $4,500,000, plus accrued interest of $40,007 thereon, was repaid with the proceeds of that private placement. At a special meeting of shareholders held October 20, 2004, shareholders other than the Dan Group and affiliates, associates or insiders of the Dan Group considered and approved the entering into of a private placement with the Dan Group. Pursuant to the private placement on November 3, 2004, we issued to Ms. Dan-Hytman, or her nominee, a secured convertible debenture with the principal amount of $10,562,568, consideration for which included the conversion of certain of the bridge loans discussed above into the convertible debenture and cash consideration of $2,000,000. We also issued to Mr. Dan, or his nominee, a secured convertible debenture with the principal amount of $12,584,143, with consideration including the conversion of the remaining bridge loans discussed above into the convertible debenture and cash consideration of $12,000,000. 67 These debentures are secured by a first charge over all of our assets and will bear interest at the rate of 4.5% per annum, compounded annually. The convertible debentures will mature on November 3, 2006, when both interest and principal will be payable. The principal amount of the convertible debentures is convertible at the option of the holder at any time into units at a price of $1.50 per unit. Each unit will be comprised of one common share and one half of a common share purchase warrant. Each whole common share purchase warrant enables the holder to purchase an additional common share at an exercise price of $2.00 per common share at any time for a period of four years from the date of issuance. The conversion price of any accrued interest on the convertible debentures will be equal to the ten-day weighted average trading price of our common shares on the TSX for the ten consecutive trading days prior to conversion, less the maximum discount permitted by the TSX. The convertible debentures include customary representations, warranties and covenants regarding our company. The events of default under the convertible debentures which would permit the holders to demand immediate payment of principal and interest, include: (i) our failure to perform its obligations under the convertible debentures; (ii) our breach of any representations and warranties we made in the convertible debentures; (iii) our ceasing or threatening to cease to carry on business in the normal course; (iv) if a secured party realizes its security over our assets in excess of $150,000; (v) if a stock exchange issues an order to cease, suspend or prohibit trading of our shares which continues for longer than two weeks; (vi) if we are in default of any covenant or obligation in excess of $150,000; (vii) if we fail to pay a debt to any creditor in excess of $250,000 and this failure continues after any applicable grace period; (viii) if we default under another debenture; (ix) if an event occurs that would have a material adverse effect on our operations; (x) if we default under any of our material contracts and do not cure this default within the prescribed time; (xi) if we receive a final judgment against us requiring a payment in excess of $150,000; (xii) if a court adjudges us bankrupt or insolvent; (xiii) if we become bankrupt or insolvent; or (xiv) if we undergo a change of control. In addition to repaying the principal amount of $4,500,000 of bridge financing loans plus accrued interest of $40,006.85 thereon, we used the proceeds of the convertible debentures issued on November 3, 2004 to repay the indebtedness owed under the convertible debentures existing at that time (with an aggregate principal amount of $4,000,000 and accrued interest of $241,250.82). Mr. Dan currently holds a convertible debenture in the principal amount of $12,584,143 and Ms. Dan-Hytman currently holds a convertible debenture in the principal amount of $10,562,568. Other than the $1,558,835 principal amount of the loan to Mr. Dan outstanding described below, we have no other indebtedness to Mr. Dan, Ms. Dan-Hytman or their respective nominees. We lease a 31,100 square foot manufacturing, laboratory, and office facility at 147 Hamelin Street in Winnipeg, Manitoba at an estimated net annual rent of $181,600 for 2004. This facility is leased Almad Investments Limited, which is jointly owned by Mr. Dan and Ms. Andrea Dan-Hytman, his daughter. The lease, which was amended effective February 1, 2004, expires on June 30, 2008 and is on market terms. On November 3, 2004, Mr. Dan loaned us $1,600,000 in order to finance capital expenditures in respect of our Winnipeg facility. The loan bears interest at a rate of 5.0% annually and we are repaying the loan on a monthly basis. As at December 10, 2004, we had $1,558,835 outstanding. On March 21, 2005, our board of directors approved an additional bridge financing loan of $2,600,000 from Clairmark Investments, an entity owned by Mr. Dan. On May 10, 2005, our board of directors approved two additional bridge financing loans of $1,500,000 and $1,500,000 from Clairmark investments, an entity wholly owned by Mr. Dan, and from Mr. Dan, which were funded on April 28, 2005 and May 12, 2005 to the Company TEVA PHARMA B.V. On September 10, 2003, we completed a private equity placement of 1,402,100 units at a price of $2.00 per unit with Teva for gross proceeds of approximately $2,804,000, less issuance costs of $147,000. Each unit consists of one of our common shares and one common share purchase warrant. Each common share purchase warrant entitles the 68 holder to purchase one common share at an exercise price of $2.00 per common share until September 10, 2008. Our chairman and principal shareholder, Mr. Dan, is a director of Teva Pharmaceutical. Teva is an indirect, wholly-owned subsidiary of Teva Pharmaceutical. As part of the September 10, 2003 private equity placement, Teva received the right to purchase that number of our securities issued pursuant to any future offering in order to maintain its ownership level in our company on a fully-diluted basis, calculated immediately prior to a offering. Teva's current ownership level in us on a fully-diluted basis (not including the exercise of outstanding options) is 4.4%. In addition, until September 10, 2008 or earlier if triggered by us, as long as Teva holds any of our common shares, we have granted to Teva a right of first negotiation to obtain an exclusive license to develop and distribute the next five indications of Proxinium(TM) for which we would otherwise seek a licensee. We are obligated to notify Teva in these circumstances and to negotiate the terms of a license agreement with Teva for 60 days on an exclusive basis. If we fail to execute and deliver a license agreement at the end of this 60 day period, we are free to negotiate the terms of a license with any third party, provided that the terms offered to the third party are not materially more favorable than those offered to Teva. C. INTERESTS OF EXPERTS AND COUNSEL. Not applicable. ITEM 8: FINANCIAL INFORMATION A. FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION. Audited annual financial statements including balance sheets, statements of loss and deficit and statements of cash flows, for the fiscal years ended December 31, 2004, 2003 and 2002, together with the notes to those statements and the report thereon of the independent registered public accounting firm dated March 4, 2005, except as to Note 19, which is as at March 23, 2005, and interim financial statements for the quarter ended March 31, 2005 and March 31, 2004 are contained under Item 18: "Financial Statements" below. LEGAL OR ARBITRATION PROCEEDINGS In September 2001, First Monitor Canada Inc. commenced an action in the Ontario Superior Court of Justice against us and seven other parties in connection with an alleged breach of a distribution agreement between First Monitor and Novopharm. First Monitor claimed that Leslie Dan, acting on behalf of Viventia, induced Novopharm to breach its agreement with First Monitor and that we were unjustly enriched as a result of the breach. First Monitor sought damages in the amount of $20,000,000, special damages, an accounting of profits, interest and costs. We denied the claim against us and consider the action to be without merit. A statement of defense reflecting this position has been served on our behalf. First Monitor's action was dismissed as abandoned on January 4, 2005. Although First Monitor could attempt to revive the action, we are not aware that it has taken any steps to do so. In the normal course of business, we may become involved in various claims and legal proceedings. Except as disclosed above, we are not aware of any material existing or pending legal proceedings against us. DIVIDEND POLICY We have never paid dividends on our common shares and we do not expect to pay dividends in the foreseeable future. If we generate earnings in the future, we expect that our earnings will be retained to finance further growth and, when appropriate, retire debt. Our board of directors will determine if and when dividends should be declared and paid in the future based on our financial position at the relevant time. 69 B. SIGNIFICANT CHANGES. Other than as discussed in this registration statement (including the financial statements and the notes thereto), there have been no significant changes in our business since December 31, 2004. ITEM 9: THE OFFER AND LISTING A. OFFER AND LISTING DETAILS. We have been listed on the TSX since December 20, 1996. Initially, our common shares were listed under the symbol "NBI", but since October 17, 2000, our common shares have been under the symbol "VBI". PRICE HISTORY The following tables provide the high and low prices as reported by the TSX and the average daily trading volumes for our securities for each of the indicated periods. THE HIGH AND LOW SALES PRICES PER COMMON SHARE AND AVERAGE DAILY TRADING VOLUME FOR PERIODS PRIOR TO MAY 12, 2004 DO NOT REFLECT THE CONSOLIDATION OF OUR ISSUED AND OUTSTANDING COMMON SHARES ON A TEN (10) OLD FOR ONE (1) NEW COMMON SHARE BASIS. On May 12, 2004, our common shares began trading on a consolidated basis on the TSX. Annual high-low price history for previous five full fiscal years:
FISCAL YEAR ENDED HIGH LOW VOLUME - ----------------- ---- --- ------ ($) ($) December 31, 2000 1.90 0.27 124,498 December 31, 2001 0.54 0.15 16,658 December 31, 2002 0.40 0.13 16,353 December 31, 2003 0.40 0.14 18,591 December 31, 2004 4.80 1.40 36,324
Quarterly high-low price history for previous two full fiscal years:
QUARTER ENDED HIGH LOW VOLUME - -------------------- ---- --- ------ ($) ($) March 31, 2003 0.25 0.14 10,767 June 30, 2003 0.25 0.15 21,542 September 30, 2003 0.30 0.19 21,075 December 31, 2003 0.25 0.18 20,627 March 31, 2004 0.50 0.19 80,906 June 30, 2004 2.59 1.41 49,149 September 30, 2004 2.75 1.40 5,302 December 31, 2004 4.80 2.21 10,991
Monthly high-low price history for previous six months:
MONTH HIGH LOW VOLUME - -------------- ---- --- ------ ($) ($) August 2004 1.75 1.50 3,834 September 2004 2.75 1.60 9,209 October 2004 4.00 2.21 10,577 November 2004 4.80 3.20 18,435 December 2004 3.75 2.88 3,587 January 2005 3.65 2.60 3,985
DESCRIPTION OF SECURITIES The securities being registered pursuant to this registration statement are our common shares, without par value. 70 B. PLAN OF DISTRIBUTION. Not applicable. C. MARKETS. Our common shares have traded on the TSX since October 17, 2000 under the symbol "VBI", and were, prior to that time, traded on the TSX under the symbol "NBI". We are intending to apply to list the common shares for trading on Amex. We expect our listing to be completed during the second quarter of fiscal 2005, however, there can be no assurance that our application will be approved. Even in the event we are listed on Amex, there can be no assurance that an active trading market in our shares in the U.S. will be established and/or if established sustained. D. SELLING SHAREHOLDERS. Not applicable. E. DILUTION. Not applicable. F. EXPENSES OF THE ISSUE. Not applicable. ITEM 10: ADDITIONAL INFORMATION A. SHARE CAPITAL. We are authorized to issue an unlimited number of preferred shares, issuable in series, and an unlimited number of common shares. As at January 1, 2005, we had 29,206,115 common shares and no preferred shares issued or outstanding. THE COMMON SHARES As of January 1, 2003, we had 26,673,252 common shares issued and outstanding, and as of December 31, 2003, we had 29,186,465 common shares issued and outstanding. There were no common shares issued during 2003 pursuant to the exercise of options under the 1996 Plan and 2001 Plan, 1,111,111 common shares were issued as a result of a private placement with our Chairman Leslie Dan in February 2003 and 1,402,100 common shares issued as a result of a private placement with Teva in September 2003. Refer to "Major Shareholders and Related Party Transactions - Related Party Transactions" in this registration statement. At our special meeting of shareholders held on May 7, 2004, our shareholders approved a special resolution authorizing the consolidation of our issued and outstanding common shares on the basis of ten (10) old common shares for one (1) new common share. On May 12, 2004, our common shares began trading on a consolidated basis on the TSX. The holders of common shares are entitled to one vote for each share held at all meetings of our shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Subject to the prior rights of the holders of our preferred shares, the holders of common shares are entitled to receive any dividend declared by our board of directors and to receive our remaining property upon dissolution. The following table is a reconciliation of our issued share capital from January 1, 2002 to January 1, 2005: 71 ISSUED AND OUTSTANDING COMMON STOCK VBI
OUTSTANDING COMMON SHARES VALUE OUTSTANDING COMMON SHARES AS AT, (PRE-CONSOLIDATION) (IN THOUSANDS) (POST-CONSOLIDATION) - ----------------------------- ------------------------- -------------- ------------------------- (#) ($) (#) January 1, 2002 195,303,946 50,556 19,530,395 Issued pursuant to Private Placement 71,428,570 9,891 7,142,857 Issued on exercise of options - - - January 1, 2003 266,732,516 60,447 26,673,252 Issued pursuant to Private Placement 11,111,111 1,160 1,111,111 Issued pursuant to Private Placement 14,021,000 1,613 1,402,100 Issued on exercise of options - - - January 1, 2004 291,864,627 63,220 29,186,465 Issued on exercise of options 196,500 42 19,650 January 1, 2005 292,061,127 63,262 29,206,115
OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE DEBENTURES As at May 17, 2005, we had 1,820,042 options outstanding. Refer to "Directors, Senior Management and Employees - Share Ownership of Directors and Executive Officers - Stock Option Plan" and "Directors, Senior Management and Employees - Share Ownership of Directors and Executive Officers - Stock Options Outstanding" in this registration statement for a more detailed summary of our outstanding stock options and a description of our 1996 and 2001 stock option plans. As at January 1, 2005, we had 11,447,113 common share purchase warrants and two convertible debentures outstanding. There are 11,447,113 common shares issuable on exercise of the warrants, and 23,146,711 common shares issuable on conversion of the principal amount of the convertible debentures and the exercise of the warrants issuable thereunder. As of March 31, 2005, there was $602,132 in accrued interest owing on the convertible debentures, which would be convertible into common shares at a conversion price equal to the ten-day weighted average trading price of our common shares on the TSX for the ten consecutive trading days prior to conversion, less the maximum permitted discount. Refer to "Major Shareholders and Related Party Transactions -Related Party Transactions" for a description of the outstanding common share purchase warrants and convertible debentures. As part of the September 10, 2003 private placement, Teva received the right to purchase that number of our securities issued pursuant to any future offering in order to maintain its ownership level in us on a fully-diluted basis, calculated immediately prior to a offering. Teva's current ownership level in us on a fully-diluted basis (not including the exercise of outstanding options) is 4.4%. B. ARTICLES OF CONTINUANCE. On July 9, 1998, we were continued under the OBCA under the name Novopharm Biotech Inc. On September 11, 2000, we filed articles of amendment to change our name to Viventia Biotech Inc. On May 7, 2004, our shareholders approved a special resolution authorizing the consolidation of our issued and outstanding common shares on a ten (10) old for one (1) new basis, and we filed articles of amendment dated May 10, 2004 to give effect to this consolidation. Our Ontario corporation number is 5268330. Our articles of continuance provide in section 8 that there are no restrictions on the business that we may carry on or on the powers that we may exercise. These provisions of our articles of continuance have not been amended or revoked. DIRECTORS Our by-laws provide that a director or officer who is a party to, or who is a director or officer of or has a material interest in, any person who is a party to a material contract or 72 transaction or proposed material contract or transaction with us shall disclose the nature and extent of his interest in the time and manner provided by the OBCA. The OBCA provides that, if applicable, a director shall disclose his interest in writing to us, or request to have entered in the minutes of meeting of directors the nature and extent of his or her interest. A director who has a material interest a contract or transaction shall not vote on any resolution to approve the contract or transaction unless the contract or transaction is: (a) an arrangement by way of security for money lent to or obligations undertaken by the director for the benefit of us or an affiliate; (b) one relating primarily to his or her remuneration as one of our directors, officers, employees or agents; (c) one for indemnity or insurance of directors; and (d) one with an affiliate. Neither our articles of continuance nor our by-laws limit the directors' power, in the absence of a independent quorum, to vote compensation to themselves or any members of their body. Our by-laws provide that the directors shall be paid remuneration as the directors may from time to time by resolution determine. A simple majority of the number of directors or a greater number as may be fixed by the directors or shareholders shall constitute a quorum for the transaction of business at any meeting of directors. Neither our articles of continuance nor our by-laws address the borrowing powers of the directors. Our by-laws provide that no person is qualified to be a director unless he or she is at least 18 years of age and that a majority of the directors must be Canadian residents. There is no mandatory retirement age for directors and there is no requirement that the directors hold any shares in us to qualify as directors. THE COMMON SHARES AND PREFERRED SHARES The holders of common shares are entitled to one vote for each common share held at all meetings of our shareholders except meetings at which only holders of the preferred shares as a class or the holders of one or more series of preferred shares are entitled to vote. Subject to the prior rights of the holders of our preferred shares, the holders of common shares shall be entitled to receive any dividend declared by our board of directors and to receive our remaining property upon dissolution. The preferred shares are issuable in series from time to time. Before the issue of preferred shares of any series, our directors shall fix the number of shares that will form such series and shall determine the designation, rights, privileges, restrictions, and conditions to be attached to the preferred shares of such series, the whole subject to the filing of articles of amendment giving a description of such series. The preferred shares of each series shall rank equally with the preferred shares of every other series with respect to dividends and the return of capital in the event of our liquidation, dissolution or winding-up, and shall be entitled to a preference over the common shares and any other shares ranking junior to the preferred shares with respect to priority in the payment of dividends and in the distribution of assets in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding up our affairs. If any cumulative dividends, whether or not declared, or declared non-cumulative dividends or amounts payable on a return of a capital in the event of liquidation, dissolution or winding-up are not paid in full in respect of any series of the preferred shares, the preferred shares of all series shall participate rateably in respect of those dividends in accordance with the sums that would be payable on our preferred shares if all those dividends were declared and paid in full, and in respect of a return of capital, in accordance with the sums that would be payable on that return if all those sums so payable were paid in full; provided, however that if there are insufficient assets to satisfy in full all those claims, the claims of the holders of the preferred shares with respect to return of capital shall be paid first and any assets remaining after the payment would be applied towards the payment of claims in respect of dividends. The preferred shares of any series may be given any other preferences not inconsistent with the rights, privileges, restrictions and conditions attached to the preferred shares as a class over the common shares and any other shares junior to the preferred shares as may be determined for a particular series of preferred shares. 73 Except as set out below, or as required by law, or unless provision is made in our articles relating to any series of preferred shares that a particular series is entitled to vote, the holders of the preferred shares as a class will not be entitled to receive notice of, to attend or to vote at any meetings of our shareholders; provided, however, that the holders of preferred shares shall be entitled to notice of meetings of shareholders called for the purpose of authorizing our dissolution or the sale, lease or exchange of all or substantially all of our property other than in the ordinary course of our business. Provisions as to modification, amendment or variation of the rights attached to the common shares and preferred shares are contained in the OBCA. Generally speaking, substantive changes to the rights attached to the common shares or preferred shares as a class or of a series of preferred shares will require the approval of the holders of the shares of such class or series, as the case may be, voting separately, by special resolution (at least two-thirds of the votes cast). Our articles of continuance also specify that rights, privileges, restrictions and conditions attached to the preferred shares as a class may be added to, changed or removed but only with the approval of the holders of the preferred shares given as specified below. The approval of the holders of the preferred shares may be given in any manner required by law, subject to a minimum requirement that a particular approval must be given by resolution signed by all the holders of the preferred shares or passed by the affirmative vote of at least two-thirds of the votes cast at a meeting of the holders of the preferred shares in order to (1) add to, change or remove any right privilege, restriction or condition attaching to the preferred shares as a class or (2) in respect of any other matter requiring the consent of the holders of the preferred shares. The formalities to be observed with respect to such meeting (including with respect to notice, adjournment, quorum, conduct of the meeting) are prescribed by our by-laws and the OBCA. On every poll taken at every meeting of the holders of preferred shares as a class or at any joint meeting of the holders of two or more series of preferred shares, each holder of preferred shares entitled to vote has one vote in respect of each $1.00 of the issue price of each preferred share held. Directors do not stand for reelection at staggered intervals. There are no redemption provisions or sinking fund provisions attached to any common shares or preferred shares. Holders of common shares or preferred shares are not liable to further capital calls by us. There are no provisions discriminating against any existing or prospective holder of common shares or preferred shares as a result of that shareholder owning a substantial number of shares, other than pursuant to the take-over bid rules contained in the provincial securities laws to which we are subject. LIMITATIONS ON RIGHTS TO OWN SECURITIES, CHANGE IN CONTROL PROVISIONS AND SIGNIFICANT SHAREHOLDERS There are no limitations on the rights to own securities contained in our articles of continuance or by-laws. For a discussion of the restrictions on the rights of non-Canadians to hold or vote our common shares, refer to the discussion of the Investment Canada Act, or ICA, under the heading "Additional Information - Exchange Controls" in this registration statement. There are no provisions of our articles or bylaws that would have an effect of delaying, deferring or preventing a change in control of us and that would operate only with respect to a merger, acquisition or corporate restructuring involving us. There are no provisions in our by-laws governing the ownership threshold above which shareholder ownership must be disclosed by any shareholder. Under provincial securities laws, to which we are subject, however, shareholder ownership must be disclosed by any shareholder who owns more than 10% of our common shares. SHAREHOLDER MEETINGS Under our by-laws, the directors have the power to convene annual and special meetings of our shareholders and to set the record date for those meetings in order to determine the shareholders of record entitled to receive notice of and to vote at such meetings. Annual meetings must be held each year, not more than 15 months after the preceding 74 annual meeting. Special meetings may be held at any time. Meetings may also be requisitioned by shareholders or a court in certain circumstances. The only persons entitled to be present at a meeting of shareholders are those entitled to vote at the meeting, the directors, the auditor and other persons who are entitled or required under any provision of the OBCA or our articles or by-laws to attend a meeting of our shareholders. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. INSPECTION OF BOOKS AND RECORDS The OBCA permits shareholders and creditors of a corporation, their agents and legal representatives to examine the records of the corporation, including articles, by-laws, unanimous shareholder agreements, minutes of meetings and resolutions of shareholders, register of directors, securities register, accounting records and records containing minutes of meetings and resolutions of directors, during the usual business hours of the corporation, and permits them to take extracts of those documents free of charge. If a corporation is an "offering corporation", any other person may also do so upon payment of a reasonable fee. A shareholder of a corporation is entitled, upon request and without charge, to one copy of the articles and by-laws, and any unanimous shareholder agreement of the corporation. The OBCA permits shareholders and creditors of a corporation, their agents and legal representatives and, where the corporation is an offering corporation, any other person, to require the corporation or its transfer agent to provide a basic list setting out the names of the shareholders of the corporation, the number of shares of each class and series owned by each shareholder and the address of each shareholder, all as shown on the records of the corporation. Furthermore, those persons can demand the provision of supplemental lists setting out any changes from the basic list. The requirement for a corporation to provide these lists applies only after the payment of a reasonable fee and the sending to the corporation or its transfer agent a statutory declaration setting out, among other things, the name and address of the applicant, whether the applicant is a shareholder, creditor or any other person, and stating that the lists will be used only in connection with an effort to influence the voting by shareholders of the corporation, an offer to acquire shares of the corporation or any other matter relating to the affairs of the corporation. ACTIONS WITHOUT A MEETING - SHAREHOLDERS Under the OBCA and our by-laws, subject to certain exceptions, written resolutions signed by all shareholders of a corporation who would be entitled to vote on a particular matter are permitted. SPECIAL MEETINGS Under the OBCA, the holders of at least 5 percent of the issued shares of a corporation with voting rights may request that the directors call a meeting of shareholders. The requisition must state the business to be transacted at the meeting and must be sent to the registered office of the corporation. SHAREHOLDER DERIVATIVE SUITS Under the OBCA, upon application to a court, a derivative action may be brought by a present or former registered holder or beneficial owner of a security of a corporation or any of its affiliates, by a director or an officer or a former director or officer of a corporation or of any of its affiliates, or by any other person who, in the discretion of the court, is a proper person to bring an action of this nature. A derivative action may only proceed if: - the complainant has given fourteen days' notice to the directors of the corporation or its subsidiary of its intention to apply to the court to bring the action; - the directors of the corporation or its subsidiary do not bring, diligently prosecute or defend or discontinue the action; - the complainant is acting in good faith; and 75 - it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued. LIMITATION OF LIABILITY AND INDEMNIFICATION The OBCA requires that every director and officer of a corporation, in exercising his or her powers and discharging his or her duties: act honestly and in good faith with a view to the best interests of the corporation; and - exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The OBCA permits a corporation to indemnify any of its directors and officers, former directors and officers and persons who act or acted at the corporation's request as a director or officer of another body corporate of which the corporation is or was a shareholder or creditor, against all costs, charges and expenses, including amounts paid to settle an action or satisfy a judgment, reasonably incurred by the person in connection with any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the corporation or body corporate, if: - he or she acted honestly and in good faith with a view to the best interests of the corporation; and - in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. The OBCA also permits a corporation, with court approval, to indemnify a person referred to above in connection with an action by or on behalf of the corporation or a body corporate to procure a judgment in its favor, to which the person is made a party by reason of being or having been a director or an officer of the corporation or body corporate, against all costs, charges and expenses reasonably incurred by the person in connection with the action if he or she fulfills the two bulleted conditions set out above. A corporation may purchase and maintain insurance for the benefit of any person referred to above against any liability incurred by the person: - in his or her capacity as a director or officer of the corporation, except where the liability relates to the person's failure to act honestly and in good faith with a view to the best interests of the corporation; or - in his or her capacity as a director or officer of another body corporate where the person acts or acted in that capacity at the corporation's request, except where the liability relates to the person's failure to act honestly and in good faith with a view to the best interest of the body corporate. Our by-laws provide that we will indemnify a director or officer, former director or officer or person who acts or acted at our request as a director or officer of a body corporate of which we are or were a shareholder or creditor, to the extent permitted by the OBCA. Our by-laws also provide that we may purchase and maintain insurance for the benefit of any of these people to the extent permitted by the OBCA. ANTI-TAKEOVER PROVISIONS In Canada, takeovers are regulated in provincial securities legislation and policies. Shareholders rights plans are permissible, so long as they comply with provincial securities legislation and are reviewed by the relevant provincial securities commissions. Under our articles of continuance, we are authorized to issue an unlimited number of preferred shares, which may be issued in series from time to time. 76 Our by-laws provide that subject to law and our articles of continuance, we may issue common shares or preferred shares at any time, to any person and for the consideration as our directors determine. However, under the OBCA we may not issue any shares until the shares are fully paid. C. MATERIAL CONTRACTS. Except for contracts entered into in the ordinary course of business, the only material contracts which we entered into prior to the date hereof as follows: 1. Convertible Secured Debenture in the amount of $12,584,142.47 issued by us in connection with the private placement to Leslie Dan, dated November 3, 2004. For details of the material terms of the convertible debentures, refer to Item 7: "Major Shareholders and Related Party Transactions - Related Party Transactions - The Dan Group" in this registration statement. 2. Convertible Secured Debenture in the amount of $5,000,000 issued by us in connection with the private placement to ADH Investments (1999) Inc., dated November 3, 2004. For details of the material terms of the convertible debentures, refer to Item 7: "Major Shareholders and Related Party Transactions - Related Party Transactions - The Dan Group" in this registration statement. 3. Convertible Secured Debenture in the amount of $5,562,568.49 issued by us in connection with the private placement to ADH Investments (1999) Inc., dated November 3, 2004. For details of the material terms of the convertible debentures, refer to Item 7: "Major Shareholders and Related Party Transactions - Related Party Transactions - The Dan Group" in this registration statement. 4. Warrant Certificate granted by us in connection with the private placement to Leslie Dan, dated November 3, 2004. For details of the material terms of the warrants, refer to Item 7: "Major Shareholders and Related Party Transactions - Related Party Transactions - The Dan Group" in this registration statement. 5. Warrant Certificate granted by us in connection with the private placement to ADH Investments (1999) Inc., dated November 3, 2004. For details of the material terms of the warrants, refer to Item 7: "Major Shareholders and Related Party Transactions - Related Party Transactions - The Dan Group" in this registration statement. 6. Payment and Security Share Agreement between Leslie Dan, ADH Investments (1999) Inc. and us, dated November 3, 2004. Under the Payment and Security Share Agreement between Leslie Dan, ADH Investments (1999) Inc. and us, dated November 3, 2004, all payments received in respect of the obligations in connection with the convertible secured debenture issued by us to Mr. Dan in the principal amount of $12,584,143 and the convertible secured debenture issued by us to ADH Investments (1999) Inc. in the amount of $10,562,568 shall be shared between Mr. Dan and ADH Investments (1999) Inc., referred to as the secured parties, in accordance with their pro rata shares (i.e., the ratio determined at the particular time of the amount of the debenture obligations in favor of a secured party to the total amount of the debenture obligations) immediately prior to the payment. If any secured party receives any amount in respect of any debenture obligation that is greater that its pro rata share it shall purchase the amount of the debenture of the other secured party that would result in the secured party each having received its pro rata share of the payment. All security interests held by the secured parties for the payment and performance of any debenture obligations shall rank pari passu and equally. If an event of default other than an insolvency event (all these events are defined in the debentures) occurs, a secured party shall first give the other secured party at least seven days prior written notice before it takes any action to enforce any of its rights and remedies. In a case of this nature the non-enforcing secured party shall be entitled to purchase the debenture obligations owing to the enforcing secured party and its security interest under the debenture upon providing written notice to the enforcing secured party at any time prior to the expiration of the seven day period, whereupon a binding agreement of purchase and sale between the non-enforcing secured party and the enforcing secured party shall be deemed to have been created. 77 7. Employment Agreement between Dr. Nick Glover and us, dated January 7, 2004. Refer to Item 6: "Directors, Senior Management and Employees - Compensation - Termination of Employment, Change in Responsibilities, and Employment" in this registration statement. 8. Employment Agreement between Mr. Michael Byrne and us, dated October 14, 2004. Refer to Item 6: "Directors, Senior Management and Employees - Compensation - Termination of Employment, Change in Responsibilities, and Employment" in this registration statement. 9. Employment Agreement between Dr. Michael Cross and us, dated December 13, 2004. Refer to Item 6: "Directors, Senior Management and Employees - Compensation - Termination of Employment, Change in Responsibilities, and Employment" in this registration statement. 10. Employment Agreement between Dr. Glen MacDonald and us, dated October 12, 2004. Refer to Item 6: "Directors, Senior Management and Employees - Compensation - Termination of Employment, Change in Responsibilities, and Employment" in this registration statement. 11. Employment Agreement between Mr. Dimtri Fitsialos and us, dated November 17, 2004. Refer to Item 6: "Directors, Senior Management and Employees - Compensation - Termination of Employment, Change in Responsibilities, and Employment" in this registration statement. 12. Exclusive License Agreement between Biovation Limited and us, dated March 8, 2004. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Platform of Technologies" in this registration statement. 13. Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and us, dated June 23, 2003. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Platform of Technologies" in this registration statement. 14. Amendment Number 1 to the Exclusive License Agreement between the Trustees of Columbia University in the City of New York and us, dated December 19, 2003. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Platform of Technologies" in this registration statement. 15. License Agreement between McGill University and Novopharm Limited, dated April 28, 1994. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Product Candidate" in this registration statement. 16. License Agreement between Tanox, Inc. and us, dated August 20, 2002. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Platform of Technologies" in this registration statement. 17. License Agreement between University of Zurich and us, dated January 9, 2003. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Product Candidate" in this registration statement. 18. Non-exclusive License Agreement between XOMA Ireland Limited and us, dated November 30, 2001. Refer to Item 4: "Information on the Corporation - Business Overview - Intellectual Property - Intellectual Property Relating to Our Manufacturing" in this registration statement. 19. Property Lease between Almad Investments Limited and us, dated January 26, 2004. Refer to Item 4: "Information on the Corporation - Business Overview - Facilities" in this registration statement. 78 20. Net Office Lease between Fana Burnhamthorpe Corp. and us, dated November 20, 2000. Refer to Item 4: "Information on the Corporation in this registration statement Business Overview - Facilities" in this registration statement. 21. Subscription Agreement, dated September 3, 2003, between Teva Pharma B.V. and Viventia Biotech Inc. Refer to "Interest of Management and Others in Material Transactions -- The Dan Group". 22. Demand Promissory Note, dated February 17, 2005, in favor of Mr. Leslie Dan. Refer to "Interest of Management and Others in Material Transactions -- The Dan Group". 23. Demand Promissory Note, dated March 1, 2005, in favor of Mr. Leslie Dan. Refer to "Interest of Management and Others in Material Transactions -- The Dan Group". 24. Demand Promissory Note, dated March 23, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. Refer to "Interest of Management and Others in Material Transactions -- The Dan Group". 25. Demand Promissory Note, dated April 28, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 26. Demand Promissory Note, dated May 12, 2005, in favor of Mr. Leslie Dan. 27. Demand Promissory Note, dated May 12, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. In the ordinary course of our business, we enter into research development agreements with third parties to provide services to augment our discovery and development research. These agreements, where relevant, are described in this registration statement under the heading "Information on the Corporation - Business Overview - Intellectual Property - Research and Development Collaborations." D. EXCHANGE CONTROLS. There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of our common shares, other than withholding tax requirements. For a discussion of withholding tax requirements, refer to "Taxation - United States Federal Income Tax Considerations" and " - Taxation -Canadian Federal Income Taxation" in this registration statement. There is no limitation imposed by Canadian law or other constituent documents on the right of a non-resident to hold or vote our common shares, other than as provided in the ICA. The following discussion summarizes the principal features of the ICA for a non-Canadian who proposes to acquire voting shares or interests or all or substantially all of the assets of a Canadian business or to establish a new Canadian business. This description of the ICA is only a general overview and should not be relied upon as a substitute for independent advice from an investor's own advisor, and it does not anticipate statutory or regulatory amendments related thereto. The ICA applies to all acquisitions of control by a non-Canadian of a Canadian business or establishment by a non-Canadian of a new Canadian business. "Non-Canadian" for the purposes of the ICA is defined as an individual, government, government agency or entity that is not Canadian. Generally, Canadians are Canadian citizens, permanent residents of Canada, governments in Canada and their agencies, and Canadian controlled corporations, partnerships, trusts and joint ventures. Generally, one of two statutory obligations may apply to a proposed investment or acquisition: (i) a notification; or (ii) an application for review. An acquisition is subject to review where the non-Canadian is a WTO investor (i.e., an investor from a country that is a member of the World Trade Organization), that investor is making a direct acquisition of the Canadian business and the assets of the Canadian business for 2004 exceed $237,000,000. In the context of an indirect acquisition, a review will generally only be required where the asset value associated with the Canadian business(es) represents greater than 50 per cent of the asset value of the transaction. Otherwise, transactions of this nature are generally not to be subject to review under the ICA. 79 It should be noted that if the Canadian business being acquired is engaged in a "sensitive sector", defined in the ICA to be financial services, culture, transportation services and uranium production, then lower thresholds apply for notification namely, $5,000,000 for direct acquisitions and $50,000,000 for indirect acquisitions. If an investment is subject to review under the ICA, the investor must demonstrate to the Minister responsible for the administration of the ICA that the investment is likely to be of net benefit to Canada in light of the several factors enumerated under the ICA. With respect to us, a non-Canadian would acquire control of us for the purposes of the ICA if the non-Canadian acquired a majority of our common shares. The acquisition of less than a majority but one third or more of our common shares would be presumed to be an acquisition of control of us unless it could be established that, following the acquisition, we were not controlled in fact by the acquirer through the ownership of these common shares. Certain transactions relating to our common shares would be exempt from the ICA, including: (a) acquisition of our common shares by a person in the ordinary course of that person's business as a trader or dealer in securities; (b) acquisition of control of us in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the ICA; and (c) acquisition of control of us by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of us, through the ownership of common shares, remained unchanged. E. TAXATION. UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS This section summarizes the material United States federal income tax consequences to "U.S. Holders" (as defined below) of the purchase, ownership and disposition of our common shares. This section assumes that you hold your common shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, the "Code", for United States federal income tax purposes and assumes that the Company is not a "controlled foreign corporation" for United States federal income tax purposes. In addition, this discussion does not address the tax consequences arising under the tax laws of any state, locality or foreign jurisdiction. Furthermore, this section does not purport to be a complete analysis of all of the potential United States federal income tax considerations that may be relevant to particular holders of our common shares in light of their particular circumstances nor does it deal with all United States federal income tax consequences applicable to holders subject to special tax rules, including banks, brokers, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, tax-exempt entities, insurance companies, persons liable for alternative minimum tax, persons that actually or constructively own 10 percent or more of our common shares, persons that hold common shares as part of a straddle or a hedging, constructive sale, synthetic security, conversion or other integrated transaction, pass-through entities (e.g., partnerships), persons whose functional currency is not the United States dollar, financial institutions, expatriates or former long-term residents of the United States, individual retirement accounts or other tax-deferred accounts, real estate investment trusts, or regulated investment companies. If any entity that is classified as a partnership for United States federal income tax purposes holds common shares, the tax treatment of its partners will generally depend upon the status of the partner and the activities of the partnership. Partnerships and other entities that are classified as partnerships for federal income tax purposes and persons holding common shares through a partnership or other entity classified as a partnership for federal income tax purposes are urged to consult their tax advisors. This section is based on the Code, existing and proposed Treasury regulations thereunder, published rulings, court decisions and administrative interpretations, all as currently in effect. These laws are subject to change, repeal or 80 revocation possibly on a retroactive basis so as to result in federal income tax consequences different from those discussed below. For purposes of this discussion, you are a "U.S. Holder" if you are a beneficial owner of common shares and you are for United States federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is subject to United States federal income tax regardless of its source, or (iv) a trust (a) if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust or (b) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person. U.S. HOLDERS DISTRIBUTIONS Subject to the passive foreign investment company rules discussed below, if you are a U.S. Holder, you must include in your gross income as ordinary income the gross amount of any dividend paid by us out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes), including the amount of any Canadian taxes withheld from this dividend. We do not maintain calculations of our earnings and profits under United States federal income tax principles. If you are a United States resident entitled to benefits under the Canada-United States Income Tax Convention, dividends on our common shares generally will be subject to Canadian withholding tax at the rate of 15 percent. You must include the dividend in income when you receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Distributions in excess of our current and accumulated earnings and profits (as determined for United States federal income tax purposes), including the amount of any Canadian taxes withheld from this distribution, will be treated as a non-taxable return of capital to the extent of your basis in the common shares and afterwards as a capital gain. Under current law, certain dividends received by individuals are taxed at lower rates than items of ordinary income. If you are a non-corporate U.S. Holder, dividends paid to you through 2008 may be subject to United States federal income tax at lower rates than other types of ordinary income, generally 15 percent-provided certain holding period and other requirements are satisfied. These requirements include (a) that we not be classified as a "passive foreign investment company", which is commonly known by the acronym PFIC, and (b) that you not treat the dividend as "investment income" for purposes of the investment interest deduction rules. As discussed below under "Passive Foreign Investment Company", we believe that we may be a PFIC. U.S. Holders should consult their own tax advisors regarding the application of these rules. In the case of a dividend paid in Canadian dollars, the amount of the dividend generally will equal the United States dollar value of the Canadian dollars distributed, determined by reference to the spot currency exchange rate on the date of your receipt of the dividend, and you will realize separate foreign currency gain or loss to the extent that gain or loss arises on the actual disposition of foreign currency received. Any foreign currency gain or loss generally will be treated as ordinary income or loss. Dividends received by a U.S. Holder with respect to common shares will be treated as foreign source income. Any Canadian tax withheld with respect to distributions made on the common shares may, subject to certain limitations, be claimed as a foreign tax credit against a U.S. Holder's United States federal income tax liability or may be claimed as a deduction for United States federal income tax purposes. The rules relating to foreign tax credits are extremely complex and the availability of a foreign tax credit depends on numerous factors. You should consult your own tax advisors concerning the application of the United States foreign tax credit rules to your particular situation. SALE OR EXCHANGE Subject to the discussion below under "Passive Foreign Investment Company", if you are a U.S. Holder and you sell or otherwise dispose of your common shares, you will generally recognize capital gain or loss for United States federal income tax purposes equal to the difference between the United States dollar value of the amount that you realize and your adjusted tax basis, determined in United States dollars, in your common shares. Your adjusted tax 81 basis in our common shares will generally be the cost to you of these shares. Capital gain of a non-corporate U.S. Holder is generally taxed at a maximum rate of 15 percent if the property has been held more than one year. The deductibility of capital losses is subject to limitations. The gain or loss will generally be gain or loss from sources within the United States for foreign tax credit limitation purposes. PASSIVE FOREIGN INVESTMENT COMPANY The Code contains special rules for the taxation of U.S. Holders who own shares in a "passive foreign investment company", referred to as a "PFIC". A PFIC is a non-U.S. company that meets an income test and/or an asset test. The income test is met if 75% or more of the company's gross income is "passive income" (generally, dividends, interest, rents, royalties, and gains from the disposition of assets producing passive income) in any taxable year. The asset test is met if at least 50% of the average value of a company's assets produce, or are held for the production of, passive income. Based on our current income, assets and activities, we believe that we may be a PFIC. If we are a PFIC, then, in the absence of the elections described below, you may be subject to increased tax liability and an interest charge with respect to gain recognized on the sale of your common shares and upon the receipt of certain "excess distributions" made in respect of your common shares. Generally, the special tax and interest charges are determined as follows: (i) the gain or excess distribution (which is treated as ordinary income) is allocated ratably over the days in your holding period for the common shares, (ii) the amounts allocated to years before the current year are taxed at the highest ordinary income rates in effect for those years, and (iii) underpayment interest is charged as if these amounts were actually taxed in the prior years but the tax had not been paid. As an alternative to the foregoing rules, if our common shares constitute "marketable stock" under applicable Treasury regulations, you may make a mark-to-market election to include in income each year as ordinary income an amount equal to the increase in value of your common shares for that year or to claim a deduction for any decrease in value (but only to the extent of previous mark-to-market gains). We expect that our common shares will be treated as marketable stock for these purposes but no assurance can be given. Alternatively, if we comply with certain information reporting requirements, you may elect to treat the Company as a "qualified electing fund", referred to as a "QEF", in which case you would be required to include in income each year your pro rata share of our ordinary earnings and net capital gains, whether or not distributed. However, we do not currently intend to provide the information necessary to permit a U.S. Holder to make the QEF election. The PFIC rules are complex. U.S. Holders should consult with their tax advisors regarding the U.S. federal income tax consequences under the PFIC rules the potential application to their situation. BACKUP WITHHOLDING TAX Backup withholding tax at a rate of 28% may apply to payments of dividends and to payments of proceeds of the sale or other disposition of common shares within the United States by a non-corporate U.S. Holder, if the holder fails to furnish a correct taxpayer identification number or otherwise fails to comply with applicable requirements of the backup withholding tax rules. Backup withholding tax is not an additional tax and amounts so withheld may be refunded or credited against a U.S. Holder's United States federal income tax liability, provided that correct information is provided to the Internal Revenue Service. CANADIAN FEDERAL INCOME TAXATION The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person, referred to as an "Investor", who acquires one or more common shares pursuant to this registration statement, and who at all material times for the purposes of the Income Tax Act (Canada), referred to as the "Canadian Act", deals at arm's length with us, is not affiliated with us, holds all common shares solely as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any common share in, or in the course of, carrying on business in Canada. It is assumed that the common shares will, at all material times, be listed on a stock exchange that is prescribed for the purposes of the Canadian Act. 82 This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980), referred to as the "Treaty", as amended. This summary takes into account all specific proposals to amend the Canadian Act and the regulations thereunder publicly announced by the government of Canada prior to the date hereof, and our understanding of the current published administrative and assessing practices of the Canada Customs and Revenue Agency. It is assumed that all these amendments will be enacted substantially as currently proposed, and that there will be no other material change to any of these laws or practices, although no assurances can be given in these respects. Except to the extent otherwise expressly set out herein, this summary does not take into account any provincial, territorial, or foreign income tax law or treaty. This summary is not, and is not to be construed as, tax advice to any particular Investor. Each prospective and current Investor is urged to obtain independent advice as to the Canadian income tax consequences of an investment in common shares applicable to the Investor's particular circumstances. An Investor generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Investor on a disposition of a common share unless the common share constitutes "taxable Canadian property" to the Investor for purposes of the Canadian Act and the Investor is not eligible for relief pursuant to an applicable bilateral tax treaty. A common share that is disposed of by an Investor will not constitute taxable Canadian property of the Investor provided that the common share is listed on a stock exchange that is prescribed for the purposes of the Canadian Act (the TSX is so prescribed), and that neither the Investor, nor one or more persons with whom the Investor did not deal at arm's length, alone or together, at any time in the five years immediately preceding the disposition, owned 25% or more of the issued shares of any class or series of our capital stock. In addition, the Treaty generally will exempt an Investor who is a resident of the United States for the purposes of the Treaty, and who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the Investor on the disposition of a common share, from that liability provided that the value of the common share is not derived principally from real property (including resource property) situated in Canada, or that the Investor does not have, and has not had within the 12-month period proceeding the disposition, a "permanent establishment" or "fixed base", as those terms are defined for the purposes of the Treaty, available to the Investor in Canada. The Treaty may not be available to a non-resident investor that is a U.S. LLC or certain other pass-through vehicles, which are not subject to tax in the United States. Any dividend on a common share, including a stock dividend, paid or credited, or deemed under the Canadian Act to be paid or credited, by us to an Investor, will generally be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, or any lesser rates as may be available under an applicable income tax treaty. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a common share to an Investor who is a resident of the United States for the purposes of the Treaty will be reduced to 5% if the beneficial owner of the dividend is a company that owns at least 10% of our voting stock, and in any other case will be reduced to 15%, of the gross amount of the dividend. It is the position of the Canada Customs and Revenue Agency that United States limited liability companies generally do not qualify as residents of the United States under the Treaty, and therefore Treaty reductions are not available to these Investors. We will be required to withhold the tax from the dividend, and remit the tax directly to the Canada Customs and Revenue Agency for the account of the Investor. F. DIVIDENDS AND PAYING AGENTS. We have not paid any dividends since our incorporation. We will consider paying dividends in future as our operational circumstances may permit having regard to, among other things, our earnings, cash flow and financial requirements. It is the current policy of our board of directors to retain any earnings to finance our business plan. G. STATEMENT BY EXPERTS. Ernst and Young LLP, independent registered public accounting firm, have audited the consolidated balance sheets of Viventia Biotech Inc. as at December 31, 2004 and 2003 and the statements of loss and deficit and cash flows for each of the years in the three-year period ended December 31, 2004, as set forth in their report thereon appearing elsewhere herein. We have included our consolidated financial statements in this registration statement in reliance of Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. 83 H. DOCUMENTS ON DISPLAY. Copies of all filings made with the Securities and Exchange Commission can be obtained from www.sec.gov. Copies of all documents filed with the securities commissions in Canada can be obtained from the website located at www.sedar.com. Our documents may be viewed at our head office located at 10 Four Seasons Place, Suite 501, Toronto, Ontario, Canada, M9B 6H7, our phone number is (416) 291-1277, our fax number is (416) 335-9306 and our website address is www.viventia.com. The contents of our website are not incorporate by reference into this registration statement. I. SUBSIDIARY INFORMATION. Not applicable. ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As at March 31, 2005, we had U.S. $45,434 in U.S. currency in cash reserves. To date, we have not engaged in any foreign currency hedging activity nor have we formally monitored the fluctuation of U.S. dollars with regard to our U.S. dollar expenditures. We do not currently engage in activities in order to hedge interest rate risk, commodity price risk or other relevant market risks. ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable. 84 PART II Not applicable. 85 PART III ITEM 13: FINANCIAL STATEMENTS Not applicable. ITEM 14: FINANCIAL STATEMENTS See pages F-1 to F-39 of this registration statement on Form 20-F. ITEM 15: EXHIBITS The following documents are filed as part of this registration statement on Form 20-F as exhibits:
EXHIBIT DESCRIPTION 1.1 Articles of continuance dated July 9, 1998. 1.2 Articles of amendment dated September 11, 2000. 1.3 Articles of amendment dated May 10, 2004. 1.4 By-law No. 1 and By-law No. 2. 2.1 1996 Stock Option Plan. 2.2 2001 Stock Option Plan. 3.1* Convertible Secured Debenture in the amount of $12,584,142.47 issued by Viventia Biotech Inc. in connection with the private placement to Leslie Dan dated November 3, 2004. 3.2* Convertible Secured Debenture in the amount of $5,000,000 issued by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.3* Convertible Secured Debenture in the amount of $5,562,568.49 issued by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.4 Warrant Certificate granted by Viventia Biotech Inc. in connection with the private placement to Leslie Dan dated November 3, 2004. 3.5 Warrant Certificate granted by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.6 Payment and Security Share Agreement between Leslie Dan, ADH Investments (1999) Inc. and Viventia Biotech Inc., dated November 3, 2004. 3.7 Employment Agreement between Dr. Nick Glover and Viventia Biotech Inc. dated January 7, 2004. 3.8 Employment Agreement between Mr. Michael Byrne and Viventia Biotech Inc. dated October 14, 2004. 3.9 Employment Agreement between Mr. Michael Cross and Viventia Biotech Inc. dated December 13, 2004. 3.10 Employment Agreement between Dr. Glen MacDonald and Viventia Biotech Inc. dated October 12, 2004. 3.11 Employment Agreement between Mr. Dimitri Fitsialos and Viventia Biotech Inc. dated November 17, 2004. 3.12* Exclusive License Agreement between Biovation Limited and Viventia Biotech Inc., dated March 8, 2004. 3.13* Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated June 23, 2003.
86 3.14* Amendment Number 1 to the Exclusive License Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated December 19, 2003. 3.15* License Agreement between McGill University and Novopharm Limited, dated April 28, 1994. 3.16* License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated August 20, 2002. 3.17* License Agreement between University of Zurich and Viventia Biotech Inc., dated January 9, 2003. 3.18* Non-exclusive License Agreement between XOMA Ireland Limited and Viventia Biotech Inc., dated November 30, 2001. 3.19 Property Lease between Almad Investments Limited and Viventia Biotech Inc., dated January 26, 2004. 3.20 Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech Inc., dated November 20, 2000. 3.21* Subscription Agreement, dated September 3, 2003, between Teva Pharma B.V. and Viventia Biotech Inc. 3.22 Demand Promissory Note, dated February 17, 2005, in favor of Mr. Leslie Dan. 3.23 Demand Promissory Note, dated March 1, 2005, in favor of Mr. Leslie Dan. 3.24 Demand Promissory Note, dated March 23, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan 3.25 Demand Promissory Note, dated April 28, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 3.26 Demand Promissory Note, dated May 12, 2005, in favor of Mr. Leslie Dan. 3.27 Demand Promissory Note, dated May 12, 2005 in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 14.1 Consent of Ernst & Young LLP.
- --------------- *Confidential Treatment Requested 87 Financial Statements VIVENTIA BIOTECH INC. The First Quarter Ended March 31, 2005 F-1 BALANCE SHEETS (in thousands of Canadian dollars) (unaudited) As at
MARCH 31, 2005 DECEMBER 31, 2004 -------------- ----------------- $ $ ASSETS Current Cash and cash equivalents 2,038 2,715 Short-term investments 52 52 Miscellaneous receivables 193 144 Prepaid expenses, deposits and supplies 441 500 ------- ------- TOTAL CURRENT ASSETS 2,724 3,411 ------- ------- Deferred financing expenses, net 178 201 Licensed technology, net 152 174 Capital assets, net 3,986 3,053 ------- ------- 7,040 6,839 ------- ------- LIABILITIES Accounts payable and accrued liabilities 4,136 3,137 Current portion of capital lease obligations 72 59 Current portion of deferred income 63 70 Current portion of term loan due to related parties 517 509 Bridge financing loans due to related parties (note 6) 4,600 - ------- ------- TOTAL CURRENT LIABILITIES 9,388 3,775 ------- ------- Capital lease obligation 101 93 Deferred income 21 29 Term loan due to related party 922 1,050 Convertible debentures due to related parties 23,147 23,147 ------- ------- TOTAL LIABILITIES 33,579 28,094 ------- ------- SHAREHOLDERS' DEFICIENCY Capital stock 63,262 63,262 Contributed surplus 9,817 9,655 Deficit (99,618) (94,172) ------- ------- TOTAL SHAREHOLDERS' DEFICIENCY (26,539) (21,255) ------- ------- 7,040 6,839 ======= =======
F-2 Statements of Loss and Deficit (in thousands of Canadian dollars, except per share data) (unaudited) Three months ended
MARCH 31, 2005 MARCH 31, 2004 -------------- ----------------- $ $ EXPENSES Research and development activities: Research activities 1,767 1,256 Salaries and benefits 1,491 1,137 Occupancy 240 207 Other operating expenses 388 144 Amortization of licensed technology 22 22 ------- ------- 3,908 2,766 General and administrative 858 335 Amortization of capital assets 222 87 Amortization of deferred financing expenses 28 12 Stock-based compensation expense 162 13 Interest expense 287 137 ------- ------- Loss before the undernoted (5,465) (3,350) ------- ------- Miscellaneous Income 19 2 ------- ------- NET LOSS FOR THE PERIOD (5,446) (3,348) Deficit - Beginning of period (94,172) (77,000) ------- ------- DEFICIT - END OF PERIOD (99,618) (80,348) ======= ======= BASIC AND DILUTED LOSS PER COMMON SHARE (0.19) (0.11) ======= =======
F-3 Statements of Cash Flows (in thousands of Canadian dollars) (unaudited) Three months ended
MARCH 31, 2005 MARCH 31, 2004 -------------- ----------------- $ $ Operating Activities Net loss for the period (5,446) (3,348) Add items not affecting cash: Amortization of capital assets 222 87 Amortization of licensed technology 22 22 Amortization of deferred financing costs 23 12 Recognized deferred revenue on license technology (16) - Stock-based compensation 162 14 Loss on sale of capital assets - 1 Changes in non-cash working capital balances related to operations Miscellaneous receivables (49) (15) Prepaid expenses, deposits and supplies 60 90 Accounts payable and accrued liabilities 230 617 ------- ------- CASH USED IN OPERATING ACTIVITIES (4,792) (2,520) ------- ------- INVESTING ACTIVITIES Proceeds on sale of capital assets - 2 Purchase of capital assets (385) (58) ------- ------- CASH USED IN INVESTING ACTIVITIES (385) (56) ------- ------- FINANCING ACTIVITIES Common share issuance costs - (370) Repayment of term loan to related parties (120) - Capital lease obligations 20 - Proceeds on bridge financing loans from related parties 4,600 2,700 ------- ------- CASH PROVIDED BY FINANCING ACTIVITIES 4,500 2,330 ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (677) (246) CASH AND CASH EQUIVALENTS, beginning of period 2,715 298 ------- ------- CASH AND CASH EQUIVALENTS, end of period 2,038 52 ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION, INTEREST PAID 24 137 ======= =======
F-4 Notes to Financial Statements 1. NATURE OF OPERATIONS Viventia Biotech Inc. [the "Company"] was continued in 1995 under the British Columbia Companies Act as Novopharm Biotech Inc. In 1998 the Company was continued under the Business Corporations Act (Ontario). The Company changed its name from Novopharm Biotech Inc. to Viventia Biotech Inc. on September 11, 2000. The Company is engaged in discovery and development of fully human monoclonal antibody therapies for the treatment of cancer. The Company's two principal shareholders are Leslie Dan, Chairman of the Board of Directors, and Andrea Dan-Hytman [collectively the Dan Group], who own or directly control other companies that collectively own 82.8% of the Company as at March 31, 2005. Substantially all of the financing received by the Company during the past three fiscal years has been received from these shareholders [notes 6 and 7]. The Company's success is dependent, in large part, on completing product development, obtaining regulatory approvals and commercializing or entering into agreements with third parties to commercialize product candidates. The successful completion of these activities is necessary to allow the Company to continue research and development activities and the commercialization of its products. It is not possible to predict either the outcome of future research and development programs or the Company's ability to fund these programs going forward. The Company has had significant losses over the past four years. At March 31, 2005, the Company has a negative net working capital of approximately $6,664,000 and without an additional source of funding it will have inadequate funds to continue its existing corporate, administrative and operational functions for the coming year and therefore there is substantial doubt about the ability of the Company to continue as a going concern. These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. These financial statements do not include adjustments that would be necessary should the Company be unable to continue as a going concern. Management plans to raise additional funds from the private or public placement of additional securities and from the principal shareholder. The Company cannot assure that such additional financing will be available or even if available, that it will be available on acceptable terms. On May 7, 2004, the Company held a special meeting of shareholders at which the shareholders approved a special resolution authorizing the consolidation of the Company's issued and outstanding common shares on a ten [old] for one [new] basis. The shareholders also approved an increase in the number of shares reserved for issuance pursuant to the terms of the Company's stock option plan from 600,000 to 2,600,000 common shares after giving effect to the above-mentioned consolidation. F-5 Accordingly, the number of common shares, warrants, and stock options have been retroactively adjusted to reflect the resolution. 2. INTERIM STATEMENTS The accompanying unaudited financial statements are prepared in accordance with Canadian generally accepted accounting principles for interim financial statements and do not include all the information required for complete financial statements. They are consistent with the policies outlined in the Company's audited financial statements for the year ended December 31, 2004. The interim financial statements and related notes should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2004. When necessary, the financial statements include amounts based on informed estimates and best judgements of management. The results of operations for the interim periods reported are not necessarily indicative of results to be expected for the year. 3. LOSS PER COMMON SHARE Loss per common share is computed using the weighted average number of common shares outstanding during the period of 29,206,115. Fully diluted loss per share has not been presented, as the calculation is anti-dilutive. 4. SHARE CAPITAL AUTHORIZED AND ISSUED SHARE CAPITAL (a) The Company has authorized an unlimited number of common shares and an unlimited number of preferred shares. The common shares issued and outstanding as of March 31, 2005 and December 31, 2004 were 29,206,115. (b) At March 31, 2005 the Company had 1,862,792 options to purchase common shares at a weighted average excise price of $2.18 per share. No options were excised and 446,000 options were granted during the first quarter of 2005. The Company has a total of 11,447,113 warrants to purchase common shares outstanding. No warrants were issued or exercised during the first quarter of 2005. 5. STOCK BASED COMPENSATION F-6 The Company accounts for stock options in accordance with the amended Canadian Institute of Chartered Accountant Handbook section 3870, Stock-based compensation and other stock-based payments" ("CICA 3870") which requires that all stock-based compensation awards be accounted for at fair value. For the purpose of measuring and expensing compensation cost, the fair value of the options is amortized to income over the option's vesting period on a straight-line basis. For the three months ended March 31, 2005 the Company issued 446,000 (March 31, 2004 - nil) stock options. The fair value of each option was estimated to be $2.35 using the following assumptions: Expected option life 7 years Volatility 72.6% Risk-free interest rate 4.33% Dividend yield nil
6. BRIDGE FINANCING LOANS During the three months ended March 31, 2005, the Company received three bridge financing loans Leslie Dan. On February 17, 2005, the Company received a bridge financing loan in the amount of $500,000, on March 1, 2005, the Company received a bridge financing loan in the amount of $1,500,000, and on March 23, 2005 the Company received a bridge financing loan in the amount of $2,600,000. These loans bear interest at 4.5% per annum and are payable upon demand. 7. FINANCIAL INSTRUMENTS The Company financial instruments recognized in the balance sheets consist of cash and cash equivalents, miscellaneous receivables and accounts payables and received liabilities. The carrying value of these financial instruments approximate their fair values due to their short-term nature. The carrying value of the convertible debentures and bridge financing loans approximates fair market value based on current expected borrowing rates from the same or similar parties. 8. STATEMENT OF CASH FLOWS Excluded from the Statements of Cash Flow for the period ended March 31, 2005 are capital asset additions of $754,000 which is included in accounts payable and accrued liabilities. 9. SUBSEQUENT EVENT On April 28, 2005, the Company received a bridge financing loan from Leslie Dan in the amount of $1,500,000 bearing interest at 4.5% per annum and it is payable on demand. 10. COMPARATIVE FIGURES The comparative financial statements have been reclassified from statements previously presented to conform to the presentation of the current year financial statements. F-7 Financial Statements VIVENTIA BIOTECH INC. December 31, 2004 and 2003 F-8 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of VIVENTIA BIOTECH INC. We have audited the balance sheets of Viventia Biotech Inc. as at December 31, 2004 and 2003 and the statements of loss and deficit and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board [United States]. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004, and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles. Toronto, Canada, March 4, 2005. [except for note 19, /s/ Ernst and Young LLP which is as at March 23, 2005] Chartered Accountants COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA - U.S. REPORTING DIFFERENCE In the United States, reporting standards for auditors require the addition of an explanatory paragraph [following the opinion paragraph] when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in note 1 to the financial statements. Our report to the Shareholders dated March 4, 2005, except for note 19, which is as at March 23, 2005, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events when they are adequately disclosed in the financial statements. Toronto, Canada, /s/ Ernst and Young LLP March 4, 2005. Chartered Accountants F-9 VIVENTIA BIOTECH INC. BALANCE SHEETS [in thousands of Canadian dollars] [See note 1 - Nature of operations and going concern assumption] As at December 31
2004 2003 $ $ ------- ------- ASSETS [note 7] CURRENT Cash and cash equivalents 2,715 247 Short-term investments 52 51 Miscellaneous receivables 144 50 Prepaid expenses, deposits and supplies 500 313 ------- ------- TOTAL CURRENT ASSETS 3,411 661 ------- ------- Deferred financing expenses [net of accumulated amortization of $159 [2003 - $82] [note 10] 201 24 Licensed technology [net of accumulated amortization of $222 [2003 - $135] [note 4] 174 261 Capital assets, net [note 5] 3,053 1,793 ------- ------- 6,839 2,739 ======= ======= LIABILITIES AND SHAREHOLDERS' DEFICIENCY CURRENT Accounts payable and accrued liabilities [note 9] 3,137 1,706 Current portion of capital lease obligations [note 15[c]] 59 9 Current portion of term loan due to related party [note 8] 509 -- Current portion of deferred income [note 14] 70 -- ------- ------- TOTAL CURRENT LIABILITIES 3,775 1,715 ------- ------- Capital lease obligations [note 15[c]] 93 8 Deferred income [note 14] 29 -- Term loan due to related party [note 8] 1,050 -- Bridge financing loans due to related parties [notes 6 and 7] -- 1,500 Convertible debentures due to related parties [note 7] 23,147 4,000 ------- ------- TOTAL LIABILITIES 28,094 7,223 ------- ------- Commitments and contingencies [notes 15 and 19] SHAREHOLDERS' DEFICIENCY Capital stock [note 11] 63,262 63,220 Contributed surplus [notes 11 and 12] 9,655 9,296 Deficit (94,172) (77,000) ------- ------- TOTAL SHAREHOLDERS' DEFICIENCY (21,255) (4,484) ------- ------- 6,839 2,739 ======= =======
See accompanying notes On behalf of the Board: Director Director F-10 VIVENTIA BIOTECH INC. STATEMENTS OF LOSS AND DEFICIT [in thousands of Canadian dollars, except per share information] Year ended December 31
2004 2003 2002 ---------- ---------- ---------- $ $ $ EXPENSES Research and development activities Salaries and benefits 5,576 4,551 4,266 Research activities 5,522 4,752 4,307 Occupancy 805 789 664 Other operating costs 787 529 607 Amortization of licensed technology [note 4] 87 87 48 ---------- ---------- ---------- 12,777 10,708 9,892 General and administrative [note 9] 1,498 1,079 1,408 Amortization of capital assets 441 524 651 Amortization of deferred financing expenses 42 82 35 Stock-based compensation expense [note 12[b]] 359 28 -- Interest expense on amounts due to related parties [notes 6 and 7] 801 435 338 ---------- ---------- ---------- 15,918 12,856 12,324 ---------- ---------- ---------- Loss before the undernoted (15,918) (12,856) (12,324) Write-off of deferred financing expenses [note 10] (1,361) -- -- Miscellaneous income [notes 5 and 14] 107 78 55 ---------- ---------- ---------- NET LOSS FOR THE YEAR (17,172) (12,778) (12,269) Deficit, beginning of period (77,000) (64,222) (51,953) ---------- ---------- ---------- DEFICIT, END OF YEAR (94,172) (77,000) (64,222) ========== ========== ========== BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.59) $ (0.45) $ (0.62) ========== ========== ========== BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING [000's] [notes 1, 2 and 11] 29,188 28,090 19,804 ========== ========== ==========
See accompanying notes F-11 VIVENTIA BIOTECH INC. STATEMENTS OF CASH FLOWS [in thousands of Canadian dollars] Year ended December 31
2004 2003 2002 $ $ $ ------- ------- ------- OPERATING ACTIVITIES Net loss for the year (17,172) (12,778) (12,269) Add (deduct) items not affecting cash Amortization of deferred financing expenses 42 82 35 Amortization of licensed technology [note 4] 87 87 48 Amortization of capital assets 441 524 651 Loss (gain) on sale of capital assets (61) (2) 26 Stock-based compensation 359 28 -- ------- ------- ------- (16,304) (12,059) (11,509) Changes in non-cash working capital balances related to operations Miscellaneous receivables (94) 2 32 Prepaid expenses, deposits and supplies (187) (103) (2) Accounts payable and accrued liabilities 738 155 160 ------- ------- ------- CASH USED IN OPERATING ACTIVITIES (15,847) (12,005) (11,319) ------- ------- ------- INVESTING ACTIVITIES Purchase of capital assets (931) (223) (132) Proceeds on sale of capital assets 175 6 38 Purchase of short-term investments (52) (51) (50) Proceeds on maturity of short-term investments 51 50 500 Deferred income 99 -- -- Purchase of licensed technology [note 4] -- -- (156) ------- ------- ------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (658) (218) 200 ------- ------- ------- FINANCING ACTIVITIES Proceeds on issuance of common shares [note 11] 42 4,804 10,000 Common share issuance costs [note 11] -- (236) (109) Proceeds on bridge financing loans from related parties [note 6] 11,900 2,000 2,800 Repayment of bridge financing loans to related parties [note 6] (4,253) (500) (2,800) Repayment of convertible debenture to related parties [note 7] (4,000) (2,000) -- Proceeds on issuance of convertible debentures from related parties [note 7] 14,000 -- 6,000 Convertible debentures issuance costs [note 7] (219) -- (141) Proceeds from term loan from related party [note 8] 1,600 -- -- Repayment of term loan to related party [note 8] (41) -- -- Capital lease obligations (56) 17 -- ------- ------- ------- CASH PROVIDED BY FINANCING ACTIVITIES 18,973 4,085 15,750 ------- ------- ------- NET INCREASE (DECREASE) IN CASH DURING THE YEAR 2,468 (8,138) 4,631 Cash and cash equivalents, beginning of year 247 8,385 3,754 ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR 2,715 247 8,385 ======= ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid 554 431 338 Income taxes paid -- -- -- ======= ======= =======
See accompanying notes F-12 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 1. NATURE OF OPERATIONS AND GOING CONCERN ASSUMPTION Viventia Biotech Inc. [the "Company"] was continued in 1995 under the British Columbia Companies Act as Novopharm Biotech Inc. In 1998 the Company was continued under the Business Corporations Act (Ontario). The Company changed its name from Novopharm Biotech Inc. to Viventia Biotech Inc. on September 11, 2000. The Company is engaged in discovery and development of fully human monoclonal antibody therapies for the treatment of cancer. The Company's two principal shareholders are Leslie Dan, Chairman of the Board of Directors, and Andrea Dan-Hytman [collectively the "Dan Group"], who own or directly control other companies that collectively own 82.8% of the Company as at December 31, 2004. Substantially all of the financing received by the Company during the past three fiscal years has been received from these shareholders [notes 6, 7, 8, 11 and 19]. The Company's success is dependent, in large part, on completing product development, obtaining regulatory approvals and commercializing or entering into agreements with third parties to commercialize product candidates. The successful completion of these activities is necessary to allow the Company to continue research and development activities and the commercialization of its products. It is not possible to predict either the outcome of future research and development programs or the Company's ability to fund these programs going forward. The Company has had significant losses over the past five years. At December 31, 2004, the Company has negative net working capital of approximately $364,000 and without an additional source of funding it will have inadequate funds to continue its existing corporate, administrative and operational functions for the coming year. There is substantial doubt about the ability of the Company to continue as a going concern. These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. These financial statements do not include adjustments that would be necessary should the Company be unable to continue as a going concern. Management plans to raise additional funds from the private or public placement of additional securities and the principal shareholder. The Company cannot assure that such additional financing will be available or, even if it is available, that it will be available on acceptable terms. On May 7, 2004, the Company held a special meeting of shareholders at which the shareholders approved a special resolution authorizing the consolidation of the Company's issued and outstanding common shares on a ten [old] for one [new] basis. The shareholders also approved an increase in the number of shares reserved for issuance pursuant to the terms of the Company's stock option plan [note 12[a]] from 600,000 to 2,600,000 common shares after giving effect to the F-13 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 above-mentioned consolidation. Accordingly, the number of common shares, warrants, and stock options have been retroactively adjusted to reflect the resolution. F-14 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles ["GAAP"]. With respect to the financial statements of the Company, the significant differences between Canadian and United States GAAP ["U.S. GAAP"] are described and reconciled in note 20. The significant accounting policies are as follows: The significant accounting policies are as follows: USE OF ESTIMATES The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand, cash balances and highly liquid short-term deposits with original maturity dates of less than 90 days at the date of purchase with financial institutions. DEFERRED FINANCING EXPENSES Deferred financing expenses, comprised primarily of legal costs, represent costs related to the issuance of the Company's convertible debentures. Amortization of deferred financing expenses is provided over the term of the convertible debentures. LICENSED TECHNOLOGY Licensed technology represents proven technology that the Company has in-licensed from other companies for the purpose of applying the technology in its research operations. Licensed technology is stated at cost less accumulated amortization. Amortization is provided on a straight-line basis over its estimated useful life of five years. F-15 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 CAPITAL ASSETS Capital assets are stated at cost less accumulated amortization. Amortization is provided on a straight-line basis at rates designed to amortize the cost of capital assets over their estimated useful lives as follows: Office equipment, furniture and fixtures 10 years Computer hardware and software 3 years Research equipment 10 years Leasehold improvements Over the term of the related lease RESEARCH AND DEVELOPMENT COSTS Research costs are expensed as incurred. Development costs are expensed as incurred unless these costs meet the criteria under Canadian GAAP for deferral and amortization. To date, no such costs have been deferred. Research costs consist of salaries and benefits of employees whose activities relate to research and development, employees who provide support for the Company's ongoing research and development activities, research supplies, rent associated with the Company's research facility and amortization of licensed technology used in connection with the Company's research and development activities. INCOME TAXES The Company applies the asset and liability method of accounting for income taxes. Under this method, future tax assets and liabilities are determined based on the differences between the financial reporting and income tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce future income tax assets when it is more likely than not that a portion of the future income tax asset will not be realized. FINANCIAL INSTRUMENTS The Company's financial instruments recognized in the balance sheets consist of cash and cash equivalents, miscellaneous receivables and accounts payable and accrued liabilities. The carrying values of these financial instruments approximate their fair values due to their short-term nature. The carrying value of the convertible debentures and bridge financing loans approximates fair market value based on current expected borrowing rates from the same or similar parties. F-16 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 STOCK OPTION PLANS The Company has two stock-based compensation plans, which are described in note 12. Prior to January 1, 2003, no compensation expense was recognized for the plans when stock or stock options were issued to employees, officers and directors. During the fourth quarter of 2003, the Company adopted the fair value method of accounting for stock-based compensation plans. The Company has selected the prospective method of adoption; accordingly, results from prior years have not been restated [note 3]. Stock options and warrants awarded to non-employees are accounted for using the fair value method and expensed as the service or product is received. Consideration paid on the exercise of stock options and warrants is credited to capital stock. LOSS PER COMMON SHARE Diluted loss per common share reflects the dilution that would occur if outstanding stock options and warrants were exercised or converted into common shares using the treasury stock method. The inclusion of the Company's stock options and warrants in the computation of diluted loss per share would have an anti-dilutive effect on loss per common share and, therefore, options and warrants are excluded from the computation. Consequently, there is no difference between basic loss per common share and diluted loss per common share. Excluded from the weighted average diluted number of common shares are the potential dilutive effect of stock options, warrants and convertible debentures as follows:
YEAR ENDED DECEMBER 31, -------------------- 2004 2003 2002 $ $ $ ----- ----- ---- [000's] Stock options 402 - - Warrants 3,163 1,145 766 ===== ===== ====
3. CHANGE IN ACCOUNTING POLICY During the year ended December 31, 2003, The Canadian Institute of Chartered Accountants ["CICA"] amended its pronouncement relating to stock-based compensation, requiring companies to measure and expense all equity instruments awarded to employees. In accordance with this pronouncement, the Company prospectively adopted the new recommendation. Consequently, the Company has applied a fair value based method to expense employee stock options awarded since F-17 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 January 1, 2003. The Company did not issue any stock options during the year ended December 31, 2002 to require the presentation of pro forma net loss for that year. 4. LICENSED TECHNOLOGY During the year ended December 31, 2001, the Company acquired a non-exclusive licence from a third party to use its technology to reduce future research and development costs in return for a deposit of $240,000. No amortization was recognized in 2001 as the licensed technology was not available for use. During the year ended December 31, 2002, the Company made an additional payment of $156,000 for this technology, which the Company implemented in its operations. The Company is also required under the terms of its licence agreement to make certain milestone payments and royalty payments [note 15]. 5. CAPITAL ASSETS Capital assets consist of the following:
DECEMBER 31, 2004 ------------------------------- NET ACCUMULATED BOOK COST AMORTIZATION VALUE $ $ $ ------ ------------ ----- Office equipment, furniture and fixtures 232 141 91 Office equipment under capital lease 23 12 11 Computer hardware and software 824 677 147 Research equipment 5,102 3,214 1,888 Research equipment under capital lease 193 24 169 Leasehold improvements 2,123 1,376 747 ----- ----- ----- 8,497 5,444 3,053 ===== ===== =====
F-18 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003
DECEMBER 31, 2003 ------------------------------- NET ACCUMULATED BOOK COST AMORTIZATION VALUE $ $ $ ----- ------------ ----- Office equipment, furniture and fixtures 213 123 90 Office equipment under capital lease 21 4 17 Computer hardware and software 748 613 135 Research equipment 4,947 3,406 1,541 Leasehold improvements 1,353 1,343 10 ----- ----- ----- 7,282 5,489 1,793 ===== ===== =====
In April and May 2004, the Company disposed of four bioreactors and two fermentors from the Winnipeg facility for gross proceeds of approximately $175,000, resulting in a gain on disposition of approximately $61,000. The equipment was no longer required in the Company's manufacturing process. 6. BRIDGE FINANCING LOANS DUE TO RELATED PARTIES During the year ended December 31, 2004, the Company received bridge financing loans of $11,900,000 from its principal shareholder, Leslie Dan, and the Dan Group. The loans bore interest at the rate of 4.5% per annum and were repayable on demand. On November 3, 2004, $8,900,000 [plus accrued interest of $246,711] were converted into two secured convertible debentures maturing in November 2006 and $4,500,000 of bridge financing [plus accrued interest of $40,007] was repaid from the proceeds of the secured convertible debentures also maturing in 2006 [note 7]. Accordingly, the outstanding amount of bridge financing loans as at December 31, 2003 is excluded from current liabilities. During the year ended December 31, 2003, the Company received three bridge financing loans from its principal shareholder in the amounts of $500,000 on September 2, 2003, $500,000 on November 27, 2003 and $1,000,000 on December 15, 2003. The $500,000 loan advanced on September 2, 2003 was non-interest bearing and was repaid during the year. The remaining $500,000 and $1,000,000 loans bore interest at 4.5% per annum and were repaid from the proceeds of the secured convertible debentures [note 7] on November 3, 2004. F-19 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 7. CONVERTIBLE DEBENTURES DUE TO RELATED PARTIES On November 3, 2004, the Company closed a private placement of secured convertible debentures [the "Private Placement"] with the Dan Group. In accordance with the terms of the Private Placement, the Dan Group invested $14,000,000 in secured convertible debentures and converted $8,900,000 [plus accrued interest of $246,711 as of November 3, 2004] of the outstanding unsecured demand bridge financing loans into secured convertible debentures. The resulting convertible debentures in an aggregate principal amount of $23,146,711 are collateralized by a first charge over all of the assets of the Company and bear interest at the rate of 4.5% per annum, compounded annually. The debentures will mature two years from the date of issuance, when both interest and principal will be payable. The principal amount of the debentures will be convertible at the option of the holder at any time into units at a price of $1.50 per unit. Each unit will be comprised of one common share of the Company and one half of a common share purchase warrant. Each whole common share purchase warrant will enable the holder to purchase an additional common share at an exercise price of $2.00 per common share at any time for a period of four years from the date of issuance. The conversion price of any accrued interest on the debentures into units will be equal to the ten-day weighted average trading price of the Company's common shares for the ten consecutive trading days prior to conversion. If the remaining debentures and common share purchase warrants were converted, 23,146,711 common shares would be issued, representing approximately 79% of the current issued and outstanding common shares of the Company. The Company used the proceeds of the Private Placement to repay the following indebtedness together with accrued interest thereon: [a] existing convertible secured debentures issued to members of the Dan Group on June 20, 2002 [with an aggregate principal amount of $4,000,000 and accrued interest of $241,251 as of November 3, 2004], and [b] other unsecured demand bridge financing loans made by members of the Dan Group [with an aggregate principal amount of $4,500,000 and accrued interest of $40,007 as of November 3, 2004]. The Company will use the balance of the proceeds, after payment of the amounts listed above and payment of issue costs related to the Private Placement, to advance its business plan. During the year ended December 31, 2003, the Company repaid $2,000,000, which boar interest at 10% per annum, plus accrued interest of $24,000, of convertible debentures. F-20 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 8. TERM LOAN On November 3, 2004, Leslie Dan in his personal capacity obtained $1,600,000 in financing which was provided to the Company to further expand its Winnipeg research facility. The loan bears interest at a rate of 5.0% per annum, repayable in blended monthly payments of $41,165, and matures in November 2007. The Company has agreed to repay this amount directly to the third-party lending institution. At December 31, 2004, the Company's commitments under the above arrangements for the next three years are as follows:
$ ----- 2005 509 2006 535 2007 515 ----- 1,559 =====
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES On January 8, 2004, the Company announced the resignation of its President and Chief Executive Officer. For the year ended December 31, 2004, the Company has incurred related severance charges of $790,000. The amount has been included within salaries and benefits expense on the Company's statements of loss and deficit for the year ended December 31, 2004. As at December 31, 2004, $652,000 of the charges have been paid and the outstanding balance of $138,000 related to these charges is included in accounts payable and accrued liabilities. 10. WRITE-OFF OF DEFERRED FINANCING EXPENSE The write-off of deferred financing expense of $1,361,000 for the year ended December 31, 2004, comprised primarily of professional fees, represented the costs associated with the propose public offering of the Company's common shares and warrants which was withdrawn in August 2004. F-21 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 11. CAPITAL STOCK As stated in note 1, the number of common shares, warrants and stock options have been retroactively adjusted to reflect the share consolidation authorized on May 7, 2004. [A] PREFERRED AND COMMON SHARES PREFERRED SHARES The Company has authorized an unlimited number of preferred shares. The preferred shares may be issued at any time or from time to time in one or more series. As at December 31, 2004 and 2003, there were no preferred shares issued or outstanding. COMMON SHARES The Company has authorized an unlimited number of common shares. Common shareholders are entitled to one vote per common share held. Subject to the prior rights of the holders of preferred shares, the holders of common shares are entitled to receive any dividend declared by the Company's Board of Directors and to receive the remaining property of the Company upon dissolution. ISSUED
COMMON SHARES -------------------- # $ ------ ------ [000's] BALANCE, DECEMBER 31, 2002 26,673 60,447 Shares issued on private placement, net [i] 1,111 1,160 Shares issued on private placement, net [ii] 1,402 1,613 ------ ------ BALANCE, DECEMBER 31, 2003 29,186 63,220 Issued on exercise of options 20 42 ------ ------ BALANCE, DECEMBER 31, 2004 29,206 63,262 ====== ======
[i] On February 10, 2003, the Company repaid $2,000,000 plus accrued interest of $24,000 on the $6,000,000 convertible debentures to a company controlled by one of the principal shareholders [note 7]. In connection with this repayment, the principal shareholder reinvested $2,000,000 less issuance costs of $89,000 [net $1,911,000] in the form of a private equity placement for 1,111,111 units with each unit consisting of one common share of the Company and one common share purchase warrant at an exercise price of $1.80 per share. The unit price is based on the closing price of the Company's common F-22 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 shares on the Toronto Stock Exchange on January 14, 2003. The warrants expire on February 10, 2008. [ii] On September 10, 2003, the Company completed a private equity placement with a wholly-owned subsidiary of Teva Pharmaceutical Industries Limited ["Teva"] for approximately $2,804,000 less issuance costs of $147,000 [net $2,657,000]. Under the terms of this transaction, Teva purchased 1,402,000 units issued by the Company at a price of $2.00 per unit. The unit price is based on the closing price of the Company's common shares on the Toronto Stock Exchange on August 21, 2003. Each unit consists of one common share of the Company and one common share purchase warrant at an exercise price of $2.00. The warrants expire on September 10, 2008. In accordance with CICA Handbook Section 3860, "Financial Instruments - Disclosure and Presentation", the net proceeds of $2,657,000 were bifurcated between capital stock [$1,613,000] and warrants [$1,044,000] on a pro rata allocation basis, based on fair value. The fair value of the warrants has been included within contributed surplus. The fair value of the common share component of the unit was based on the $2.00 closing price of the Company's common shares as stated above [note 11[b]]. [B] WARRANTS A summary of the warrants issued and outstanding at December 31, 2003 and 2004 and the changes since December 31, 2002 is presented as follows:
WEIGHTED AVERAGE WARRANTS EXERCISE PRICE OUTSTANDING $ # -------------- ---------- [000's] BALANCE, DECEMBER 31, 2002 1.90 10,466 Granted 1.90 2,513 Expired 2.70 (1,532) ---- ------ BALANCE, DECEMBER 31, 2003 AND 2004 1.82 11,447 ==== ======
F-23 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 As at December 31, 2003 and 2004, warrants outstanding to purchase common shares were as follows:
WARRANTS OUTSTANDING TERMS OF WARRANTS # - ------------------------------------------------------------------ ------------ [000's] Expire August 24, 2006 at $3.35 per share 1,791 Expire December 17, 2007 at $1.40 per share 7,143 Expire February 10, 2008 at $1.80 per share [note 11[a][i]] 1,111 Expire September 10, 2008 at $2.00 per share [note 11[a][ii]] 1,402 ------ 11,447 ======
As at December 31, 2003 and 2004, none of the above-mentioned purchase warrants had been exercised. The proceeds from the each of the private placement has been allocated between capital stock and contributed surplus based on the estimated fair value of the warrants. The warrants were fair valued using the Black-Scholes option pricing model with the following assumptions for each of the issuances.
Risk-free Fair Expected interest value volatility rate ----- ---------- --------- August 24, 2001 $1.90 81% 4.6% December 17, 2002 $0.90 80% 3.0% February 10, 2003 $1.00 80% 2.9% September 10, 2003 $0.74 78% 4.5% ----- -- ---
The expected life of the warrant and the dividend yield for each of the above transaction was 5 years and nil, respectively. F-24 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 nil 12. STOCK OPTIONS AND STOCK-BASED COMPENSATION [A] STOCK OPTIONS During the year ended December 31, 2001, the shareholders approved the establishment of the 2001 Share Incentive Plan [the "Plan"]. Under the Plan, the number of common shares reserved for issuance to employees and directors will not exceed 10% of the number of common shares issued and outstanding at any time; the number of common shares that may be issued to any one employee and/or director and their associates, within a one-year period, cannot exceed 5% of the outstanding issue; and, the number of common shares reserved for issuance to any one person cannot exceed 5% of the number of common shares outstanding. The options can be granted to any person who is a director, officer or employee of the Company or any of its subsidiaries or affiliates, or any person that has been engaged to provide services for the Company or its affiliates. The term of options granted shall generally be seven years, but will not exceed 10 years. The vesting period for these options is generally three years with 1/12 vesting at the end of each quarter. The subscription price for the common shares will be based on the trading price for the common shares on the last trading day before the date of grant of the options or a more representative fair market price, as determined by the Board of Directors. The maximum aggregate number of common shares that are reserved for issuance under the Plan is 2,600,000. The Company's original share option plan [the "1996 Plan"] was approved by shareholders of the Company on December 16, 1996 with 493,337 common shares reserved for issuance. The total number of common shares reserved for issuance under both the 1996 Plan and the Plan is 1,093,337, representing 3.75% of the total issued and outstanding common shares of the Company as at December 31, 2004. No further grants of options will be made under the 1996 Plan. The term of options granted under the 1996 Plan shall generally be five years but will not exceed 10 years. The vesting period for these options is five years with 1/5 vesting at the end of each year. Options that have been granted pursuant to the 1996 Plan will continue to be governed by the 1996 Plan until they are exercised, cancelled, or forfeited and/or expired. As a result of the amalgamation with Genesys Pharma Inc. ["GPI"] in 1997, all outstanding GPI options were exchanged for the Company's options according to a conversion ratio of 1:1.6. In total, 136,043 options held by GPI employees were converted into 217,669 options of the Company. These options were not issued pursuant to the terms of the Plan and are in addition to the maximum number of common shares reserved for issuance under the Plan. F-25 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 A summary of the options issued and outstanding at December 31, 2004 and the changes since December 31, 2002 is presented as follows:
WEIGHTED AVERAGE OPTIONS EXERCISE OUTSTANDING PRICE # $ ----------- -------- BALANCE, DECEMBER 31, 2002 437,340 3.50 Granted 114,275 2.00 Forfeited or expired (105,823) 3.34 --------- ---- BALANCE, DECEMBER 31, 2003 445,792 3.10 Granted 1,247,000 1.56 Forfeited or expired (217,375) 2.96 Exercised (19,650) 2.17 --------- ---- BALANCE, DECEMBER 31, 2004 1,455,767 1.82 ========= ====
The following table summarizes information about stock options outstanding at December 31, 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------ ------------------------ RANGE WEIGHTED WEIGHTED WEIGHTED OF AVERAGE AVERAGE AVERAGE EXERCISE OPTIONS REMAINING EXERCISE OPTIONS EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE $ # [years] $ # $ - --------- ----------- ---------------- -------- ----------- -------- 1.56-2.00 1,277,892 7.9 1.58 89,446 1.72 2.01-4.00 135,125 3.7 2.32 135,125 2.32 7.50 42,750 0.3 7.50 42,750 7.50 --------- --- ---- ------- ---- 1,455,767 7.3 1.82 267,321 2.95 ========== === ==== ======= ====
[b] STOCK-BASED COMPENSATION Effective January 1, 2003, the Company began prospectively recording compensation expense for awards granted to employees. During the years ended December 31, 2003 and 2004, 114,275 and 1,247,000 options were granted to employees, respectively. Amounts of $28,334 and $359,046 were recorded as an expense and credited to contributed surplus in 2003 and 2004, respectively for the fair value of stock options granted to employees determined using F-26 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 the Black-Scholes option pricing model. No options were granted to non-employees. Consideration paid on the exercise of stock options and warrants is credited to capital stock. The fair value of the options issued was estimated using the Black-Scholes option pricing model with the following assumptions:
YEAR ENDED DECEMBER 31, ------------------------ 2004 2003 2002 ------- ------- ---- Expected volatility 72% 73% - Risk-free interest rate 3.9% 3.9% - Expected option life 7 YEARS 7 years - ======= ======= =
Dividend yield assumption used for all years presented was nil. The estimated weighted average fair value of the options granted was $1.40 and $1.30 for the years ended December 31, 2003 and 2004, respectively. Pro forma disclosure is calculated using the Black-Scholes option pricing model. The Black-Scholes option pricing model estimated the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require four highly subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the calculated values. Accordingly, management believes that these models do not necessarily provide a reliable single measure of the fair value of the Company's stock option awards. The Company did not issue any stock options during the year ended December 31, 2002, therefore, pro forma net loss for the year ended December 31, 2002 and pro forma net loss per common share is consistent with those reported for that period. F-27 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 13. INCOME TAXES The tax effects of temporary differences and net operating losses that give rise to future tax assets are as follows:
2004 2003 $ $ ------- ------- FUTURE TAX ASSETS Non-capital losses carried forward 11,996 8,412 Research and development expenditures 6,833 5,169 Net non-refundable investment tax credits 5,230 4,081 Net capital losses carried forward 621 617 Carrying value of capital assets in excess of tax basis 1,250 914 Financing costs 199 161 ------- ------- TOTAL FUTURE TAX ASSETS 26,129 19,354 ------- ------- Less valuation allowance (26,129) (19,354) ------- ------- NET FUTURE TAX ASSETS - - ======= =======
At December 31, 2004, the Company's deductible temporary differences for which no related income tax assets have been recognized are as follows: [a] The Company has accumulated non-capital losses for income tax purposes of approximately $32,472,000, which can be carried forward to reduce future Canadian taxable income. [b] The Company has approximately $17,779,000 in Canadian scientific research and development expenditures which can be carried forward indefinitely to reduce future years' taxable income. [c] The Company has non-refundable investment tax credits of $5,230,000 that can be carried forward and may be applied against future years' income taxes payable. [d] Net capital loss carryforwards of $3,364,000, which may be used to reduce future years' capital gains, can be carried forward indefinitely. F-28 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 The non-capital losses and investment tax credits which cannot be carried forward indefinitely expire as follows:
NON-CAPITAL INVESTMENT TAX LOSSES CREDITS $ $ ----------- -------------- 2005 - 107 2006 - - 2007 3,146 - 2008 3,846 14 2009 6,810 - 2010 8,410 920 2011 10,260 910 2012 - 828 2013 - 1,030 2014 - 1,421 ------ ----- 32,472 5,230 ====== =====
14. MISCELLANEOUS INCOME For the year ended December 31, 2004, miscellaneous income consisted of the $61,000 gain on the disposition of capital assets [note 5], interest income of $19,000 and a proportionate share of a U.S. $100,000 one-time access fee paid as part of an agreement whereby exclusive rights were provided to a third-party to evaluate a specific collection of the Company's anti cancer monoclonal antibodies. The U.S.$100,000 is being amortized over the two year period of exclusivity. 15. COMMITMENTS AND CONTINGENCIES [a] The Company enters into research, development and licence arrangements with various parties in the ordinary course of business. These arrangements outline various research services that are being provided to the Company and enable it to utilize know-how and technology. The arrangements require compensation to be paid by the Company, typically by a combination of the following methods: [i] Fees comprising amounts due initially upon entering into the arrangements as well as additional amounts due either on specified timelines or defined services to be provided. [ii] Milestone payments that are dependent on products developed under the arrangements proceeding towards specified plans of clinical trials and commercial development. F-29 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 [iii] Royalty payments calculated as a percentage of net sales commencing upon commercial sales of products developed. At December 31, 2004, the Company's commitments under the above arrangements for the next five years are as follows:
$ --- 2005 257 2006 100 2007 100 2008 100 2009 100 --- 657 ===
The amounts above are principally comprised of fee-related committed research and licence payments and potential milestone payments due in 2005. Other milestone and royalty-related amounts that may become due under the various arrangements are dependent on, among other factors, products identified as investigational new drugs, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which is uncertain. Amounts due per the various agreements for milestone payments are accrued once the occurrence of a milestone is likely. Amounts due as royalty payments will be accrued as commercial revenues from the product are earned. The Company periodically enters into research agreements or strategic alliances with third parties that include indemnification provisions that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims or damages arising from these transactions. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions is unlimited. These indemnification provisions generally survive termination of the underlying agreement. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification payments under such agreements and is not aware of any claims for each of the periods presented; accordingly, no amount has been accrued in the accompanying financial statements with respect to these indemnification obligations. F-30 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 [b] The Company's future minimum commitments under operating leases for the next four years are as follows:
$ --- 2005 292 2006 196 2007 203 2008 102 --- 793 ===
Certain premises, the commitments for which are included in the above table, are leased from an affiliate of Leslie Dan at an annual rent of $185,100 for 2005. For the years 2006 to 2008, all amounts are due to an affiliate of Leslie Dan.. The lease expires on June 30, 2008. [c] The following is a schedule of minimum payments for assets under capital lease:
$ --- 2005 71 2006 65 2007 35 --- 171 Less interest 19 Less current portion 59 --- Long term portion 93 ===
[d] In September 2001, an action was commenced by First Monitor Canada Inc. ["First Monitor"] against the Company and seven other parties in connection with an alleged breach of a distribution agreement between First Monitor and Novopharm Limited ["Novopharm"]. First Monitor is seeking damages in the amount of $20,000,000. On January 4, 2005 First Monitor's action was dismissed as abandoned by the courts. [e] During the ordinary course of business activities, the Company may be contingently liable for litigation and a party to claims. Management believes that adequate provisions have been made in the accounts where required. Although it is not possible to estimate the extent of potential costs and losses, if any, management believes that the ultimate resolution of such contingencies will not have an adverse effect on the financial position of the Company. F-31 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 16. SEGMENTED INFORMATION The Company operates in a single industry and is engaged in biopharmaceutical research and development activities primarily carried out in Canada. All of the Company's assets are located in Canada. 17. STATEMENT OF CASH FLOWS For the year ended December 31, 2004, excluded from the statement of cash flows are the following items:
$ ----- Conversion of bridge financing loan and related interest [note 7] 9,147 Increase in accounts payable related to capital assets purchases 693 -----
18. COMPARATIVE FINANCIAL STATEMENTS The comparative financial statements have been reclassified from statements previously presented to conform to the presentation of the 2004 financial statements. 19. SUBSEQUENT EVENTS For the period from February 17 to March 23, 2005 the Company received bridge financing loans of $500,000, $1,500,000 and $2,600,000 respectively, from its principal shareholders, the Dan.Group The loans bear interest at 4.5% per annum and are repayable on demand. F-32 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 20. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The Company prepares its financial statements in accordance with Canadian GAAP, which differ in certain material respects from U.S. GAAP. The material differences as they apply to the Company's financial statements are as follows: If U.S. GAAP were followed, the effects on the statements of loss and deficit would be as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 2004 2003 2002 $ $ $ -------- -------- -------- Net loss for the year, Canadian GAAP (17,172) (12,778) (12,269) ADJUSTMENTS Licensed technology [a] -- -- (156) Amortization of licensed technology [a] 87 87 48 Stock-based compensation [b] 359 28 -- ------- ------- ------- NET LOSS AND COMPREHENSIVE LOSS FOR THE YEAR [U.S. GAAP] [c] (16,726) (12,663) (12,377) ======= ======= ======= BASIC AND DILUTED LOSS PER COMMON SHARE [U.S. GAAP] $ (0.57) $ (0.45) $ (0.62) ======= ======= ======= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic and diluted [000's] 29,188 28,090 19,804 ======= ======= =======
F-33 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 Balance sheet items, which would vary under U.S. GAAP, are as follows:
YEAR ENDED DECEMBER 31, ------------------------- 2004 2003 $ $ --------- --------- ASSETS Licensed technology -- -- ======== ======== SHAREHOLDERS' DEFICIENCY Capital stock 110,573 110,531 Additional paid-in-capital 21,175 21,175 Deficit accumulated during the development stage (153,177) (136,451) -------- -------- (21,429) (4,745) ======== ========
A reconciliation of the Company's capital stock between Canadian GAAP and U.S. GAAP is as follow:
YEAR ENDED DECEMBER 31, 2004 2003 $ $ -------- -------- CAPITAL STOCK, CANADIAN GAAP 63,262 63,220 Common shares issued in exchange for assets [note 20 [e][3][iv]] 11,277 11,277 Incremental value attributed to common shares issued on conversion of interest in Partnership I [note 20 [e][3][v-vi]] 41,181 41,181 Fair value of warrants issued in private placements [notes 11[a][ii] and notes 20[e][3][vii],[ix] and [x] (5,147) (5,147) ------- ------- Capital stock, U.S GAAP 110,573 110,531 ======= =======
F-34 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 A reconciliation of the Company's contributed surplus/additional paid-in capital between Canadian GAAP and U.S. GAAP is as follow:
YEAR ENDED DECEMBER 31, 2004 2003 $ $ ------ ------ CONTRIBUTED SURPLUS, CANADIAN GAAP 9,655 9,296 Amortization of stock option compensation (387) (28) Fair value of warrants issued to Novopharm in regards to Partnership I and II [note 20 [e][3][ii-v]] 1,940 1,940 Acquisition of GPI [note 20 [e][3][iv]] 4,820 4,820 Value of warrants issued in connection with private placement [note 20 [e][3][vii]] 5,147 5,147 ------ ------ Additional paid-in capital, U.S GAAP 21,175 21,175 ====== ======
A reconciliation of the Company's deficit between Canadian GAAP and U.S. GAAP is as follow:
YEAR ENDED DECEMBER 31, 2004 2003 $ $ --------- --------- DEFICIT, CANADIAN GAAP (94,172) (77,000) Consolidation of Partnerships I and II (42,461) (41,952) Write off of acquired research and development (15,762) (16,358) Write down of assets (1,169) (1,169) Stock-based compensation expense 387 28 -------- -------- Deficit accumulated during the development stage, U.S GAAP (153,177) (136,451) ======== ========
F-35 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 If U.S. GAAP were followed, the effects on the statements of cash flows would be as follows:
YEAR ENDED DECEMBER 31, ----------------------------------------- 2004 2003 2002 $ $ $ -------- -------- -------- OPERATING ACTIVITIES Balance under Canadian GAAP (15,847) (12,005) (11,319) Purchase of licensed technology [a] (87) (87) (156) ------- ------- ------- BALANCE UNDER U.S. GAAP (15,934) (12,092) (11,475) ======= ======= ======= INVESTING ACTIVITIES Balance under Canadian GAAP (658) (197) 200 Purchase of licensed technology [a] 87 87 156 ------- ------- ------- BALANCE UNDER U.S. GAAP (571) (110) 356 ======= ======= =======
Cash provided by financing activities under Canadian GAAP of $18,973, $4,085 and $15,750 for the years ended December 31, 2004, 2003 and 2002, respectively, remain unchanged for U.S. GAAP purposes. [a] Acquired research and development and licensed technology Under U.S. GAAP, the Company's acquired and licensed technology is considered in-process research and development and is immediately expensed upon acquisition in accordance with Statement of Financial Accounting Standard ["FAS"] No. 2, "Accounting for Research and Development Costs" ["FAS 2"]. The Company's acquired technology does not have an alternative future use given its specialized nature and therefore is expensed immediately upon acquisition. Under Canadian GAAP, the acquired technology is considered to be an intangible asset which is amortized over its expected useful life and reviewed for impairment. [b] Fixed stock options granted to employees Accounting Principles Board Opinion ["APB"] No. 25, "Accounting for Stock Issued to Employees" ["APB 25"] requires the Company to recognize compensation expense relating to the intrinsic value of the options when the market price of the underlying stock is greater than the exercise price of the Company's employee stock options on the grant date. Under Canadian GAAP, in accordance with Section 3870, the Company was not required to record compensation expense for stock options granted to employees until January 1, 2004. However, the Company elected to begin accounting for the grant of stock options at fair value and recognize related compensation costs in 2003. F-36 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 Under U.S. GAAP, for stock options awarded to employees, pro forma disclosure of net loss and loss per share is provided below as if these awards were accounted for using the fair value method. [c] Pro forma stock-based compensation disclosures In accordance with Section 3870 of the CICA Handbook, under Canadian GAAP, stock options and warrants awarded to non-employees in 2002 are accounted for using the fair value method. Accordingly, the Company recognized stock-based compensation expense of $359 and $28 for the years ended December 31, 2004 and 2003, respectively. Under U.S. GAAP, the method of accounting for stock options is dependent upon who the option is issued to and whether the option is fixed or based on certain performance criteria. The Company follows APB 25 for awards issued to employees and FAS No. 123, "Accounting for Stock-Based Compensation" ["FAS 123"] for awards issued to non-employees. Accounting differences under Canadian GAAP and U.S. GAAP for stock options are described below. FAS 123 requires pro forma disclosures of net loss and loss per share, as if the fair value method, as opposed to the intrinsic value based method, of accounting for employee stock options had been applied. The following table presents the Company's net loss and loss per share on a pro forma basis using the fair value method as determined by using the Black-Scholes option pricing model:
YEAR ENDED DECEMBER 31, -------------------------------------- 2004 2003 2002 $ $ $ -------- -------- -------- Net loss for the year U.S. GAAP - as reported (16,726) (12,663) (12,377) Pro forma stock-based compensation expense (510) (179) (167) ------- ------- ------- NET LOSS FOR THE YEAR U.S. GAAP - PRO FORMA (17,236) (12,842) (12,544) ======= ======= ======= BASIC AND FULLY DILUTED LOSS PER SHARE As reported $ (0.58) $ (0.45) $ (0.62) Pro forma $ (0.59) $ (0.46) $ (0.63) ======= ======= =======
F-37 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 The assumptions used to calculate the fair value of stock compensation expense using the Black-Scholes option pricing model are noted in note 12[b]. No stock options were issued during the year ended December 31, 2002. The Black-Scholes option pricing model, used by the Company to calculate option values, as well as other accepted option valuation models were developed to estimate fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require highly subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the calculated values. Accordingly, management believes that these models do not necessarily provide a reliable single measure of the fair value of the Company's stock option awards. [d] Comprehensive income FAS 130, "Reporting Comprehensive Income" establishes standards for the reporting and display of comprehensive income and its components in general purpose financial statements. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, and includes all changes in equity during a period. For the periods presented, the Company did not have any material transaction that would otherwise have had an impact on comprehensive income. As such, net loss for the year under U.S. GAAP is consistent with comprehensive income. [e] Development-stage disclosures Since inception, the Company has not had significant revenue from operations. Accordingly, in accordance with FAS No. 7, "Accounting and Reporting by Development Stage Enterprise" ["FAS 7"], the Company is considered to be a development stage enterprise under U.S. GAAP. F-38 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 FAS 7 requires development-stage companies to disclose, in addition to the same basic financial statements as presented in these financial statements, the following information: [1] Statement of net loss:
CUMULATIVE FROM INCEPTION ON JULY 28, 1995 TO DECEMBER 31, 2004 ----------------- EXPENSES Research and development activities Salaries and benefits 37,703 Research activities 28,886 Occupancy 5,965 Other operating costs 11,000 Write-off of acquired research and development 45,546 -------- 129,100 General and administrative 12,551 Amortization of capital assets 5,687 Amortization of deferred financing expenses 160 Write-off of deferred financing expenses 1,360 Interest expense on amounts due to related parties 1,597 Write-off of other assets 3,364 Financing costs 660 -------- 154,479 -------- Cumulative loss before the undernoted (154,479) Miscellaneous income 1,302 -------- Cumulative net loss from inception (153,177) ========
[2] Statement of cash flows:
CUMULATIVE FROM INCEPTION ON JULY 28, 1995 TO SEPTEMBER 30, 2004 ------------------ Cash used in operating activities (96,558) Cash used in investing activities (10,616) Cash provided by financing activities 109,889 ------- 2,715 =======
F-39 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 [3] The following represents the Company's cumulative statement of shareholders' equity (deficiency) determined in accordance with U.S. GAAP from inception:
ADDITIONAL EXCHANGEABLE PAID-IN COMMON SHARES SHARES CAPITAL DEFICIT TOTAL # $ $ $ $ $ ------- ----- ------------ ---------- -------- ------- [000's] BALANCE JULY 28, 1995 -- -- -- -- -- -- July 28, 1995 [Hygeia Holding, Inc.] [i and ii] 1,364 3,682 -- -- -- 3,682 Issued in exchange for assets [i] 2,173 2,056 -- -- -- 2,056 Issued in exchange for loan and interest thereon [i] 585 1,581 -- -- -- 1,581 Issued for services [i] 75 7 -- -- -- 7 Issued for cash [i] 726 1,960 -- -- -- 1,960 Net loss for the period [ii] -- -- -- -- (9,809) (9,809) Partnership I [ii] Issuance of warrants to Novopharm -- -- -- 1,054 -- 1,054 Issuance of exchangeable shares to Novopharm -- -- 2,034 -- -- 2,034 ----- ----- ------ ------ ------- ------ BALANCE, DECEMBER 31, 1995 4,923 9,286 2,034 1,054 (9,809) 2,565 Net loss for the year [ii] -- -- -- -- (8,300) (8,300) Stock options exercised during the year [iii] 11 74 -- -- -- 74 Partnership I [iii] Issuance of warrants to Novopharm -- -- -- 1,795 -- 1,795 Issuance of exchangeable shares to Novopharm -- -- 6,629 -- -- 6,629 Conversion of warrants to exchangeable shares -- -- 1,622 (1,622) -- -- ----- ----- ------ ------ ------- ------ BALANCE, DECEMBER 31, 1996 4,934 9,360 10,285 1,227 (18,109) 2,763
F-26 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003
ADDITIONAL EXCHANGEABLE PAID-IN COMMON SHARES SHARES CAPITAL DEFICIT TOTAL # $ $ $ $ $ ------- ------- ------------ ---------- -------- ------- [000's] BALANCE, DECEMBER 31, 1996 [CONT'D] 4,934 9,360 10,285 1,227 (18,109) 2,763 Net loss for the year [ii] -- -- -- -- (51,160) (51,160) Stock options exercised during the year [iv] 24 162 -- -- -- 162 Warrants exercised during the year [iv] 70 405 -- -- -- 405 Partnership I [iv] Issuance of exchangeable shares to Novopharm -- -- 7,336 -- -- 7,336 Issuance of warrants to Novopharm -- -- -- 2,162 -- 2,162 Conversion of warrants to exchangeable shares -- -- 1,622 (1,622) -- -- Partnership II - Issuance of exchangeable shares to Novopharm [iv] -- -- 2,039 -- -- 2,039 Acquisition of GPI [iv]: Issuance of stock options -- -- -- 2,347 -- 2,347 Issuance of warrants -- -- -- 2,473 -- 2,473 Transaction costs -- (1,092) -- -- -- (1,092) Common shares issued in exchange for assets [iv] 2,014 34,236 -- -- -- 34,236 ------ ------ ------ ------ ------- ------ BALANCE DECEMBER 31, 1997 7,042 43,071 21,282 6,587 (69,269) 1,671
F-27 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003
ADDITIONAL EXCHANGEABLE PAID-IN COMMON SHARES SHARES CAPITAL DEFICIT TOTAL # $ $ $ $ $ ------- ------- ------------ ---------- -------- -------- [000's] BALANCE DECEMBER 31, 1997 [CONT'D] 7,042 43,071 21,282 6,587 (69,269) 1,671 Net loss for the year [ii] -- -- -- -- (13,843) (13,843) Stock options exercised during the year [v] 1 8 -- -- -- 8 Warrants exercised during the year [v] 5 25 -- -- -- 25 Partnership I [v] Issuance of exchangeable shares to Novopharm -- -- 5,355 -- -- 5,355 Issuance of warrants to Novopharm -- -- -- 1,135 -- 1,135 Conversion of warrants to exchangeable shares -- -- 1,622 (1,622) -- -- Partnership II - Issuance of exchangeable shares to Novopharm [v] -- -- 8,231 -- -- 8,231 Common shares issued on conversion of interest in Partnership I [v] 6,085 26,220 (26,220) -- -- -- Common shares issued on conversion of advances [v] 169 1,120 -- -- -- 1,120 Warrants issued with respect to Partnership II [v] -- -- -- 660 -- 660 Transaction costs [v] -- (88) -- -- -- (88) Common shares issued on conversion of interest in Partnership II [v] 494 5,858 (5,858) -- -- -- ------ ------ ------- ------ ------- ------ BALANCE, DECEMBER 31, 1998 13,796 76,214 4,412 6,760 (83,112) 4,274 Net loss for the year [ii] -- -- -- -- (9,030) (9,030) Partnership II - Issuance of exchangeable shares [vi] -- -- 10,588 -- -- 10,588 Common shares issued on conversion of interest in Partnerships [vi] 1,744 15,000 (15,000) -- -- -- ------ ------ ------- ------ ------- ------ BALANCE, DECEMBER 31, 1999 15,540 91,214 -- 6,760 (92,142) 5,832
F-28 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003
ADDITIONAL EXCHANGEABLE PAID-IN COMMON SHARES SHARES CAPITAL DEFICIT TOTAL # $ $ $ $ $ ------- ------- ------------ ---------- ------- -------- [000's] BALANCE, DECEMBER 31, 1999 [CONT'D] 15,540 91,214 -- 6,760 (92,142) 5,832 Net loss for the year -- -- -- -- (9,129) (9,129) Stock options exercised during the year [vii] 50 384 -- -- -- 384 Common shares issued for cash in private placement [vii] 2,149 10,252 -- 2,788 -- 13,040 ------ ------- ------- ------ -------- ------- BALANCE, DECEMBER 31, 2000 17,739 101,850 -- 9,548 (101,271) 10,127 Net loss for the year -- -- -- -- (10,140) (10,140) Stock options issued for cash in private placement [viii] 1,791 2,446 -- 3,403 -- 5,849 ------ ------- ------- ------ -------- ------- BALANCE, DECEMBER 31, 2001 19,530 104,296 -- 12,951 (111,411) 5,836 Net loss for the year -- -- -- -- (12,377) (12,377) Common shares issued for cash in private placement [ix] 7,143 3,462 -- 6,429 -- 9,891 ------ ------- ------- ------ -------- ------- BALANCE, DECEMBER 31, 2002 26,673 107,758 -- 19,380 (123,788) 3,350 Net loss for the year -- -- -- -- (12,663) (12,663) Common shares issued for cash in private placement [notes 11[a][i] and [x]] 1,111 1,160 -- 751 -- 1,911 Common shares issued for cash in private placement [note 11 [a][ii]] 1,402 1,613 -- 1,044 -- 2,657 ------ ------- ------- ------ -------- ------- BALANCE, DECEMBER 31, 2003 29,186 110,531 -- 21,175 (136,451) (4,745) Common shares issued on exercise of options 20 42 -- -- 42 Net loss for the year -- -- -- -- (16,726) (16,726) ------ ------- ------- ------ -------- ------- BALANCE, DECEMBER 31, 2004 29,206 110,573 -- 21,175 (153,177) (21,429)
F-29 VIVENTIA BIOTECH INC. NOTES TO FINANCIAL STATEMENTS [tabular amounts in thousands of Canadian dollars, except per share information] December 31, 2004 and 2003 F-30 [i] Effective July 28, 1995, the Company completed a reorganization which included a reverse takeover of Hygeia. Prior to the reverse takeover, Hygeia had 1,363,665 common shares outstanding. Also effective July 28, 1995, the Company issued 2,172,630 common shares to Novopharm as a result of: a contribution of certain assets with a carrying value of $2,056,000. The Company also issued 585,463 common shares to settle a loan and the interest there on of $1,581,000, and $725,926 common shares for cash proceeds of $1,960,000. As a result of these transactions, Novopharm acquired control of the Company. As part of the Hygeia reverse takeover, the Company issued 75,000 common shares for performance by certain Hygeia directors and officers valued at approximately $7,000. For Canadian GAAP purposes, the acquisition of Hygeia, was accounted for in accordance with Emerging Issues Committee 10, Reverse Takeover Accounting and CICA Handbook Section 1580, "Business Combinations" ["CICA 1580"]. CICA 1580 requires the fair value of acquisitions that were purchased through the issuance of common shares be determined on the date of acquisition. For U.S. GAAP purposes, the acquisition of Hygeia was accounted for in accordance APB No. 16, "Business Combinations" ["APB 16"] and Emerging Issues Tasks Force ["EIFT"] 99-12, "Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination" ["EITF 99-12"]. Under APB 16 and EITF 99-12, the fair value of the share consideration is required to be determined on the date the terms of the acquisition are agreed to and announced which differed from the date of acquisition. The Company has determined that for purpose of the Hygeia acquisition, the fair value of the share consideration issued, for Canadian GAAP purposes, was consistent with the fair value determined for U.S. GAAP purposes due to the short period and limited trading activity between the announcement date and closing date. [ii] Research Partnerships During the period from July 28, 1995 to December 31, 1999, the Company performed its research and development activities through two partnerships with Novopharm. One partnership operated for the period from July 28, 1995 to July 31, 1998 ["Partnership I"] and the second partnership operated for the period from June 30, 1997 to December 31, 1999 ["Partnership II"], collectively the Partnerships. For Canadian GAAP purposes these Partnerships were accounted for in accordance with CICA 3040, "Long-term Investments". Based on the partnership and collaboration agreements, the Company's assets were initially contributed to the Partnerships and all the Company's research was carried out in the Partnership until December 31, 1999. Under Canadian GAAP, since the Partnerships losses were allocated to the Novopharm, the Company's financial statements did not reflect any research activities for the periods that the Partnerships existed. The Company's assets contributed initially were considered to be "Investment in Partnerships" and were carried at cost. For U.S. GAAP purposes, the Company determined the Partnerships to be Special Purpose Entities ("SPE") as the Partnerships were created to accomplish a narrow and well-defined objective. Furthermore, it was always contemplated through the partnership agreements that: the Partnerships would have a limited duration; the Company would ultimately retain the intellectual property being developed by the Partnerships; and that Novopharm's partnership interest would be converted into Company shares. Accordingly, for U.S. GAAP purposes, the Company accounted for the Partnerships in accordance with EITF D-14, "Transactions involving Special-Purpose Entities" ["EITF D-14"]. EITF D-14 requires the party which ultimately retains virtually all of the substantive risks and rewards of the assets or the debt of the SPE account for the SPE using the consolidation method of accounting for investment. Accordingly, the Company has consolidated for U.S. GAAP purposes, the Partnerships' financial results for the period from July 28, 1995 to December 31, 1999 in accordance with EITF D-14. During the year Novopharm provided funding of $3,088,000 to Partnership I, which resulted in exchangeable shares valued at $2,034,000 and warrants valued at $1,054,000. Under U.S. GAAP Concepts Statement 6 ["Concept No. 6"], it was determined that Novopharm was effectively receiving exchangeable shares for funding up to $6,000,000 per annum and warrants for any F-30 excess funding up to $4,000,000 per annum. The exercise price for the exchangeable shares and warrants was $2.70 per share. The fair value of each warrant issued was determined to be $1.40 using the Black-Scholes model with the following assumptions: Expected volatility 71% Risk-free interest rate 6.1% Expected option life 3 years Dividend yield nil
As the minimum funding received by the Company through the Partnerships was effectively equivalent to the receipt of equity and warrants, the funds were allocated to exchangeable shares and warrants on a pro-rata basis based on their relative fair values. On an annual basis, funding in excess of the minimum was considered to be an exercise of warrants into exchangeable shares based on the relationship of the excess funding over the $6,000,000 minimum to the maximum excess of $4,000,000. [iii] During the year ended December 31, 1996, the Company issued 10,682 common shares pursuant the exercise of stock options for cash proceeds of approximately $74,000. During the year Novopharm provided funding of $8,424,000 to Partnership I, which resulted in exchangeable shares valued at $6,629,000 and warrants valued at $1,795,000. Based on the level of funding in excess of the minimum annual commitment, $1,622,000 of warrants have been deemed to be exercised and converted into exchangeable shares. Consistent with the treatment of exchangeable shares and warrants for funding received during the period ended December 31, 1995, the funding received during the year ended December 31, 1996 was accounted for in accordance with Concept No. 6 using the following assumptions: Expected volatility 71% Risk-free interest rate 6.1% Expected option life 3 years Dividend yield nil
[iv] During the year ended December 31, 1997, the Company issued 24,100 common shares pursuant to the exercise of stock options for cash proceeds of approximately $162,000, and 70,200 common shares pursuant to the exercise of warrants for cash proceeds of approximately $405,000. During the year Novopharm provided funding of $9,498,000 to Partnership I, which resulted in exchangeable shares valued at $7,336,000 and warrants valued at $2,162,000. Based on the level of funding in excess of the minimum annual commitment, $1,622,000 of warrants have been deemed to be exercised and converted into exchangeable shares. In addition, Novopharm contributed $2,039,000 to Partnership II which resulted in exchangeable shares valued at $2,039,000. The exchangeable shares and warrants were accounted for in accordance with Concept No. 6 using the following assumptions: Expected volatility 71% Risk-free interest rate 6.1% Expected option life 3 years Dividend yield nil
Acquisition of Genesys Pharm Inc. Effective August 25, 1997, the Company completed an amalgamation with GPI. Pursuant to the terms of the amalgamation, the Company issued 2,013,899 common shares to the shareholders of GPI. The F-31 transaction was treated as an acquisition of GPI. Transaction costs of approximately $1,092,000 relating to the amalgamation were incurred during the year. For Canadian GAAP purposes, the acquisition of GPI was accounted for in accordance with CICA 1580 which required the fair value of acquisitions that were purchased through the issuance of common shares be determined on the date of acquisition using an average share price before and after the date of acquisition. For U.S. GAAP purposes, the acquisition of GPI was accounted for in accordance with APB 16 and EITF 99-12. Under APB 16 and EITF 99-12, the fair value of the share consideration is required to be determined on the date of announcement which differed from the date of acquisition. For Canadian GAAP purposes, the Company determined the fair value of the share consideration to be approximately $22,959,000 based on an acquisition date of August 25, 1997. For U.S. GAAP purposes, the Company determined the fair value of the share consideration to be approximately $34,236,000 based on an announcement date of April 15, 1997. The difference between the fair value calculated for U.S. GAAP purposes and Canadian GAAP of $11,277,000 was allocated to acquired research and development technology. This resulted in an immediate write off to income under U.S. GAAP of $34,236,000 less tangible assets acquired of $814,000 for total acquired research and development technology of $33,422,000. In addition, the Company assumed GPI's outstanding stock options and warrants of 136,043 and 160,524, respectively and exchanged them for 217,669 and 256,839 of the Company's stock options and warrants, respectively, in connection with this acquisition. For U.S. GAAP purposes, in accordance with APB 16 and FAS 123 such financial instruments must be accounted for at fair value. The Company estimated the fair value of these financial instruments using the Black-Scholes option pricing model. The fair values of these items were taken into consideration for the purpose of determining the purchase price of GPI. The amount of $2,347,000 and $2,473,000 for options and warrants, respectively, was charged to additional paid-in capital with a corresponding adjustment to acquired research and development. The fair value of these options and warrants were determined using the following assumptions: Expected volatility 55 % Risk-free interest rate 4.5% Expected option life 1 year Dividend yield nil
[v] During the year ended December 31, 1998, the Company issued 1,200 common shares pursuant to the exercise of stock options for cash proceeds of approximately $8,000, and 4,900 common shares pursuant to the exercise of warrants for cash proceeds of $25,000. During the year Novopharm provided funding of $6,490,000 to Partnership I, which resulted in exchangeable shares valued at $5,355,000 and warrants valued at $1,135,000. Based on the level of funding in excess of the minimum commitment, $1,622,000 of warrants have been deemed to be exercised and converted into exchangeable shares. For U.S. GAAP purposes, pursuant to the wind-up and conversion of Partnership I and the agreement to increase the conversion price further described below, on July 31, 1998, 6,084,653 common shares fair valued at $26,220,000 were issued to Novopharm in exchange for their exchangeable shares. During 1998, Novopharm provided funding to Partnership II of $3,819,000 to July 31, 1998 and $4,412,000 during the balance of the year, which resulted in exchangeable shares valued at $8,231,000. Pursuant to the terms of the initial funding agreement for Partnership II as described below. Novopharm effectively converted their exchangeable shares received based on the funding to July 31, 1998 into 494,455 common shares of the Company valued at approximately $5,858,000. For Canadian GAAP purpose, the issuance of common shares of 6,084,653 and 494,455 related to the wind-up and conversion of Partnership I and partial conversion of Partnership II was valued at approximately $3,918,000 and 420,000, respectively. F-32 The Company issued 169,117 common shares at the then market price of $6.60 per common share, in settlement of advances from Novopharm in the amount of approximately $1,120,000. Additional transaction costs of approximately $88,000 were incurred during the year relating to the acquisition of GPI which occurred in the prior year. In consideration for the agreement by Novopharm to provide funding to Partnership I described in [ii] above, to a minimum annual contribution of $6,000,000 for a period of three years, Novopharm was effectively entitled to convert their partnership contributions into common shares of the Company at the price of $2.70 per share, to a maximum of $10,000,000 per annum. In 1998, Novopharm agreed to change the conversion right from $2.70 to $4.90 per common shares. For agreeing to this change Novopharm was granted 800,000 warrants exercisable until July 24, 2003 into common shares of the Company, if the Company filed a new drugs submission with the United States Food and Drug Administration or Health Canada within five years. For purpose of U.S. GAAP, the fair value of the 800,000 warrants exercisable until July 24, 2003 were ascribed a nominal fair value given the high degree of risk of the conditions required for their exercise being met. F-33 Novopharm was also committed to fund Partnership II. For the period from June 30, 1997 to July 31, 1998 Novopharm committed $4,500,000 for which Novopharm was effectively entitled to convert their Partnership II contributions into exchangeable shares at the market value at the time of funding. These exchangeable shares could be converted into a maximum of 494,455 common shares. For the period from August 1, 1998 to December 31, 1999, Novopharm committed to fund Partnership II with a minimum capital contribution of $15,000,000. Novopharm was effectively entitled to convert its contributions to Partnership II, into common shares of the Company at the price of $8.60 per share. In addition, as part of this funding arrangement, the Company issued 1,200,000 warrants, exercisable at $12.00 per share, expiring on December 31, 1999. For U.S. GAAP purposes, in accordance with Concept No. 6, these warrants were fair valued at approximately $660,000 using the following assumptions: Expected volatility 55 % Risk-free interest rate 4.5% Expected option life 1 year Dividend yield nil
[vi] During the year ended December 31, 1999, Novopharm contributed $10,588,000 to Partnership II in exchange for exchangeable shares of the Company. On December 31, 1999, the Company issued 1,744,186 common shares pursuant to the wind-up of Partnership II and the conversion of Novopharm's exchangeable shares relating to their contribution to partnership II from August 31, 1998 to December 31, 1999. The common shares issued to Novopharm in exchange for the exchangeable shares were valued under US GAAP as described in note 20[3][v] at $15,000,000. [vii] On April 17, 2000, the Company arranged an equity private placement with Dan Family Holdings Ltd. ["DFH"] for 684,932 units at an issue price of $7.30 per unit. Each unit consisted of one common share and one-half common share purchase warrant. On October 12, 2000, the Company arranged an equity private placement with DFH and Mr. Leslie Dan for 1,250,000 and 214,286 units respectively at an issue price of $5.60 per unit. Each unit consisted of one common share of the Company and one-half common share purchase warrant. As a result of these private placements 2,149,217 common shares and 1,074,608 common share purchase warrants were issued for cash proceeds of $13,040,338 net of costs of $159,662. With respect to the common share purchase warrants, 342,466 were exercisable until April 17, 2001 at $7.30 and until April 17, 2002 at $15.00 and 732,142 common share purchase warrants were exercisable until October 12, 2003 at $5.60 per share. F-34 In accordance with FAS 123, the fair value of these warrants of $2,788,000 was determined using the Black-Scholes pricing model with the following assumptions:
APRIL 17, OCTOBER 12, 2000 2000 --------- ----------- Expected volatility 106% 91% Risk-free interest rate 6.4% 5.9% Expected option life 2 years 3 years
Dividend yield for each placement was nil. During the year ended December 31, 2000, the Company issued 50,049 common shares pursuant to the exercise of stock options for cash proceeds of approximately $384,000. During the year ended December 31, 2004, the Company issued 19,650 common shares pursuant to the exercise of stock options for cash proceeds of approximately $42,000. [viii] On August 24, 2001, the Company completed a private equity placement with DFH for $6,000,000 net of issuance costs of $151,233 [net $5,848,767]. Under the terms of the transaction, DFH purchased 1,791,045 units issued by the Company at a price of $3.35 per unit. The unit price is based on the closing price of the Company's common shares on the Toronto Stock Exchange on July 25, 2001. Each unit is comprised of one common share of the Company and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share of the Company at an exercise price of $3.35 per share until August 24, 2006. In accordance with FAS 123, the fair value of these warrants of $3,403,000 (approximately $1.90 per warrant) was determined using the Black-Scholes pricing model with the following assumptions: Expected volatility 81% Risk-free interest rate 4.6% Expected option life 5 years Dividend yield nil
[ix] On December 17, 2002, the Company completed a private equity placement with Leslie Dan and 1533686 Ontario Limited, a company related to Leslie Dan, for $10,000,000, net of issuance costs of $109,147 [net $9,890,853]. Under the terms of the transaction, the Company issued 7,142,857 units at a price of $1.40 per unit. The unit price is based on the closing price of the Company's common shares on the Toronto Stock Exchange on December 17, 2002. Each unit is comprised of one common share of the Company and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share of the Company at an exercise price of $1.40 per share until December 17, 2007. In accordance with FAS 123, the fair value of these warrants of $6,429,000 (approximately $0.90 per warrant) was determined using the Black-Scholes pricing model with the following assumptions: Expected volatility 80% Risk-free interest rate 3.0% Expected option life 5 years Dividend yield nil
[x] In accordance with FAS 123, the fair value of these warrants issued in connection with the February 10, 2003 private placement [note 11[a][i]], was estimated to be $1,111,000 (approximately $1.00 per warrant) using the Black-Scholes pricing model with the following assumptions: F-35 Expected volatility 80% Risk-free interest rate 2.9% Expected option life 5 years Dividend yield nil
[f] Additional balance sheet information Accounts payable and accrued liabilities consisted primarily of the following:
2004 2003 $ $ ----- ----- Trade payables 1,780 601 Accrued interest 171 4 Accrued professional fees 61 59 Accrued wages and bonuses 773 515 Accrued financing costs 72 ----- Accrued clinical costs 77 131 Accrued financial reporting costs 120 120 Other accrued liabilities [i] 83 276 ----- ----- 3,137 1,706 ===== =====
[i] Other accrued liabilities primarily consisted of operating costs. In accordance with Canadian GAAP, the Company's cash and cash equivalents and short-term investments are carried at the lower of cost or market based on quoted market prices. Under U.S. GAAP, these investments would have been classified as held-to-maturity and would be recorded at amortized cost. There is no significant difference between cost under Canadian GAAP and amortized cost under U.S. GAAP. Accrued interest is included in the short-term investments balance, which approximates fair value. [g] Recent accounting developments In December 2002, FASB issued FAS No. 123(R) "Share-Based Payment " ["FAS 123(R)"]. FAS 123(R) amends certain provisions of FAS 123 to with respect to the method of accounting for stock options. Specifically FAS 123(R) eliminates the option to apply the intrinsic method of accounting for stock options with pro forma disclosure for each reported period for stock options given to employee. FAS 123(R) requires companies to fair value all stock option grants and the amortization of the fair value must be included in the determination of a company's financial results. FAS 123(R) is effective for the first interim or annual period beginning after June 15, 2005. The Company has not yet determined the method of adoption or the effect of adopting SFAS No. 123(R), and it has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS No. 123. In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions" ["SFAS 153"]. SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non-monetary transactions occurring in fiscal periods beginning after June 15, 2005. Accordingly, the Company is required to adopt SFAS No. 153 beginning January 1, 2006. The Company does not expect SFAS 152 to have a material impact on the Company's financial position or results of operations. F-36 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf. VIVENTIA BIOTECH INC. By: /s/ Dr. Nick Glover ------------------------------------- Dr. Nick Glover Date: June 10, 2005 President and Chief Executive Officer F-37 EXHIBIT INDEX EXHIBIT DESCRIPTION 1.1 Articles of continuance dated July 9, 1998. 1.2 Articles of amendment dated September 11, 2000. 1.3 Articles of amendment dated May 10, 2004. 1.4 By-law No. 1 and By-law No. 2. 2.1 1996 Stock Option Plan. 2.2 2001 Stock Option Plan. 3.1* Convertible Secured Debenture in the amount of $12,584,142.47 issued by Viventia Biotech Inc. in connection with the private placement to Leslie Dan dated November 3, 2004. 3.2* Convertible Secured Debenture in the amount of $5,000,000 issued by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.3* Convertible Secured Debenture in the amount of $5,562,568.49 issued by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.4 Warrant Certificate granted by Viventia Biotech Inc. in connection with the private placement to Leslie Dan dated November 3, 2004. 3.5 Warrant Certificate granted by Viventia Biotech Inc. in connection with the private placement to ADH Investments (1999) Inc. dated November 3, 2004. 3.6 Payment and Security Share Agreement between Leslie Dan, ADH Investments (1999) Inc. and Viventia Biotech Inc., dated November 3, 2004. 3.7 Employment Agreement between Dr. Nick Glover and Viventia Biotech Inc. dated January 7, 2004. 3.8 Employment Agreement between Mr. Michael Byrne and Viventia Biotech Inc. dated October 14, 2004. 3.9 Employment Agreement between Mr. Michael Cross and Viventia Biotech Inc. dated December 13, 2004. 3.10 Employment Agreement between Dr. Glen MacDonald and Viventia Biotech Inc. dated October 12, 2004. 3.11 Employment Agreement between Mr. Dimitri Fitsialos and Viventia Biotech Inc. dated November 17, 2004. 3.12* Exclusive License Agreement between Biovation Limited and Viventia Biotech Inc., dated March 8, 2004. 3.13* Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated June 23, 2003. 3.14* Amendment Number 1 to the Exclusive License Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated December 19, 2003. 3.15* License Agreement between McGill University and Novopharm Limited, dated April 28, 1994. 3.16* License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated August 20, 2002. 3.17* License Agreement between University of Zurich and Viventia Biotech Inc., dated January 9, 2003. F-38 3.18* Non-exclusive License Agreement between XOMA Ireland Limited and Viventia Biotech Inc., dated November 30, 2001. 3.19 Property Lease between Almad Investments Limited and Viventia Biotech Inc., dated January 26, 2004. 3.20 Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech Inc., dated November 20, 2000. 3.21* Subscription Agreement, dated September 3, 2003, between Teva Pharma B.V. and Viventia Biotech Inc. 3.22 Demand Promissory Note, dated February 17, 2005, in favor of Mr. Leslie Dan. 3.23 Demand Promissory Note, dated March 1, 2005, in favor of Mr. Leslie Dan. 3.24 Demand Promissory Note, dated March 23, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 3.25 Demand Promissory Note, dated April 28, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 3.26 Demand Promissory Note, dated May 12, 2005, in favor of Mr. Leslie Dan. 3.27 Demand Promissory Note, dated May 12, 2005, in favor of Clairmark Investments, an entity owned by Mr. Leslie Dan. 14.1 Consent of Ernst & Young LLP. - ---------- * Confidential Treatment Requested. F-39 EX-1.1 2 t17062exv1w1.txt EXHIBIT 1.1 For Ministry Use Only Ontario Corporation Number A l'usage exclusif du ministere Numero de la compagnie en Ontario 1269226 [GOVERNMENT OF ONTARIO EMBLEM] Ministry of Ministere de Consumer and la Consommation Commercial Relations et du Commerce CERTIFICATE CERTIFICAT This is to certify that these Ceci certifie que les presents articles are effective on statuts entrent en vigueur le JULY 09 JUILLET, 1998 /s/ Director/Directeur Business Corporations Act/Loi sur les societes par actions ________________________________________________________________________________ Form 6 Business Corporations Act Formule numero 6 Loi sur les compagnies ARTICLES OF CONTINUANCE STATUTS DE PROROGATION 1. The name of the corporation is: Denomination sociale de la compagnie: N O V O P H A R M B I O T E C H I N C . 2. The corporation is to be continued Nouvelle denomination sociale de la under the name compagnie (si elle est differente (if different from 1): de celle inscrite ci-dessus): __________________________________ _____________________________________ 3. Name of jurisdiction the Nom de l'etat que quitee corporation is leaving: la compagnie: BRITISH COLUMBIA ____________________________________________________________________________ (Name of jurisdiction) (Nome de l'etat) 4. Date of incorporation/amalgation Date de la constitution ou de la fusion: 25 AUGUST 1997 ________________________________________________________________________________ (Day, Month, Year) (jour, mois, annee) 5. The address of the registered Adresse du siege social: office is: 54 NOVOPHARM COURT ____________________________________________________________________________ (Street & Number or R R Number & if Multi-Office Building give Room No.) (Rue et numero ou numero de la R R et, s'il s'agit d'un edifice a bureau, numero du bureau) TORONTO, ONTARIO M1B 2K9 ____________________________________________________________________________ (Name of Municipality or Post Office) (Postal Code) (Nom de la municipalite ou du bureau de poste) (Code postal) CITY OF TORONTO THE PROVINCE OF ONTARIO ________________________________ in ________________________________ (Name of Municipality, dans le/la (County, District or Regional Geographic Township) Municipality) (Nom de la municipalite, (Comte, district, municipalite ou canton) regionale) DYE & DURHAM FORM 6 (B.C.A.) 6. Number (or minimum and Nombre (ou nombres minimal et maximal) maximum number) of directors is: d'administrateurs: Minimum of 3; maximum of 20
7. The director(s) is/are: Administrateur(s): Residence address, giving Street & No. or R.R. No., Resident Canadian First name, initials and last name Municipality and Postal Code State Prenom, initiales et nom de famille Adresse personnelle, y compris la rue et le numero, Yes or No le numero de la R.R., le nom de la municipalite et le Resident Canadien code postal Oui/Non - ------------------------------------------------------------------------------------------------------------------- James C. Baillie 35 Church Street, Apt. 816, Toronto, Ontario Yes M5E 1T3 Dr. Martin Barkin 54 Old Forest Hill Road, Toronto, Ontario Yes M5P 2P9 Dr. Michael Dan 26 Greengate Road, Toronto, Ontario Yes M3B 1E8 Dr. Albert Friesen 77 Shorecrest Drive, Winnipeg, Manitoba Yes R3P 1P4 David T. Howard #3 - 215 East Keith Road, North Vancouver, Yes British Columbia V7L 1V4 Murray S. Palay 501 Boreham Blvd., Winnipeg, Manitoba Yes R3P 0K2 Michael M. Tarrow 191 Commonwealth Avenue, Boston, Mass, No 02116 Dr. Mark Wainberg 6506 Fern Road, Montreal, Quebec H4V 1E4 Yes Leslie Dan 78 The Bridle Path, Toronto, Ontario M3B 2B1 Yes
8. Restrictions, if any, on business the corporation may carry on or on powers the corporation may exercise. Limites, s'il y a lieu, imposees aux activites commerciales ou aux pouvoirs de la compagnie. No restrictions 9. ___ _______ and any maximum number of shares that the corporation is authorized to issue: Categories et nombre maximal, s'il y a lieu, d'actions que la compagnie est autorisee a emettre. Unlimited number of Common Shares and unlimited number of Preferred Shares, issuable in series. 10. Rights, privileges, restrictions and conditions (if any) attaching to each class of shares and directors authority with respect to any class of shares which may be issued in series: Droits, privileges, restrictions et conditions, s'il y a lieu rattaches a chaque categorie d'actions et pouvoirs des administrateurs relatifs a chaque categorie d'actions qui peut etre emise en serie: See attached pages 4A to 4B 11. The issue, transfer or ownership of shares is/is not restricted and the restrictions (if any) are as follows: L'emission, le transfert ou la propriete d'actions est/n'est pas restreinte. Les restrictions, s'il y a lieu, sont les suivantes: N/A 12. Other provisions, if any. Autres dispositions, s'il y a lieu: N/A 13. The corporation has complied with subsection 180(3) of the Business Corporations Act. La compagnie s'est conformee aux dispositions du paragraphe 180(3) de la Loi sur les compagnies. 14. The continuation of the corporation under the laws of the Province of Ontario has been properly authorized under the laws of the jurisdiction in which the corporation was incorporated/amalgamated or previously continued on La prorogation de la compagnie en vertu des lois de la province de l'Ontario a ete dument autorisee en vertu des lois de l'autorite legislative sous le regime de laquelle la compagnie a ete constituee ou fusionnee ou prorogee le 26 MAY 1998 ________________________________________________________________________________ (Day Month Year) (jour mois. annee) 15. The corporation is to be continued under the Business Corporations Act to the same extent as if it has been incorporated thereunder. La prorogation de la compagnie en vertu de la Loi sur les compagnies a le meme effet que si la compagnie avait ete constituee en vertu de cette Loi. These articles are signed in duplicate. Les presents status sont signes en double exemplaire. NOVOPHARM BIOTECH INC. _________________________________________ (Name of Corporation) (Denomination sociale de la compagnie) By/Par: /s/ Chief Financial Officer __________________________________________ (Signature) (Description of Office) (Signature) (Fonction) SCHEDULE A 1. PREFERRED SHARES The Preferred Shares, as a class, shall be designated as Preferred Shares and shall have attached thereto the following rights, privileges, restrictions and conditions: 1.1 DIRECTORS' RIGHT TO ISSUE IN ONE OR MORE SERIES The Preferred Shares may be issued at any time or from time to time in one or more series. Before any shares of a series are issued, the board of directors of the Corporation shall fix the number of shares that will form such series and shall, subject to the limitations set out in the Articles, determine the designation, rights, privileges, restrictions and conditions to be attached to the Preferred Shares of such series, the whole subject to the filing with the Director (as defined in the Business Corporations Act (the "Act")) of Articles of Amendment containing a description of such series including the rights, privileges, restrictions and conditions determined by the board of directors of the Corporation. 1.2 RANKING OF THE PREFERRED SHARES The Preferred Shares of each series shall rank on a parity with the Preferred Shares of every other series with respect to dividends and return of capital in the event of the liquidation, dissolution or winding-up of the Corporation, and shall be entitled to a preference over the Common Shares of the Corporation and over any other shares ranking junior to the Preferred Shares with respect to priority in payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs. If any cumulative dividends, whether or not declared, or declared non-cumulative dividends or amounts payable on a return of capital in the event of the liquidation, dissolution or winding-up of the Corporation are not paid in full in respect of any series of the Preferred Shares, the Preferred Shares of all series shall participate rateably in respect of such dividends in accordance with the sums that would be payable on such shares if all such dividends were declared and paid in full, and in respect of such return of capital in accordance with the sums that would be payable on such return of capital if all sums so payable were paid in full; provided, however, that if there are insufficient assets to satisfy in full all such claims as aforesaid, the claims of the holders of the Preferred Shares with respect to return of capital shall be paid and satisfied first and any assets remaining thereafter shall be applied towards the payment and satisfaction of claims in respect of dividends. The Preferred Shares of any series may also be given such other preferences not inconsistent with the rights, privileges, restrictions and conditions attached to the Preferred Shares as a class over the Common Shares of the Corporation and over any other shares ranking junior to the Preferred Shares as may be determined in the case of such series of Preferred Shares. 1.3 VOTING RIGHTS Except as hereinafter referred to or as required by law or unless provision is made in the Articles relating to any series of Preferred Shares that such series is entitled to vote, the holders of the Preferred Shares as a class shall not be entitled as such to receive notice of, to attend or to vote at any meeting of the shareholders of the Corporation; provided, however, that the holders of Preferred Shares -2- shall be entitled to notice of meetings of shareholders called for the purpose of authorizing the dissolution of the Corporation or the sale, lease or exchange of all or substantially all the property of the Corporation other than in the ordinary course of the business of the Corporation. 1.4 AMENDMENT WITH APPROVAL OF HOLDERS OF THE PREFERRED SHARES The rights, privileges, restrictions and conditions attached to the Preferred Shares as a class may be added to. changed or removed but only with the approval of the holders of the Preferred Shares given as hereinafter specified. 1.5 APPROVAL OF HOLDERS OF THE PREFERRED SHARES The approval of the holders of the Preferred Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Preferred Shares as a class or in respect of any other matter requiring the consent of the holders of the Preferred Shares may be given in such manner as may then be required by law, subject to a minimum requirement that such approval be given by resolution signed by all the holders of the Preferred Shares or passed by the affirmative vote of at least 2/3 of the votes cast at a meeting of the holders of the Preferred Shares duly called for that purpose. The formalities to be observed with respect to the giving of notice of any such meeting or any adjourned meeting, the quorum required therefor and the conduct thereof shall be those from time to time prescribed by the by-laws of the Corporation with respect to meetings of shareholders, or if not so prescribed, as required by the Act as in force at the time of the meeting. On every poll taken at every meeting of the holders of the Preferred Shares as a class, or at any joint meeting of the holders of two or more series of Preferred Shares, each holder of Preferred Shares entitled to vote thereat shall have one vote in respect of each $1.00 of the issue price of each Preferred Share held. 2. COMMON SHARES The holders of the Common Shares shall be entitled to vote at all meetings of shareholders of the Corporation except meetings at which only the holders of the Preferred Shares as a class or the holders of one or more series of the Preferred Shares are entitled to vote, and shall be entitled to one vote at all such meetings in respect of each Common Share held. After payment to the holders of the Preferred Shares of the amount or amounts to which they may be entitled, the holders of the Common Shares shall be entitled to receive any dividend declared by the board of directors of the Corporation and to receive the remaining property of the Corporation upon dissolution. EX-1.2 3 t17062exv1w2.txt EXHIBIT 1.2 1 For Ministry Use Only Ontario Corporation Number A l'usage exclusif du ministere Numero de la societe en Ontario 1269226 ------------------------------- (GOVERNMENT OF ONTARIO EMBLEM) Ministry of Ministere de Consumer and la Consommation Commercial Relations et du Commerce CERTIFICATE CERTIFICAT This is to certify that these articles Ceci certifie que les presents status are effective on entrent en vigueur le SEPTEMBER 11 SEPTEMBRE, 2000 /s/ Director/Directrice Business Corporations Act/Loi sur les societes par actions - -------------------------------------------------------------------------------- ARTICLES OF AMENDMENT Form 3 STATUTS DE MODIFICATION Business Corporations 1. The name of the corporation is: Denomination sociale de la societe: Act NOVOPHARM BIOTECH INC. Formule 3 Loi sur les ------------------------------------------------------------------------ societes par actions ------------------------------------------------------------------------ ------------------------------------------------------------------------ 2. The name of the corporation is Nouvelle denomination sociale de la changed to (if applicable): societe (s'il y a lieu): VIVENTIA BIOTECH INC. ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ 3. Date of incorporation/amalgamation: Date de la constitution ou de la fusion: 1997/08/25 ------------------------------------------------------------------------ (Year, Month, Day) (annee, mois jour) 4. The articles of the corporation Les statuts de la societe sont modifies are amended as follows: de la facon suivante:
The certificate and articles of the corporation are amended to change the name of the corporation from Novopharm Biotech Inc. to Viventia Biotech Inc. DSG 01/2000 2 5. The amendment has been duly authorized as required by Sections 168 & 170 (as applicable) of the Business Corporations Act. La modification a ete dument autorisee conformement aux articles 168 et 170 (selon le cas) de la Loi sur les societes par actions. 6. The resolution authorizing the amendement was approved by the shareholder/ directors (as applicable) of the corporation on Les actionnaires ou les administrateurs (selon le cas) de la societe ont approuve la resolution autorisant la modification le 2000/09/06 - -------------------------------------------------------------------------------- (Year, Month, Day) (annee, mois, jour) These articles are signed in duplicate. Les presents statuts sont signes en double exemplaire. NOVOPHARM BIOTECH INC. --------------------------------------------------------------------- (Name of Corporation) (Denomination sociale de la societe) MICHAEL A. BYRNE By/Par: /s/ CHIEF FINANCIAL OFFICER --------------------------------------------------------------------- (Signature) (Description of Office) (Signature) (Fonction) DSG 01/2000 EX-1.3 4 t17062exv1w3.txt EXHIBIT 1.3 1 For Ministry Use Only Ontario Corporation Number a l'usage exclusif du ministere Numero de la societe en Ontario 1269226 (GOVERNMENT OF ONTARIO EMBLEM) Ministry of Ministere des Services Consumer and au consommateurs Business Services et aux entreprise CERTIFICATE CERTIFICAT This is to certify that these articles Ceci certifie que les presents status are effective on entrent en vigueur le May 10 Mai, 2004 /s/ Director/Directrice Business Corporations Act/Loi sur les societes par actions --------------------------------------------------------------------------- ARTICLES OF AMENDMENT STATUTS DE MODIFICATION Form 3 Business Corporations Act Formule 3 Loi sur les societes par actions 1. The name of the corporation is: (Set out in BLOCK CAPITAL LETTERS) Denomination sociale actuelle de la societe (ecrire en LETTRES MAJUSCULES SEULEMENT): VIVENTIA BIOTECH INC. 2. The name of the corporation is changed to (if applicable): (Set out in BLOCK CAPITAL LETTERS) Nouvelle denomination sociale de la societe) (s'il y a lieu) (ecrire en LETTRES MAJUSCULES SEULEMENT): 3. Date of incorporation/amalgamation: Date de la constitution ou de la fusion: 1997, August, 25 --------------------------------------------------------------------------- (Year, Month, Day) (annee, mois, jour) 4. COMPLETE ONLY IF THERE IS A CHANGE IN THE NUMBER OF DIRECTORS OR THE MINIMUM / MAXIMUM NUMBER OF DIRECTORS. IL FAUT REMPLIR CETTE PARTIE SEULEMENT SI LE NOMBRE D'ADMINISTRATEURS OU SI LE NOMBRE MINIMAL OU MAXIMAL D'ADMINISTRATEURS A CHANGE. Number of directors is/are: OR minimum and maximum number of directors is/are: Nombre d'administrateurs: OU nombre minimum et maximum d'administrateurs: Number OR minimum and maximum Nombre OU minimum et maximum ------ ------------------- 5. The articles of the corporation are amended as follows: Les statuts de la societe sont modifies de la facon suivante: 07119 (03/2003) DSG 04/2003 2 the Company is hereby authorized and directed to amend its articles as follows: (a) the certificate and articles of the Company are amended to change each issued and outstanding ten (10) common shares into one (1) issued and outstanding common share, such that the currently issued and outstanding 291,864,627 common shares of the Company are changed into approximately 29,186,463 common shares. (b) if the consolidation would otherwise result in the issuance of a fractional share, no fractional share will be issued but rather the number of shares registered in the name of the shareholder shall be rounded up to the nearest whole share for registered shareholders holding 0.50 or more fractional shares and shall be rounded down to the nearest whole share for any registered shareholder holding 0.49 or less fractional shares without any payment or other compensation being made to any shareholder in respect thereof. 6. The amendment has been duly authorized as required by sections 168 and 170 (as applicable) of the Business Corporations Act. La modification a ete dument autorisee conformement aux articles 168 et 170 (selon le cas) de la Loi sur les societes par actions. 7. The resolution authorizing the amendment was approved by the shareholders (as applicable) of the corporation on Les actionnaires ou les administrateurs (selon le cas) de la societe ont approuve la resolution autorisant la modification le 2004, May, 7 - -------------------------------------------------------------------------------- (Year, Month, Day) (annee, mois, jour) These articles are signed in duplicate. Les presents statuts sont signes en double exemplaire. VIVENTIA BIOTECH INC. - -------------------------------------------------------------------------------- (Name of Corporation) (If the name is to be changed by these articles set out current name) (Denomination sociale de la societe) (Si l'on demande un changement de nom, indiquer ci-dessus la denomination sociale actuelle). By/ Par: /s/ Chief Financial Officer & Secretary - --------------------------------------- ----------------------------------- (Signature) (Description of Office) (Signature) (Fonction) 07119 (03/2003) DSG 04/2003 EX-1.4 5 t17062exv1w4.txt EXHIBIT 1.4 BY-LAW NO. 1 of NOVOPHARM BIOTECH INC. (the "Corporation") 1. REGISTERED OFFICE 1.1. The registered office of the Corporation shall be in the place within Ontario specified in the articles of the Corporation and at such location therein as the directors may from time to time determine. 2. CORPORATE SEAL 2.1. Until changed by the directors the corporate seal of the Corporation shall be in the form impressed in the margin hereof. 3. DIRECTORS 3.1. NUMBER AND QUORUM. The number of directors shall be not fewer than the minimum and not more than the maximum provided in the articles, at least one-third of whom shall not be officers or employees of the Corporation or of any of its affiliates. The number of directors shall be determined by the directors when they are empowered by special resolution to make such determination and otherwise the number of directors shall be determined by special resolution. A simple majority of the number of directors so determined or such greater number as may be fixed by the directors or shareholders shall constitute a quorum for the transaction of business at any meeting of directors. 3.2. QUALIFICATION. No person shall be qualified to be a director if he is less than eighteen years of age; if he is of unsound mind and has been so found by a court in Canada or elsewhere; or if he has the status of a bankrupt. A majority of the directors shall be resident Canadians. 3.3. ELECTION AND TERM OF OFFICE. The directors shall be elected at each annual meeting of shareholders of the Corporation and each director shall hold office until the close of the first annual meeting following his election provided that if an election of directors is not held at an annual meeting of shareholders, the directors then in office shall continue in office until their successors are elected. Retiring directors are eligible for re-election. 3.4. VACATION OF OFFICE. A director ceases to hold office if he dies, is removed from office by the shareholders, ceases to be qualified for election as a director or, subject to the Business Corporations Act, resigns by a written resignation received by the Corporation. A written resignation of a director becomes effective at the time it is received by the Corporation, or at the time specified in the resignation, whichever is later. 3.5. REMOVAL OF DIRECTORS. The shareholders may by ordinary resolution at an annual or special meeting of shareholders remove any director or directors from office provided that where the holders of any class or series of shares have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution of the shareholders of that class or series. A vacancy created by the removal of a director may be filled at the meeting of the shareholders at which the director is removed. -ii- 3.6. VACANCIES. Subject to the Act, a quorum of directors may fill a vacancy among the directors. A director appointed or elected to fill a vacancy holds office for the unexpired term of his predecessor. 3.7. ACTION BY DIRECTORS. The directors shall manage or supervise the management of the business and affairs of the Corporation. The powers of the directors may be exercised at a meeting (subject to sections 3.8 and 3.9) at which a quorum is present or by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the directors. Where there is a vacancy in the board of directors the remaining directors may exercise all the powers of the board of directors so long as a quorum remains in office. 3.8. CANADIAN MAJORITY AT MEETINGS. The directors shall not transact business at a meeting other than filling a vacancy in the board of directors unless a majority of directors present are resident Canadians or if a resident Canadian director who is unable to be present approves in writing or by telephone or other communications facilities the business transacted at the meeting and a majority of resident Canadian directors would have been present had that director been present at the meeting. 3.9. MEETING BY TELEPHONE. If all the directors of the Corporation present at or participating in the meeting consent, a meeting of directors or of a committee of directors may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and a director participating in such a meeting by such means is deemed to be present at that meeting. 3.10. PLACE OF MEETINGS. Meetings of directors may be held at any place within or outside of Ontario. A majority of the meetings of directors need not be held within Canada in any financial year of the Corporation. 3.11. CALLING OF MEETINGS. Meetings of the directors shall be held at such time and place as the Chairman of the board of directors, the President or any two directors may determine. 3.12. NOTICE OF MEETING. Notice of the time and place of each meeting of directors shall be given to each director by telephone not less than 48 hours before the time of the meeting or by written notice not less than four days before the day of the meeting and need not specify the purpose of or the business to be transacted at the meeting. Meetings of the directors may be held at any time without notice if all the directors have waived or are deemed to have waived notice. 3.13. FIRST MEETING OF NEW BOARD. No notice shall be necessary for the first meeting of newly-elected directors held immediately following their election at a meeting of shareholders. 3.14. ADJOURNED MEETING. Notice of an adjourned meeting of directors is not required if the time and place of the adjourned meeting is announced at the original meeting. 3.15. REGULAR MEETING. The directors may appoint a day or days in any month or months for regular meetings and shall designate the place and time at which such meetings are to be held. A copy of any resolution of directors fixing the place and time of regular meetings of the board of directors shall be sent to each director forthwith after being passed, and no other notice shall be required for any such regular meeting. 3.16. CHAIRMAN. The Chairman of the board of directors, or in his absence the Chief Executive Officer if a director, or in his absence a director chosen by the directors at the meeting shall be the chairman of any meeting of directors. -iii- 3.17. VOTING AT MEETINGS. Questions arising at any meeting of directors shall be decided by a majority of votes. In the case of an equality of votes, the chairman of the meeting, in addition to his original vote, shall have a second or casting vote. 3.18. CONFLICT OF INTEREST. A director or officer who is a party to, or who is a director or officer of or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the Corporation shall disclose the nature and extent of his interest at the time and in the manner provided by the Act. 3.19. REMUNERATION AND EXPENSES. The directors shall be paid such remuneration as the directors may from time to time by resolution determine. The directors shall also be entitled to be paid their traveling and other expenses properly incurred by them in going to, attending and returning from meetings of directors or committees of directors. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Corporation, the fact of his being a director or officer of the Corporation shall not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services. 4. COMMITTEES 4.1. COMMITTEES OF DIRECTORS. The directors may appoint from among their number one or more committees of directors and delegate to them any of the powers of the directors except those which under the Act a committee of directors has no authority to exercise. A majority of any members of any such committee shall be resident Canadians. 4.2. AUDIT COMMITTEE. The directors shall appoint from among their number an audit committee composed of not fewer than three directors, a majority of whom are not officers or employees of the Corporation or any affiliate of the Corporation. The audit committee shall review the financial statements of the Corporation and shall report thereon to the directors of the Corporation before such financial statements are approved by the directors. The auditor of the Corporation is entitled to receive notice of every meeting of the audit committee and, at the expense of the Corporation, to attend and be heard thereat; and, if so requested by a member of the audit committee, shall attend every meeting of the committee held during the term of office of the auditor. The auditor of the Corporation or any member of the audit committee may call a meeting of the committee. 4.3. TRANSACTION OF BUSINESS. Subject to section 3.9 the powers of a committee appointed by the directors may be exercised at a meeting at which a quorum is present or by resolution in writing signed by all members of the committee entitled to vote on that resolution at a meeting of the committee. Meetings of a committee may be held at any place in or outside Canada. 4.4. PROCEDURE. Unless otherwise determined by the directors each committee shall have power to fix its quorum and to regulate its procedure. 5. OFFICERS 5.1. GENERAL. The directors may from time to time appoint a Chairman of the board of directors, a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Chief Financial Officer and such other officers as the directors may determine, including one or more assistants to any of the -iv- officers so appointed. The officers so appointed may but need not be members of the board of directors except as provided in sections 5.4 and 5.5. 5.2. TERM OF OFFICE. Any officer may be removed by the directors at any time but such removal shall not affect the rights of such officer under any contract of employment with the Corporation. Otherwise, each officer shall hold office until his successor is appointed. 5.3. THE CHAIRMAN OF THE BOARD. The Chairman of the board of directors, if any, shall be appointed from among the directors and shall, when present, be chairman of meetings of shareholders and directors and shall have such other powers and duties as the directors may determine. 5.4. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have general supervision of the Corporation's business and affairs and, in the absence or unwillingness to act of the Chairman of the board of directors, shall be chairman at meetings of shareholders and directors when present. 5.5. THE PRESIDENT. The President shall have such powers and duties as the directors or the Chief Executive Officer may determine. 5.6. VICE-PRESIDENT. A Vice-President shall have such powers and duties as the directors or the President may determine. 5.7. SECRETARY. The Secretary shall give, or cause to be given, all notices required to be given to shareholders, directors, auditors and members of committees; shall attend and be secretary of all meetings of shareholders, directors and committees appointed by the directors and shall enter or cause to be entered on books kept for that purpose minutes of all proceedings at such meetings; shall be the custodian of the corporate seal of the Corporation and of all records, books, documents and other instruments belonging to the Corporation; and shall have such other powers and duties as the directors or the Chief Executive Officer may determine. 5.8. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep proper books of account and accounting records with respect to all financial and other transactions of the Corporation; shall be responsible for the deposit of money, the safe-keeping of securities and the disbursement of the funds of the Corporation; shall render to the directors when required an account of all his transactions as Chief Financial Officer and of the financial position of the Corporation; and he shall have such other powers and duties as the directors or the Chief Executive Officer may determine. 5.9. OTHER OFFICERS. The powers and duties of all other officers shall be such as the directors or the Chief Executive Officer may determine. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the directors or the Chief Executive Officer otherwise direct. 5.10. VARIATION OF DUTIES. The directors may, from time to time, vary, add to or limit the powers and duties of any officer. 5.11. CONFLICT OF INTEREST. An officer shall disclose his interest in any material contract or proposed material contract in accordance with section 3.18. 5.12. AGENTS AND ATTORNEYS. The directors shall have power from time to time to appoint agents or attorneys for the Corporation in or out of Canada with such powers (including the power to sub-delegate) of management, administration or otherwise as the directors may specify. -v- 6. PROTECTION OF DIRECTORS, OFFICERS AND OTHERS 6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify a director or officer, a former director or officer or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, and the heirs and legal representatives of such a person to the extent permitted by the Act. 6.2. INSURANCE. The Corporation may purchase and maintain insurance for the benefit of any person referred to in section 6.1 to the extent permitted by the Act. 7. MEETINGS OF SHAREHOLDERS 7.1. ANNUAL MEETINGS. The annual meeting of the shareholders shall be held at the registered office of the Corporation or at such other place, in or outside Ontario, at such time in each year as the directors may determine, for the purpose of receiving the reports and statements required to be placed before the shareholders at an annual meeting, electing directors, appointing an auditor or auditors, and for the transaction of such other business as may properly be brought before the meeting. 7.2. OTHER MEETINGS. The directors shall have power at any time to call a special meeting of shareholders to be held at such time and at such place, in or outside Ontario, as may be determined by the board of directors. 7.3. NOTICE OF MEETINGS. Notice of the time and place of a meeting of shareholders shall be given not less than twenty-one days nor more than fifty days before the meeting to each holder of shares carrying voting rights at the close of business on the record date for notice, to each director and to the auditor of the Corporation. Notice of a meeting of shareholders at which special business is to be transacted shall state or be accompanied by a statement of the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall include the text of any special resolution or by-law to be submitted to the meeting. All business transacted at a special meeting of shareholders and all business transacted at an annual meeting of shareholders, except consideration of the minutes of an earlier meeting, the financial statements and auditor's report, election of directors and reappointment of the incumbent auditor, shall be deemed to be special business. 7.4. RECORD DATE FOR NOTICE. For the purpose of determining shareholders entitled to receive notice of a meeting of shareholders, the directors may fix in advance a date as the record date for such determination of shareholders, but the record date shall not precede by more than fifty days or by less than twenty-one days the date on which the meeting is to be held. Where no record date is fixed, the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be at the close of business on the day immediately preceding the day on which the notice is given, or, if no notice is given, shall be the day on which the meeting is held. If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day the directors fix the record date, notice thereof shall be given, not less than seven days before the date so fixed, by advertisement in a newspaper published or distributed in the place where the Corporation has its registered office and in each place in Canada where it has a transfer agent or where a transfer of its shares may be recorded and by written notice to each stock exchange in Canada on which the shares of the Corporation are listed for trading. -vi- 7.5. PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors, the auditor and other persons who are entitled or required under any provision of the Act or the articles or by-laws of the Corporation to attend a meeting of shareholders of the Corporation. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. 7.6. CHAIRMAN. The Chairman of the board of directors, or in his absence or unwillingness to act the Chief Executive Officer, or in his absence a person chosen by a vote at the meeting shall be chairman of meetings of shareholders. 7.7. SCRUTINEERS. At each meeting of shareholders one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the chairman with the consent of the meeting. 7.8. QUORUM. Two persons present in person and each being entitled to vote thereat shall constitute a quorum for the transaction of business at any meeting of shareholders. 7.9. RIGHT TO VOTE. The Corporation shall prepare or shall cause to be prepared a list of shareholders entitled to receive notice of a meeting, arranged in alphabetical order and showing the number of shares held by each shareholder, which list shall be prepared. 7.9.1. if a record date is fixed as hereinbefore provided, not later than ten days after that date; 7.9.2. if no record date is fixed, at the close of business on the day immediately preceding the day on which the notice is given, or where no notice is given, on the day on which the meeting is held. A person named in the said list is entitled to vote the shares shown opposite his name at the meeting to which the list relates, except to the extent that the person has transferred any of his shares and the transferee of those shares produces properly endorsed share certificates, or otherwise establishes that he owns the shares, and demands, not later than ten days before the meeting that his name be included in the list before the meeting, in which case the transferee is entitled to vote his shares at the meeting. 7.10. JOINT SHAREHOLDERS. Where two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may in the absence of the others vote the shares, but if two or more of those persons are present, in person or by proxy, they shall vote as one on the shares jointly held by them. 7.11. REPRESENTATIVES. Where a body corporate or association is a shareholder of the Corporation, the Corporation shall recognize any individual authorized by a resolution of the directors or governing body of the body corporate or association to represent it at meetings of shareholders of the Corporation. An individual so authorized may exercise on behalf of the body corporate or association he represents all the powers it could exercise if it were an individual shareholder. 7.12. EXECUTORS AND OTHERS. An executor, administrator, committee of a mentally incompetent person, guardian or trustee and, where a corporation is such executor, administrator, committee, guardian or trustee of a testator, intestate, mentally incompetent person, ward or cestui que trust, any duly appointed representative of such corporation, upon filing with the secretary of the meeting sufficient proof of his appointment, shall represent the shares in his or its hands at all meetings of shareholders of the Corporation and may vote accordingly as a shareholder in the same manner and to the same extent as -vii- the shareholder of record. If there be more than one executor, administrator, committee, guardian or trustee, the provisions of this by-law respecting joint shareholders shall apply. 7.13. PROXYHOLDERS. Every shareholder entitled to vote at a meeting of shareholders may by means of a proxy appoint a proxyholder or one or more alternate proxyholders, who need not be shareholders, as his nominee to attend and act at the meeting in the manner, to the extent and with the authority conferred by the proxy. A proxyholder or an alternate proxyholder has the same rights as the shareholder who appointed him to speak at a meeting of shareholders in respect of any matter, to vote by way of ballot at the meeting and, except where a proxyholder or an alternate proxyholder has conflicting instructions from more than one shareholder, to vote at such meeting in respect of any matter by way of any show of hands. A proxy shall be executed by the shareholder or his attorney authorized in writing or, if the shareholder is a body corporate, by an officer or attorney thereof duly authorized and ceases to be valid one year from its date. A proxy shall be in such form as may be prescribed from time to time by the directors or in such other form as the chairman of the meeting may accept and as complies with all applicable laws and regulations. 7.14. TIME FOR DEPOSIT OF PROXIES. The directors may by resolution fix a time not exceeding forty-eight hours, excluding Saturdays and holidays, preceding any meeting or adjourned meeting of shareholders before which time proxies to be used at that meeting must be deposited with the Corporation or an agent thereof, and any period of time so fixed shall be specified in the notice calling the meeting. 7.15. VOTES TO GOVERN. Subject to the Act and the articles of the Corporation, at all meetings of shareholders every question shall be decided, either on a show of hands or by ballot, by a majority of the votes cast on the question. In case of an equality of votes, the chairman of the meeting shall have a second or casting vote. 7.16. SHOW OF HANDS. Voting at a meeting of shareholders shall be by show of hands except where a ballot is demanded by a shareholder or proxyholder entitled to vote at the meeting or where required by the chairman. A ballot may be demanded either before or after any vote by show of hands. Upon a show of hands every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon be required or demanded, an entry in the minutes of a meeting of shareholders to the effect that the chairman declared a motion to be carried is admissible in evidence as prima facie proof of the fact without proof of the number or proportion of the votes recorded in favour of or against the motion. A demand for a ballot may be withdrawn at any time prior to taking of a poll on the ballot. 7.17. BALLOTS. If a ballot is demanded or required, the vote upon the question shall be taken in such manner as the chairman of the meeting shall direct and each person present and entitled to vote at the meeting shall, unless the articles of the Corporation otherwise provide, be entitled to one vote for each share in respect of which he is entitled to vote at the meeting. 7.18. ADJOURNMENT. The chairman of any meeting of shareholders may, with the consent of the meeting and subject to such conditions as the meeting may decide, adjourn the same from time to time and from place to place. If a meeting of shareholders is adjourned for less than thirty days it is not necessary to give notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of thirty days or more, notice of the adjourned meeting shall be given as for an original meeting. Any business may be brought before or dealt with at any adjourned meeting which might have -viii- been brought before or dealt with at the original meeting in accordance with the notice calling such original meeting. 7.19. RESOLUTION IN LIEU OF MEETING. A resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of shareholders except where a written statement in respect thereof has been submitted by a director or where representations in writing are submitted by the auditor of the Corporation, in either case, in accordance with the Act. 8. SHARES 8.1. ISSUE. Subject to the Act and the articles of the Corporation, shares of the Corporation may be issued at such times and to such persons and for such consideration as the directors may determine, provided that no shares may be issued until it is fully paid as provided in the said Act. 8.2. COMMISSIONS. The directors may authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares. 8.3. SHARE CERTIFICATE. Every shareholder is entitled at his option to a share certificate in respect of the shares held by him that complies with the Act or to a non-transferable written acknowledgement ("written acknowledgement") of his right to obtain a share certificate from the Corporation in respect of the shares of the Corporation held by him, but the Corporation is not bound to issue more than one share certificate or written acknowledgement in respect of a share or shares held jointly by several persons and delivery of a share certificate or written acknowledgement to one of several joint holders is sufficient delivery to all. Written acknowledgements shall be in such form or forms as the directors shall from time to time by resolution determine. The Corporation may charge a fee in accordance with the Act for a share certificate issued in respect of a transfer. Subject to the provisions of the Act and to the requirements of any stock exchange on which shares of the Corporation may be listed, share certificates shall be in such form or forms as the directors shall from time to time approve. Unless otherwise determined by the directors, share certificates shall be signed by the Chairman of the board of directors, the Chief Executive Officer, the President, or a Vice-President or a director and by the Secretary or an Assistant Secretary and need not be under the corporate seal and certificates for shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned on behalf of such transfer agent and/or registrar. Share certificates shall be signed manually by at least one director or officer of the Corporation or by or on behalf of a registrar, transfer agent, branch transfer agent or issuing or other authenticating agent of the Corporation and any additional signatures required on share certificates may be printed or otherwise mechanically reproduced thereon. A manual signature is not required on a share certificate representing a fractional share. If a share certificate contains a printed or mechanically reproduced signature of a person, the Corporation may issue the share certificate, notwithstanding that the person has ceased to be a director or an officer of the Corporation, and the share certificate is as valid as if he were a director or an officer at the date of its issue. 8.4. TRANSFER AGENTS AND REGISTRARS. For each class of shares issued by it, the Corporation may appoint one or more agents to keep the securities register and the register of transfers and one or more branch registers. Such an agent may be designated as a transfer agent or registrar according to functions and one agent may be designated both transfer agent and registrar. The securities register and the register of transfers shall be kept at the registered office of the Corporation or at such other places in -ix- Ontario as are designated by the directors, and the branch register or registers of transfers may be kept at such offices of the Corporation or other places, either within or outside Ontario, as are designated by the directors. 8.5. TRANSFER OF SHARES. Subject to the Act, no transfer of a share shall be registered except upon presentation of the certificate representing such share with an endorsement which complies with the Act, together with such reasonable assurance that the endorsement is genuine and effective as the directors may prescribe, upon payment of all applicable taxes and fees and upon compliance with the articles of the Corporation. 8.6. NON-RECOGNITION OF TRUST. Subject to the Act, the Corporation may treat the registered holder of any share as the person exclusively entitled to vote, to receive notices, to receive any dividend or other payment in respect of the share, and to exercise all the rights and powers of an owner of the share. 8.7. REPLACEMENT OF SHARE CERTIFICATES. Where the owner of a share certificate claims that the share certificate has been lost, apparently destroyed or wrongfully taken, the Corporation shall issue or cause to be issued a new certificate in place of the original certificate if the owner (i) so requests before the Corporation has notice that the share certificate has been acquired by a bona fide purchaser; (ii) files with the Corporation an indemnity bond sufficient in the Corporation's opinion to protect the Corporation and any transfer agent, registrar or other agent of the Corporation from any loss that it or any of them may suffer by complying with the request to issue a new share certificate; and (iii) satisfies any other reasonable requirements imposed from time to time by the Corporation. 9. DIVIDENDS AND RIGHTS 9.1. DECLARATION OF DIVIDENDS. Subject to the Act, the directors may from time to time declare dividends payable to the shareholders according to their respective rights and interest in the Corporation. 9.2. CHEQUES. A dividend payable in money shall be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at the address of such holder in the Corporation's securities register, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all such joint holders and mailed to them at their address in the Corporation's securities register. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. 9.3. NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the directors may from time to time prescribe, whether generally or in any particular case. 9.4. RECORD DATE FOR DIVIDENDS AND RIGHTS. The directors may fix in advance a date, preceding by not more than fifty days the date for payment of any dividend or the date for the issue of any warrant or other evidence of the right to subscribe for securities of the Corporation, as a record date for the determination of the persons entitled to receive payment of such dividend or to exercise the rights to subscribe for such securities, and notice of any such record date shall be given not less than seven days before such record date in the manner provided by the Act. If no record date is so fixed, the record date -x- for the determination of the persons entitled to receive payment of any dividend or to exercise the right to subscribe for securities of the Corporation shall be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the directors. 9.5. UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation. 10. NOTICES 10.1. GENERAL. A notice or document required by the Act, the regulations thereunder, the articles or the by-laws of the Corporation to be sent to a shareholder or director of the Corporation may be sent by prepaid mail addressed to, or may be delivered personally to, the shareholder at his latest address as shown in the records of the Corporation or to the director at his latest address as shown in the records of the Corporation or in the most recent notice filed under the Corporations Information Act, whichever is the more current. A notice or document if mailed to a shareholder or director of the Corporation shall be deemed to have been given when deposited in a post office or public letter box. If the Corporation sends a notice or document to a shareholder in accordance with this section and the notice or document is returned on three consecutive occasions because the shareholder cannot be found, the Corporation is not required to send any further notices or documents to the shareholder until he informs the Corporation in writing of his new address. 10.2. COMPUTATION OF TIME. In computing the time when a notice or document must be given or sent under any provision requiring a specified number of days' notice of any meeting or other event, a "day" shall mean a clear day and the period of days shall be deemed to commence the day following the event that began the period and shall be deemed to terminate at midnight of the last day of the period except that if the last day of the period falls on a Sunday or holiday the period shall terminate at midnight of the day next following that is not a Sunday or holiday. 10.3. OMISSION AND ERRORS. The accidental omission to give any notice or send any document to any shareholder, director or other person or the non-receipt of any notice or document by any shareholder, director or other person or any error in any notice or document not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded on such notice or document. 10.4. NOTICE TO JOINT SHAREHOLDER. All notices or documents with respect to any shares registered in more than one name may, if more than one address appears on the securities register of the Corporation in respect of such joint holding, be given to such joint shareholders at the first address so appearing, and all notices so given or documents so sent shall be sufficient notice to all the holders of such shares. 10.5. PROOF OF SERVICE. A certificate of the Secretary or other duly authorized officer of the Corporation, or of any agent of the Corporation, as to facts in relation to the mailing or delivery or sending of any notice or document to any shareholder or director of the Corporation or to any other person or publication of any such notice or document, shall be conclusive evidence thereof and shall be binding on every shareholder or director or other person as the case may be. 10.6. Signature on Notice. The signature on any notice or document given by the Corporation may be printed or otherwise mechanically reproduced thereon or partly printed or otherwise mechanically reproduced thereon. -xi- 10.7. WAIVER OF NOTICE. Notice may be waived or the time for the sending of a notice or document may be waived or abridged at any time with the consent in writing of the person entitled thereto. Attendance of any director at a meeting of the directors or of any shareholder at a meeting of shareholders is a waiver of notice of such meeting, except where he attends for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. 11. BUSINESS OF THE CORPORATION 11.1. VOTING SHARES AND SECURITIES IN OTHER CORPORATIONS. All of the shares or other securities carrying voting rights of any other body corporate or bodies corporate held from time to time by the Corporation may be voted at any and all meetings of holders of such securities of such other body corporate or bodies corporate in such manner and by such person or persons as the directors of the Corporation shall from to time determine or failing such determination the proper signing officers of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation instruments of proxy and arrange for the issue of voting certificates and other evidence of the right to vote in such names as they may determine. 11.2. BANK ACCOUNTS, CHEQUES, DRAFTS AND NOTES. The Corporation's bank accounts shall be kept in such chartered bank or banks, trust company or trust companies or other firm or corporation carrying on a banking business as the directors may by resolution from time to time determine. Cheques on bank accounts, drafts drawn or accepted by the Corporation, promissory notes given by it, acceptances, bills of exchange, orders for the payment of money and other instruments of a like nature may be made, signed, drawn, accepted or endorsed, as the case may be, by such officer or officers, person or persons as the directors may by resolution from time to time name for that purpose. Cheques, promissory notes, bills of exchange, orders for the payment of money and other negotiable paper may be endorsed for deposit to the credit of any one of the Corporation's bank accounts by such officer or officers, person or persons, as the directors may by resolution from time to time name for that purpose, or they may be endorsed for such deposit by means of a stamp bearing the Corporation's name. 11.3. EXECUTION OF INSTRUMENTS. The Chairman of the board of directors, the Chief Executive Officer, the President, a Vice-President or any director, together with the Secretary, the Chief Financial Officer, Assistant Secretary, Assistant Treasurer or any other director, shall have authority to sign in the name and on behalf of the Corporation all instruments in writing and any instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The board of directors shall have power from time to time by resolution to appoint any other officer or officers or any person or persons on behalf of the Corporation either to sign instruments in writing generally or to sign specific instruments in writing. Any signing officer may affix the corporate seal to any instrument requiring the same. The term "instruments in writing" as used herein shall, without limiting the generality thereof, include contracts, documents, powers of attorney, deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property (real or personal, immovable or movable), agreements, tenders, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, stocks, bonds, debentures or other securities, instruments of proxy and all paper writing. 11.4. FISCAL YEAR. Until changed by resolution of the directors the fiscal year of the Corporation shall terminate on the last day of December in each year. -xii- 12. INTERPRETATION 12.1. In this by-law, wherever the context requires or permits, the singular shall include the plural and the plural the singular; the word "person" shall include firms and corporations, and masculine gender shall include the feminine and neuter genders. Wherever reference is made to any determination or other action by the directors such shall mean determination or other action by or pursuant to a resolution passed at a meeting of the directors, or by or pursuant to a resolution consented to by all the directors as evidenced by their signatures thereto. Wherever reference is made to "the Business Corporations Act" or the "Act", it shall mean the Business Corporations Act of the Province of Ontario, and every other act or statute incorporated therewith or amending the same, or any act or statute substituted therefor. Unless the context otherwise requires, all words used in this by-law shall have the meanings given to such words in the Act. BY-LAW NO. 2 By-Law No. 1 is hereby amended by adding the following section 7.20 of By-Law No. 1: 7.20 ELECTRONIC MEETINGS: A meeting of shareholders of the Company may be held by telephonic or electronic means and a shareholder who, through those means, votes at a meeting or establishes a communications link to a meeting will be deemed to be present at that meeting. EX-2.1 6 t17062exv2w1.txt EXHIBIT 2.1 NOVOPHARM BIOTECH INC. 1996 SHARE INCENTIVE PLAN DATED FOR REFERENCE MARCH 29, 1996 ARTICLE 1 PURPOSE AND INTERPRETATION PURPOSE 1.1 The purpose this Share Incentive Plan will be to advance the interests of the Company by encouraging equity participation in the Company through the acquisition of Common Shares of the Company. DEFINITIONS 1.2 In the Plan ASSOCIATE has the meaning assigned by the Securities Act; BOARD means the board of directors of the Company; CHANGE OF CONTROL means the acquisition by any person or by any person and its joint actors (as such term is defined in the Securities Act), whether directly or indirectly, of voting securities (as such term is defined in the Securities Act) of the Company which,' when added to all other voting securities of the Company at the time held by such person and its joint actors, totals for the first time not less than 35% of the outstanding voting securities of the Company; COMMON SHARES means common shares without par value in the capital of the Company; COMPANY means Novopharm Biotech Inc.; DIRECTOR means a director of the Company or any of its subsidiaries; EFFECTIVE DATE for an Option means the date of grant thereof; EMPLOYEE means an individual who is an employee of the Company or of any subsidiary or affiliate Company including the Novopharm Biotech Partnership; -2- EXPIRY DATE means the day on which an Option lapses as specified in the Commitment therefor; INSIDER means (i) an insider as defined in the Securities Act, other than a person who fits within that definition solely by virtue of being a director or senior officer of a subsidiary of the Company, and (ii) an Associate of any person who is an insider by virtue of Section (i); NOVOPHARM BIOTECH PARTNERSHIP means the Partnership formed between the Company and Novopharm Limited; OPTION means the right to purchase Common Shares granted hereunder to a Service Provider; OPTION COMMITMENT means the notice of grant of an Option delivered by the Company hereunder to a Service Provider and substantially in the form of Schedule "A" hereto; OPTIONED SHARES means Common Shares subject to an Option; OPTIONEE means an individual to whom an Option is granted by the Company under the Plan; OUTSTANDING ISSUE means the number of Common Shares outstanding on a non-diluted basis excluding shares issued pursuant to share compensation arrangements over the preceding one-year period; PARTICIPANT means a person that becomes an Optionee or is issued Common Shares under the Share Bonus Plan; PLAN means the Share Option Plan the terms of which are set out herein; REGULATORY APPROVAL means the approval of the Vancouver Stock Exchange, the Toronto Stock Exchange or any other securities regulatory agency that may have jurisdiction in the circumstances; RESERVED FOR ISSUANCE refers to Common Shares that may be issued in the future upon the exercise of stock options which have been granted; -3- SECURITIES ACT means the Securities Act, S.B.C. 1985, c. 83, as amended from time to time; SERVICE PROVIDER means (i) an employee or director of the Company or of any of its subsidiaries or affiliates including the Novopharm Biotech Partnership, and (ii) any other person or company engaged to provide directly or indirectly ongoing management consulting and other research or collaboration services to the Company or any of its subsidiaries or affiliates, including the Novopharm Biotech Partnership; SHARE COMPENSATION ARRANGEMENT means the Plan described herein and any other stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism involving the issuance or potential issuance of shares to one or more Service Providers, including a share purchase from treasury which is financially assisted by the Company by way of a loan, guaranty or otherwise; SUBSCRIPTION PRICE means the amount payable per Common Share on the exercise of an Option, as determined in accordance with section 3.1; TAKE OVER BID has the meaning assigned to that term in the Securities Act but excludes an exempt take over bid pursuant to section 80 of the Securities Act. ARTICLE 2 SHARE OPTION PLAN ESTABLISHMENT OF SHARE OPTION PLAN 2.1 There is hereby established a Share Option Plan to recognize contributions made by Service Providers and to create an incentive for their continuing relationship with the Company and its subsidiaries and affiliates. Any share options granted by the Company prior to the date hereof, all of which are listed in Schedule B hereto, are not included hereunder or affected hereby. -4- ELIGIBILITY 2.2 Options to purchase unissued Common Shares may be granted hereunder to Service Providers. INCORPORATION OF TERMS OF SHARE OPTION PLAN 2.3 Subject to specific variations approved by the Board, all terms and conditions set out herein will be incorporated into and form part of an Option granted hereunder. MAXIMUM SHARES TO BE ALLOTTED 2.4 The maximum aggregate number of Common Shares that are Reserved for Issuance under the Plan is 1,500,000 Common Shares. LIMITATIONS ON ISSUE 2.5 The number of Common Shares Reserved for Issue to any person under this Plan shall in no event exceed 5% of the then Outstanding Issue. 2.6 No Option may be granted if, together with any other Share Compensation Arrangement, it could result, at any time, in (a) the number of Common Shares that may be Reserved for Issuance under the Plan pursuant to Share Compensation Arrangements (including stock options under any pre-existing share compensation arrangement) granted to Insiders exceeding 10% of the then Outstanding Issue, (b) the number of Common Shares that may be issued to Insiders within a one year period exceeding 10% of the Outstanding Issue (or 5% to any one Insider and his or her associates), and (c) the number of Common Shares Reserved for Issuance to any one Insider and such Insider's associates pursuant to Share Compensation Arrangements (including stock options under any pre-existing Share Compensation Arrangement) exceeding within one year 5% of the Outstanding Issue. SHARES NOT ACQUIRED 2.7 Any Common Shares not acquired under an Option which has expired or been cancelled or terminated may be made the subject of a further Option pursuant to the provisions of the Plan. -5- POWERS OF THE BOARD 2.8 The Board will be responsible for the general administration of the Plan and the proper execution of its provisions, the interpretation of the Plan and the determination of all questions arising hereunder. Without limiting the generality of the foregoing, the Board has the power to (a) allot Common Shares for issuance in connection with Options granted under the Plan, (b) grant Options hereunder, (c) subject to Regulatory Approval, amend, suspend, terminate or discontinue the Plan, or revoke or alter any action taken in connection therewith, except that no amendment or suspension of [he Plan will, without the written consent of all Optionees, alter or impair any Option granted under the Plan, (d) save and except for the provisions of Section 2.8(a), delegate all or such portion of its powers hereunder as it may determine to one or more committees of the Board, either indefinitely or for such period of time as it may specify, and thereafter each such committee may exercise the powers and discharge the duties of the Board in respect of the Plan so delegated to the same extent as the Board is hereby authorized so to do, and (e) may in its sole discretion reduce the benefits that may be granted to Service Providers under the Plan but may not increase such benefits. ARTICLE 3 TERMS AND CONDITIONS OF OPTIONS SUBSCRIPTION PRICE 3.1 The Subscription Price per Optioned Share shall be the greater of: (a) the closing price for the Common Shares an the stock exchange on which the Common Shares of the Company are traded at the date of the grant on the last trading day before the date of grant of the Option; -6- (b) if the Board determines that the Subscription Price determined in Section (a) is not a representative price, the weighted average of the trading prices for the Common Shares on the five trading days before the date of grant of the Option; (c) if the Company's Common Shares are listed on more than one stock exchange at the date of grant of the Option, then as calculated in (a) and (b) above using the trading price or prices on the stock exchange on which a majority of the Common Shares are listed; or (d) if the Common Shares arc not listed on a stock exchange then the price determined by the Board using good faith discretion. TERM OF OPTION 3.2 (a) Subject to Section 3.2(b) and (c), the term of an Option will be five years from the Effective Date thereof. (b) If the Board determines that in the case of an Optionee (i) hired or appointed for special purposes not expected to exceed five years, (ii) likely to retire within five years from the date of grant, or (iii) whose employment or appointment is otherwise subject to special circumstances (such circumstances to be determined by the Board in its discretion), it is desirable to grant to such an Optionee an Option which may be wholly exercised during a period less than five years from the Effective Date or for which the vesting of rights should be varied, the Board shall have the power to vary the terms of that Optionee's Option in such manner as in its discretion the Board shall determine. In no event will the term of any Option be longer than 10 years. (c) The Board may provide in the case of a particular Optionee that in the event of a Change of Control or Take Over Bid, the Option held by that Optionee may be exercised by the Optionee in full at any time or from time to rime on or before its Expiry Date. VESTING OF OPTION RIGHTS 3.3 Subject to Section 3.4, Options granted under the Plan shall vest and be cumulatively exercisable in instalments at a rate to be fixed by the Board which will generally be in equal -7- thirds over a 36-month period. Options may be exercised only after vesting and may not be exercised after the tenth anniversary of the grant of the Option. Vesting, at the discretion of the Board, will generally be subject to: (a) the Service Provider remaining employed by or continuing to provide services to the Company or any of its subsidiaries and affiliates including the Novopharm Biotech Partnership and receiving a satisfactory performance review by the Company or its subsidiary or affiliate during the vesting period; or (b) remaining as a Director of the Company or any of its subsidiaries or affiliates during the vesting period. VARIATION OF VESTING PERIODS 3.4 At the time an Option is granted the Board may determine with respect to any Service Provider that it is desirable to grant to the Service Provider an Option for which the vesting of rights should be other than as provided in Section 3.3, and may fix such vesting period for that Option as it may, in its sole discretion, determine to be appropriate. However, in no event will any Option be exercisable after the tenth anniversary of the granting of such Option. OPTIONEE CEASING TO BE DIRECTOR, EMPLOYEE OR SERVICE PROVIDER 3.5 No Option may be exercised after the Optionee, if a Director has ceased to be a Director or if an Employee or other Service Provider has left the employ or service of the Company or any of its subsidiaries and affiliates, except as follows: (a) in the case of the death of an Optionee, any Option held by him at the date of death shall become exercisable, whether or not the Optionee was eligible to exercise the Option at the date of the Optionee's death, in whole or in part but only by the person or persons to whom the Optionee's rights under the Option shall pass by the Optionee's will or laws of descent and distribution. All such Options shall be exercisable only for six months after the date of death or prior to the expiration of the term of the Option in respect thereof, whichever is sooner unless the Board otherwise determines to extend such period; (b) if an Optionee ceases to be an Employee or Service Provider to the Company or any of its subsidiaries or affiliates (other than as a result of termination with cause) or ceases to act as a Director of the Company or a subsidiary of the Company, an Option held by such Optionee may be exercised following the date an which such Optionee ceases to be so employed or providing services or ceases to be a Director, as the case may be for a period of thirty (30) days (unless the Board determines to -8- extend this period in special circumstances) but only to the extent that the Optionee was eligible to exercise the Option at the date the Optionee ceased to be an Employee, Service Provider or Director of the Company or any subsidiary or affiliate of the Company; and (c) in the case of an Optionee being dismissed from employment or service for cause, the Option and all option rights that had accrued to the Optionee to the date of termination shall immediately terminate; but provided that in no event may the term of the Option exceed 10 years. NON ASSIGNABLE 3.6 Subject to Section 3.5(a) an Option shall be exercisable only by the Optionee to whom it is granted and shall not be assignable. ADJUSTMENT OF THE NUMBER OF OPTIONED SHARES 3.7 The number of Common Shares subject to an Option will be subject to adjustment in the events and in the manner following: (a) in the event of a subdivision of Common Shares as constituted on the date hereof, at any time while an Option is in effect, into a greater number of Common Shares, the Company will thereafter deliver at the time of purchase of Optioned Shares hereunder, in addition to the number of Optioned Shares in respect of which the right to purchase is then being exercised, such additional number of Common Shares as result from the subdivision without an Optionee making any additional payment or giving any other consideration therefor, (b) in the event of a consolidation of the Common Shares as constituted on the date hereof, at any time while an Option is in effect, into a lesser number of Common Shares, the Company will thereafter deliver and an Optionee will accept, at the time of purchase of Optioned Shares hereunder, in lieu of the number of Optioned Shares in respect of which the right to purchase is then being exercised, the lesser number of Common Shares as result from the consolidation, (c) in the event of any change of the Common Shares as constituted on the date hereof, at any time while an Option is in effect, the Company will thereafter deliver at the time of purchase of Optioned Shares hereunder the number of shares of the appropriate class resulting from the said change as an Optionee would have been entitled to receive in respect of the number of Common Shares so purchased had the right to purchase been exercised before such change, -9- (d) in the event of a capital reorganization, reclassification or change of outstanding equity shares (other than a change in the par value thereof) of the Company, a consolidation, merger or amalgamation of the Company with or into any other company or a sale of the property of the Company as or substantially as an entirety at any time while an Option is in effect, an Optionee will thereafter have the right to purchase and receive, in lieu of the Optioned Shares immediately theretofore purchasable and receivable upon the exercise of the Option, the kind and amount of shares and other securities and property receivable upon such capital reorganization, reclassification, change, consolidation, merger, amalgamation or sale which the holder of a number of Common Shares equal to the number of Optioned Shares immediately theretofore purchasable and receivable upon the exercise of the Option would have received as a result thereof. The subdivision or consolidation of Common Shares at any time outstanding (whether with or without par value) will not be deemed to be a capital reorganization or a reclassification of the capital of the Company for the purposes of this Section 3.7(d), (e) an adjustment will take effect at the time of the event giving rise to the adjustment, and the adjustments provided for in this Section are cumulative, (f) the Company will not be required to issue fractional shares in satisfaction of its obligations hereunder. Any fractional interest in a Common Share that would, except for the provisions of this Section 3.7(f), be deliverable upon the exercise of an Option will be cancelled and not be deliverable by the Company, and (g) if any questions arise at any time with respect to the Subscription Price or number of Optioned Shares deliverable upon exercise of an Option in any of the events set out in this Section 3.7, such questions will be conclusively determined by the Company's auditors, or, if they decline to so act, any other firm of Chartered Accountants, in Vancouver, British Columbia or Toronto, Ontario that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and all Optionees. -10- ARTICLE 4 PROCEDURE OPTION COMMITMENT 4.1 Upon grant of an Option hereunder, the Secretary of the Company will deliver to the Optionee an Option Commitment detailing the terms of his or her Option and upon such delivery the Service Provider will be a Participant in the Plan and have the right to purchase the Optioned Shares at the Subscription Price set out therein. MANNER OF EXERCISE 4.2 An Optionee who wishes to exercise his Option may do so by delivering (a) a written notice to the Company specifying the number of Optioned Shares being acquired pursuant to the Option, and (b) cash or a certified cheque payable to the Company for the aggregate Subscription Price for the Optioned Shares being acquired. DELIVERY OF CERTIFICATE 4.3 Not later than five days after receipt of the notice of exercise described in Section 4.2 and payment in full for the Optioned Shares being acquired, the Company will direct its transfer agent to issue a certificate to the Optionee for the appropriate number of Optioned Shares. ARTICLE 5 GENERAL TRANSFERABILITY 5.1 The benefits, rights and options accruing to any Optionee under any of the Plan will not be transferable by any Optionee other than in the manner provided for in the Plan. During the lifetime of an Optionee, all benefits, rights and options may only be exercised by the Optionee or by his guardian or legal representative. -11- EMPLOYMENT AND SERVICES 5.2 Nothing contained in the Plan will confer upon any Optionee any right with respect to employment or provision of services with the Company or any subsidiary or affiliate of the Company, or interfere in any way with the right of the Company to terminate the Optionee's employment or service at any time. Participation in the Plan by an Optionee will be voluntary. NO REPRESENTATION OR WARRANTY 5.3 The Company makes no representation or warranty as to the future market value of Common Shares issued in accordance with the provisions of the Plan. INTERPRETATION 5.4 The Plan will be governed and construed in accordance with the laws of the Province of British Columbia. AMENDMENT OF THE PLAN 5.5 The Board reserves the right, in its absolute discretion, to at any time amend, modify or terminate the Plan. Any amendment to any provision of the Plan will be subject to any necessary approvals by any stock exchange or regulatory body having jurisdiction over the securities of the Company. EX-2.2 7 t17062exv2w2.txt EXHIBIT 2.2 VIVENTIA BIOTECH INC. AMENDED 2001 STOCK OPTION PLAN As approved by the shareholders of the corporation on May 7, 2004 . . . TABLE OF CONTENTS ARTICLE 1. GENERAL 1.1. Purpose.......................................................................................... 1 1.2. Administration................................................................................... 1 1.3. Interpretation................................................................................... 1 1.4. Shares Reserved.................................................................................. 3 ARTICLE 2. SHARE OPTION PLAN 2.1. Grants........................................................................................... 4 2.2. Exercise of Options.............................................................................. 4 2.3. Option Price..................................................................................... 5 2.4. Grant to Participant's RRSP or Holding Company................................................... 5 2.5. Termination, Retirement, Death, Departure or Ceasing to be an Eligible Person.................... 5 2.6. Option Agreements................................................................................ 5 2.7. Payment of Option Price.......................................................................... 6 2.8. Amendment of Option Terms........................................................................ 6 ARTICLE 3. GENERAL 3.1. Right to Terminate Options on Sale of Corporation................................................ 6 3.2. Prohibition on Transfers of Options.............................................................. 7 3.3. Capital Adjustments.............................................................................. 7 3.4. Non-Exclusivity.................................................................................. 7 3.5. Amendment and Termination........................................................................ 7 3.6. Compliance with Legislation...................................................................... 8 3.7. Effective Date................................................................................... 8
Schedule "A": Option Agreement REGULATIONS - 2 - VIVENTIA BIOTECH INC. STOCK OPTION PLAN ARTICLE 1. GENERAL 1.1. PURPOSE The purpose of this Plan is to advance the interests of the Corporation by (i) providing Eligible Persons with additional incentive; (ii) encouraging stock ownership by Eligible Persons; (iii) increasing the proprietary interest of Eligible Persons in the success of the Corporation; (iv) encouraging Eligible Persons to remain with the Corporation or its Affiliates; and (v) attracting new employees, officers, directors and Consultants to the Corporation or its Affiliates. 1.2. ADMINISTRATION (a) This Plan will be administered by the Board or a committee of the Board duly appointed for this purpose by the Board and consisting of not less than 3 directors. If a committee is appointed for this purpose, all references to the term "Board" will be deemed to be references to the committee. (b) Subject to the limitations of this Plan, the Board has the authority: (i) to grant Options to purchase Shares to Eligible Persons; (ii) to determine the terms, including the limitations, restrictions and conditions, if any, upon such grants; (iii) to interpret this Plan and to adopt, amend and rescind such administrative guidelines and other rules and Regulations relating to this Plan as it may from time to time deem advisable, subject to required prior approval by any applicable regulatory authority; and (iv) to make all other determinations and to take all other actions in connection with the implementation and administration of this Plan as it may deem necessary or advisable. The Board's guidelines, rules, Regulations, interpretations and determinations will be conclusive and binding upon all parties. 1.3. INTERPRETATION For the purposes of this Plan, the following terms will have the following meanings unless otherwise defined elsewhere in this Plan: A. "AFFILIATE" means any corporation that is an affiliate of the Corporation as defined under the Securities Act (Ontario); B. "ASSOCIATE" has the meaning attributed to that term in the Securities Act (Ontario); - 3 - C. "BOARD" means the Board of Directors of the Corporation or a committee thereof appointed in accordance with the Plan; D. "CONSULTANT" means (i) an individual (including an individual whose services are contracted for through a corporation) or (ii) a corporation, in either case, designated by the Board with whom the Corporation has a contract for substantial services; E. "CONTROL" means: (i) when applied to the relationship between a Person and a corporation, the beneficial ownership by the Person, at the relevant time, of shares of the corporation carrying either (a) more than 50% of the voting rights ordinarily exercisable at meetings of shareholders of the corporation or (b) the percentage of voting rights ordinarily exercisable at meetings of shareholders of the corporation sufficient in fact to elect a majority of the directors of the corporation; and (ii) when applied to the relationship between a Person and a partnership or joint venture, the beneficial ownership by the Person, at the relevant time, of more than 50% of the ownership interests of the partnership or joint venture in circumstances where it can reasonably be expected that the Person directs the affairs of the partnership or joint venture; F. "CORPORATION" means Viventia Biotech Inc.; G. "ELIGIBLE PERSON" means subject to the Regulations and to all applicable law, any employee, officer, director, or Consultant of (i) the Corporation or (ii) any Affiliate of the Corporation (and includes any such person who is on a leave of absence authorized by the Board or the Board of Directors of any Affiliate); H. "HOLDING COMPANY" means a holding company owned and controlled by an Eligible Person; I. "INSIDER" means (a) an "insider" as defined in the Securities Act (Ontario), other than a person who falls within that definition solely by virtue of being a director or senior officer of the Corporation, and (b) an Associate of any person who is an insider by virtue of (a); J. "OPTION" means a right granted to an Eligible Person to purchase Shares of the Corporation on the terms of this Plan and includes a Performance Based Option and a Time Based Option; K. "OUTSTANDING ISSUE" means the number of Shares outstanding at the time of the grant (on a non-diluted basis), or such lesser number as may be required by applicable regulatory authorities from time to time; - 4 - L. "PARTICIPANT" means an Eligible Person to whom or to whose RRSP or to whose Holding Company an Option has been granted; M. "PERFORMANCE BASED OPTIONS" means Options that vest on the basis of the Corporation achieving certain measurable performance targets; N. "PLAN" means the Corporation's Stock Option Plan; O. "REGULATIONS" means the regulations made pursuant to this Plan, as same may be amended from time to time; P. "RRSP" means a registered retirement savings plan; Q. "SHARES" means the common shares of the Corporation; R. "TERMINATION DATE" means the date on which a Participant ceases to be an Eligible Person; S. "TIME BASED OPTIONS" means Options that vest on the basis of the passage of time; and T. "TRANSFER" includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of security interest or other arrangement by which possession, legal title or beneficial ownership passes from one person to another, or to the same person in a different capacity, whether or not voluntary and whether or not for value, and any agreement to effect any of the foregoing. Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine. This Plan is to be governed by and interpreted in accordance with the laws of the Province of Ontario. 1.4. SHARES RESERVED The aggregate maximum number of Shares available for issuance from treasury under this Plan is 2,600,000. Any Shares subject to an Option which has been granted under the Plan and which have been cancelled or terminated in accordance with the terms of the Plan without having been exercised will again be available under this Plan. - 5 - ARTICLE 2. SHARE OPTION PLAN 2.1. GRANTS (a) Subject to this Plan, the Board will have the authority to determine the limitations, restrictions and conditions, if any, in addition to those set out in this Plan, applicable to the exercise of an Option, including, without limitation, the nature and duration of the restrictions, if any, to be imposed upon the sale or other disposition of Shares acquired upon exercise of the Option, and the nature of the events, if any, and the duration of the period in which any Participant's rights in respect of Shares acquired upon exercise of an Option may be forfeited. An Eligible Person, an Eligible Person's RRSP and an Eligible Person's Holding Company may receive Options on more than one occasion under this Plan and may receive separate Options on any one occasion. (b) Subject to the Regulations, the aggregate number of securities available for issuance under the Plan: (i) to any one person together with any RRSP of which that person is an annuitant, or Holding Company of that person will be 5% of the Outstanding Issue; (ii) to an Insider together with any RRSP of which that Insider is an annuitant, or Holding Company of that Insider will not exceed 10% of the Outstanding Issue; (iii) to Insiders together with any RRSPs of which those Insiders are annuitants, or Holding Companies of those Insiders, within a one-year period will not exceed 10% of the Outstanding Issue; and (iv) to an Insider together with any RRSP of which that Insider is an annuitant, or Holding Company of that Insider, as well as that Insider's Associates, within a one-year period will not exceed 5% of the Outstanding Issue. 2.2. EXERCISE OF OPTIONS (a) Options granted must be exercised no later than 10 years after the date of grant or such lesser period as the applicable grant or Regulations may require. (b) The Board may determine when any Option will become exercisable and may determine that the Option will be exercisable in instalments. (c) No fractional Shares may be issued and the Board may determine the manner in which fractional Share value will be treated. - 6 - (d) Not less than 100 Shares may be purchased at any one time except where the remainder totals less than 100. 2.3. OPTION PRICE The Board will establish the exercise price of an Option at the time each Option is granted on the basis of the closing market price of the Shares on the market with the highest closing price on the last trading date preceding the date of the grant. If there is no trading on that date, the exercise price will be the average of the bid and ask on the date preceding the date of the grant. 2.4. GRANT TO PARTICIPANT'S RRSP OR HOLDING COMPANY Upon written notice from the Participant, any Option that might otherwise be granted to that Participant, will be granted, in whole or in part, to an RRSP or a Holding Company established by and for the sole benefit of the Participant. 2.5. TERMINATION, RETIREMENT, DEATH, DEPARTURE OR CEASING TO BE AN ELIGIBLE PERSON (a) If a Participant ceases to be an Eligible Person for any reason whatsoever other than death, each Option held by the Participant, the Participant's RRSP or the Participant's Holding Company will cease to be exercisable 30 days after the Termination Date. If any portion of an Option has not vested by the Termination Date, that portion of the Option may not under any circumstances be exercised by the Participant, the Participant's RRSP or the Participant's Holding Company. Without limitation, and for greater certainty only, this subsection (a) will apply regardless of whether the Participant was dismissed with or without cause and regardless of whether the Participant received compensation in respect of dismissal or was entitled to a period of notice of termination which would otherwise have permitted a greater portion of the Option to vest in the Participant or the Participant's RRSP or the Participant's Holding Company. (b) If a Participant dies, the legal representatives of the Participant may exercise the Options held by the Participant, the Participant's RRSP and the Participant's Holding Company within 180 days after the date of the Participant's death but only to the extent the Options were by their terms exercisable on the date of death. 2.6. OPTION AGREEMENTS Each Option must be confirmed, and will be governed, by an agreement (an "Option Agreement") in the form of Schedule "A" (as the same may be amended from time to time by the Regulations) signed by the Corporation and the Participant or an RRSP of which the Participant is an annuitant or the Participant's Holding Company. The vesting schedule for Performance Based Options and Time Based Options will be set out in the Option Agreement. - 7 - 2.7. PAYMENT OF OPTION PRICE The exercise price of each Share purchased under an Option must be paid in full by bank draft or certified cheque at the time of exercise, and upon receipt of payment in full, but subject to the terms of this Plan, the number of Shares in respect of which the Option is exercised will be duly issued as fully paid and non-assessable. 2.8. AMENDMENT OF OPTION TERMS With the consent of any applicable regulatory authorities (as required) and the Participant affected thereby, the Board may amend or modify any outstanding Option in any manner to the extent that the Board would have had the authority to initially grant the award as so modified or amended, including without limitation, to change the date or dates as of which, or the price at which, an Option becomes exercisable. ARTICLE 3. GENERAL 3.1. RIGHT TO TERMINATE OPTIONS ON SALE OF CORPORATION Notwithstanding any other provision of this Plan, if the Board at any time by resolution declares it advisable to do so in connection with any of the following events (each, a "Proposed Transaction"): (a) a proposed sale or conveyance of Shares or other securities of the Corporation pursuant to which the proposed purchaser of the Shares (other than a purchaser that is Dan Family Holdings Ltd. or any Person Controlled by Leslie Dan) would acquire Control of the Corporation; (b) any proposed sale or conveyance of all or substantially all of the property and assets of the Corporation; (c) any proposed consolidation or amalgamation of the Corporation; or (d) any similar proposed transaction; the Corporation may give written notice to any or all Participants advising either that their respective Options, including Options held by their RRSPs or Holding Companies (whether or not currently exerciseable), are then exercisable or that all or some of their Options, including Options held by their RRSPs or Holding Companies (whether or not currently exercisable) may be exercised only within 30 days after the date of the notice and not thereafter and that all rights of the Participants, their RRSPs and Holding Companies under any Options not exercised will terminate at the expiration of this 30-day period, provided that the Proposed Transaction is completed within 180 days after the date of the notice. If the Proposed Transaction is not completed within the 180-day period, no right under any Option will be affected by the notice, except that the Option - 8 - may not be exercised between the date of expiration of the 30-day period and the day after the expiration of the 180-day period. 3.2. PROHIBITION ON TRANSFER OF OPTIONS Options are personal to each Eligible Person. No Eligible Person or RRSP or Holding Company of an eligible person may deal with any Options or any interest in any Option or Transfer any Options now or hereafter held by the Eligible Person or RRSP or Holding Company except in accordance with the Plan. If a Participant's Holding Company ceases to be owned and controlled by the Participant, such Participant will be deemed to have Transferred any Options held by such holding company. A purported Transfer of any Options in violation of the Plan will not be valid and the Corporation will not issue any Share upon the attempted exercise of improperly Transferred Options. 3.3. CAPITAL ADJUSTMENTS If there is any change in the outstanding Shares by reason of a stock dividend or split, recapitalization, consolidation, combination or exchange of shares, or other fundamental corporate change, the Board will make, subject to any prior approval required of relevant stock exchanges or other applicable regulatory authorities, if any, an appropriate substitution or adjustment in (i) the exercise price of any unexercised Options; and (ii) the number or kind of shares or other securities reserved for issuance pursuant to this Plan; provided, however, that no substitution or adjustment will obligate the Corporation to issue or sell fractional shares. In the event of the reorganization of the Corporation or the amalgamation or consolidation of the Corporation with another corporation, the Board may make such provision for the protection of the rights of Eligible Persons, Participants, their RRSPs and their Holding Companies as the Board in its discretion deems appropriate. The determination of the Board, as to any adjustment or as to there being no need for adjustment, will be final and binding on all parties. 3.4. NON-EXCLUSIVITY Nothing contained herein will prevent the Board from adopting other or additional compensation arrangements for the benefit of any Eligible Person or Participant, subject to any required regulatory or shareholder approval. 3.5. AMENDMENT AND TERMINATION (a) The Board may amend, suspend or terminate this Plan or any portion thereof at any time in accordance with applicable legislation, and subject to any required regulatory or shareholder approval. Subject to Section 3.1, no amendment, suspension or termination will alter or impair any Options, or any rights pursuant thereto, granted previously to any Participant, the Participant's RRSP or the Participant's Holding Company without the consent of that Participant. - 9 - (b) If this Plan is terminated, the provisions of this Plan and any administrative guidelines, and other rules and Regulations adopted by the Board and in force at the time of this Plan, will continue in effect as long as any Options or any rights pursuant thereto remain outstanding. However, notwithstanding the termination of the Plan, the Board may make any amendments to the Plan or Options it would be entitled to make if the Plan were still in effect. 3.6. COMPLIANCE WITH LEGISLATION The Board may postpone or adjust any exercise of any Option or the issue of any Shares pursuant to this Plan as the Board in its discretion may deem necessary in order to permit the Corporation to effect or maintain registration of this Plan or the Shares issuable pursuant thereto under the securities laws of any applicable jurisdiction, or to determine that the Shares and this Plan are exempt from such registration. The Corporation is not obligated by any provision of this Plan or any grant hereunder to sell or issue Shares in violation of any applicable law. In addition, if the Shares are listed on a stock exchange, the Corporation will have no obligation to issue any Shares pursuant to this Plan unless the Shares have been duly listed, upon official notice of issuance, on a stock exchange on which the Shares are listed for trading. 3.7. EFFECTIVE DATE This Plan will become effective on the date shareholder and regulatory approval is obtained. EX-3.1 8 t17062exv3w1.txt EXHIBIT 3.1 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT 3.1 CONVERTIBLE SECURED DEBENTURE I S S U E D B Y: VIVENTIA BIOTECH INC. I S S U E D T O: LESLIE L. DAN NOVEMBER 3, 2004 TABLE OF CONTENTs ARTICLE 1. INTERPRETATION.........................................................................................1 1.1. Definitions.....................................................................................1 1.2. Interpretation..................................................................................8 1.3. Schedules.......................................................................................8 1.4. Proper Law and Attornment.......................................................................8 1.5. Non-Business Days...............................................................................9 1.6. Application of Payments.........................................................................9 ARTICLE 2. DEBENTURE..............................................................................................9 2.1. Indebtedness....................................................................................9 ARTICLE 3. INTEREST...............................................................................................9 3.1. Interest........................................................................................9 ARTICLE 4. CONVERSION.............................................................................................9 4.1. Optional Conversion.............................................................................9 ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS.......................................................................11 5.1. Definitions....................................................................................11 5.2. Adjustment in Rights...........................................................................13 5.3. Adjustment in Conversion Price.................................................................14 5.4. Rules for Adjustment in Rights and Exercise Price..............................................16 5.5. Notice of Adjustment in Exercise Price and Rights..............................................18 5.6. Corporation to Reserve Shares..................................................................18 5.7. Applicable Securities Legislation..............................................................18 ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................................19 6.1. Corporation's Representations and Warranties...................................................19
ii 6.2. Holder Representations and Warranties..........................................................23 6.3. Holder's Acknowledgments.......................................................................24 6.4. Corporation's Positive Covenants...............................................................24 6.5. Corporation's Negative Covenants...............................................................27 ARTICLE 7. EVENTS OF DEFAULT.....................................................................................29 7.1. Events of Default..............................................................................29 7.2. Rights Upon Default............................................................................30 7.3. Charges and Expenses...........................................................................31 7.4. Further Assurances.............................................................................31 7.5. Performance by the Secured Party...............................................................31 7.6. Dealings by the Holder.........................................................................31 7.7. No Set-Off.....................................................................................31 ARTICLE 8. SECURITY..............................................................................................32 8.1. Security.......................................................................................32 ARTICLE 9. GENERAL PROVISIONS....................................................................................32 9.1. Notices........................................................................................32 9.2. Amendments.....................................................................................33 9.3. Time of the Essence............................................................................33 9.4. Severability...................................................................................34 9.5. Counterparts...................................................................................34 9.6. Further Assurances.............................................................................34 9.7. Entire Agreement...............................................................................34 9.8. Transferability................................................................................34 9.9. Parties In Interest............................................................................35
iii SCHEDULE A Common Share Purchase Warrants SCHEDULE B Conversion Notice SCHEDULE C Security Interest SCHEDULE D Material Contracts THIS INDENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005. CONVERTIBLE SECURED DEBENTURE THIS DEBENTURE issued as of the 3rd day of November, 2004. ISSUED BY: VIVENTIA BIOTECH INC., a corporation governed by the laws of the Province of Ontario (hereinafter, the "Corporation") ISSUED TO: LESLIE DAN, of the City of Toronto in the Province of Ontario (hereinafter the "Holder") WHEREAS the Holder has agreed to purchase and the Corporation has agreed to sell a convertible secured debenture on the terms and conditions set out herein in the principal amount of $12,584,142.47; NOW THEREFORE this Debenture witnesses that in consideration of $1.00 and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation agrees as follows: ARTICLE 1. INTERPRETATION 1.1. DEFINITIONS For the purposes of this Debenture, unless otherwise defined herein, the following terms shall have the following meanings ascribed to them: (a) "BOARD" means the board of directors of the Corporation; (b) "BUSINESS DAY" means a day other than a Saturday, Sunday or any other day that is a statutory or civic holiday in the Province of Ontario; -2- (c) "CAPITAL LEASE" means a capital lease or a lease, which should be treated as a capital lease, in each case under generally accepted accounting principles; (d) "CHANGE OF CONTROL EVENT" means an event or series of related events whereby the Dan Family ceases to Control the Corporation; (e) "COLLATERAL" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (f) "COMMON SHARES" means the common shares in the capital of the Corporation, provided that if a change referred to in Sections 5.2 or 5.3 occurs in respect of or affecting the Common Shares, then thereafter "Common Shares" means the shares or other securities or property purchasable or receivable on the conversion of this Debenture as a result of any such change; (g) "COMMON SHARE PURCHASE WARRANTS" means the common share purchase warrants issued upon the conversion of this Debenture evidenced by a certificate in the form attached hereto as Schedule "A"; (h) "CONTRACTS" means agreements, franchises, leases, easements, servitudes, privileges and other rights acquired from persons; (i) "CONTROL" has the meaning given thereto in the Business Corporations Act (Ontario) on the date hereof; (j) "CONVERSION DATE" means 10:00 a.m. (Toronto time) on the effective date of conversion as provided in Section 4.1; (k) "CONVERSION NOTICE" has the meaning ascribed thereto in Section 4.1(a); (l) "CONVERSION PRICE" means $1.50, subject to adjustment as provided in Article 5; (m) "CURRENT MARKET PRICE" has the meaning ascribed thereto in Section 5.1; (n) "DAN FAMILY" means Leslie Dan, Andrea Dan-Hytman and their respective associates and affiliates, as defined in the Securities Act (Ontario); (o) "DEBENTURE" means this interest bearing convertible secured debenture of the Corporation in the principal amount of $12,584,142.47; (p) "DEFAULT" means an event, which, with the giving of notice, lapse of time or otherwise would constitute an Event of Default; (q) "DEFICIENCY" means, at any time, the difference, if any between: (i) the aggregate of: (A) the amount of the Obligations at that time; and (B) the Reasonable Expenses incurred up that time; and -3- (ii) the proceeds of disposition received by the Holder from a disposition of the Collateral in accordance with Section 3.1a(vi) of Schedule "C"; (r) "DIVIDEND PAID IN THE ORDINARY COURSE" has the meaning ascribed thereto in Section 5.1; (s) "ENCUMBRANCE" means, in respect of any Person, any mortgage, debenture, pledge, hypothec, lien, charge, assignment by way of security, consignment, lease, hypothecation, security interest granted or permitted by such Person or arising by operation of law, in respect of any such Person's property or assets, or any consignment or Capital Lease of property by such Person as consignee or lessee or any other security agreement, trust or arrangement having the effect of security for the payment of any debt, liability or obligation, or any title defect, adverse claim or other encumbrance and "ENCUMBRANCES", "ENCUMBER" and "ENCUMBERED" shall have corresponding meanings; (t) "EQUITY SHARES" has the meaning ascribed thereto in Section 5.1; (u) "EVENT OF DEFAULT" means any of the events described in Section 7.1; (v) "EXISTING LOCATIONS" means 147 Hamelin Street, Winnipeg, Manitoba and 10 Four Seasons Place, Suite 501, Toronto, Ontario; (w) "HOLDER'S COUNSEL" means the firm of Cassels Brock & Blackwell LLP or such other firm of legal counsel as the Holder may from time to time designate; (x) "INDEBTEDNESS" means, without duplication, with respect to any Person and calculated on a consolidated or combined basis, as applicable, (i) indebtedness for borrowed money, (ii) obligations under Capital Leases, (iii) obligations under letters of credit, guarantees, legally binding comfort letters or indemnities issued in connection therewith, whether issued for the benefit of the Corporation or a Subsidiary of the Corporation or another or others, (vi) obligations arising pursuant to bankers' acceptance facilities or indemnities issued in connection therewith, and (v) all other contingent obligations incurred for the purpose of or having the effect of providing financial assistance to another entity, including, without limitation, guarantees, endorsements of bills of exchange (other than for collection or deposit in the ordinary course of business), obligations to purchase assets regardless of the delivery or non-delivery thereof and obligations to make advances or otherwise provide financial assistance to any other entity, (y) "INTEREST" has the meaning ascribed thereto in Section 3.1; (z) "INTEREST CONVERSION PRICE" means the ten (10) day weighted average trading price of the Corporation's Common Shares on the TSX for the ten (10) consecutive trading days preceding the giving of a Conversion Notice less the maximum discount permitted by the TSX; (aa) "INTEREST RATE" has the meaning ascribed thereto in Section 3.1; -4- (bb) "MATERIAL ADVERSE EFFECT" means, (i) a material adverse effect on the business, assets, liabilities, operations, results of operations or condition (financial or other) of the Corporation on a consolidated basis, or the ability of the Corporation to carry on its business or a significant part of its business, (ii) any impairment of the ability of the Corporation to perform any of its obligations hereunder or otherwise, or (iii) any material impairment of any lien granted by the Corporation to the Holder, in each case as determined by the Holder; (cc) "MATERIAL CONTRACT" means all Contracts, the breach or default of which could have a Material Adverse Effect, all such Material Contracts of the Corporation and its Subsidiaries as of the date hereof being listed on Schedule "D" all as may be amended, supplemented, restated or replaced from time to time; and when used in relation to any Person, the term "Material Contracts" shall mean and refer to Material Contracts to which such Person is a party or by which it or any of its assets is bound and includes any Material Contract to which such Person may hereafter become a party or be bound, and "Material Contract" means any one of them; (dd) "MATURITY DATE" means 10:00 a.m. (Toronto time) on November 3, 2006; (ee) "OBLIGATION" means all indebtedness, liabilities and obligations (whether direct, indirect, absolute, contingent or otherwise) of the Corporation from time to time, under or in respect of this Debenture; (ff) "OTHER DEBENTURE(s)" means the interest bearing convertible secured debenture(s) of the Corporation being on the same terms and conditions as this Debenture in favour of ADH Investments (1999) Inc; (gg) "OTHER HOLDER" means ADH Investments (1999) Inc; (hh) "PATENTS" means the patents and patent applications identified in Appendix 1 to Schedule "C", and all registrations and recordings of those patents in Canada, the United States of America or elsewhere, including any reissue, continuation or other extension in whole or in part of any such patent; (ii) "PAYMENT AND SECURITY SHARING AGREEMENT" means the agreement of even date herewith among the Corporation, the Holder and the Other Holder dealing with payment and security sharing among the Holder and Other Holder; (jj) "PERMITTED ENCUMBRANCES" means, in respect of any Person, (i) undetermined or inchoate Encumbrances and charges incidental to construction, maintenance or operations which have not at the time been filed pursuant to law or which relate to obligations not yet due and delinquent; (ii) the Encumbrance of taxes and assessments for the then current year, the Encumbrance for taxes and assessments not at the time overdue and Encumbrances securing worker's compensation assessments and the lien for specified taxes and assessments which are overdue but the validity of which -5- is being contested at the time in good faith, if such Person shall have made on its books provision reasonably deemed by it to be adequate therefor; (iii) any Encumbrance or any right of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease provided that such obligations are not in default; (iv) any Encumbrance resulting from cash or governmental obligations deposited in the ordinary course of business in connection with contracts, bids, tenders or to secure worker's compensation, unemployment insurance, surety or appeal bonds, costs of litigation, when required by law, public and statutory obligations, liens or claims incidental to current construction, mechanics', warehousemen's, carriers' and other similar liens; (v) any Encumbrance resulting from security given in the ordinary course of business to a public utility or any governmental authority when required by such utility or governmental authority in connection with the operations of the Corporation; (vi) easements, rights of way and servitudes and other similar rights in real property which in the opinion of Holder's Counsel, acting reasonably, will not in the aggregate materially impair the use of the land concerned for the purpose for which it is held or used by such Person; (vii) title defects or irregularities which in the opinion of Holder's Counsel, acting reasonably, are of a minor nature and in the aggregate will not materially impair the use of the property for the purposes for which it is held by such person or materially affect the Security Interest; (viii) any Encumbrance resulting from any judgment rendered or claim filed against such Person which such Person shall be contesting in good faith and by appropriate proceedings, if such Person shall have made on its books provisions reasonably deemed by it to be adequate therefor; (ix) construction, contractors', mechanics', carriers', warehousemen's, suppliers' and materialmen's liens and liens in respect of vacation pay, workers' compensation, unemployment insurance or similar statutory obligations, provided the obligations secured by such liens are not yet due and payable and, in the case of construction liens, which have not yet been filed or for which the Corporation has not received written notice of a lien; (x) liens arising from court or arbitral proceedings, provided that the claims secured thereby are being contested in good faith by the Corporation or a subsidiary; execution thereon has been stayed and continues to be stayed; and such liens do not, in the aggregate, materially detract from the value of the assets of the Corporation or materially impair the use thereof in the business of the Corporation; -6- (xi) any Encumbrance resulting from the excess of the amount of any taxes, rates, assessments or governmental charges or levies for which final assessments have not been received over and above the amount of such taxes, rates, assessments or governmental charges or levies as estimated by a responsible officer of such Person; (xii) all rights reserved to or vested in any governmental authority by the terms of any lease, licence, franchise, grant or permit held by such Person or by any statutory provision to terminate any such lease, licence, franchise grant or permit or to require annual or periodic payments as a condition of the continuance thereof or to distrain against or to obtain a lien on any property or assets of such Person in the event of failure to make such annual or other periodic payments; (xiii) liens in connection with any Capital Lease to the extent they are limited to the assets which are the subject of such Capital Leases (or other agreement carrying the right to use); (xiv) Purchase Money Security Interests; (xv) the Security Interest; (xvi) the security interest in the Other Debenture(s); (xvii) such other liens as may be consented to in writing by the Holder; and (xviii) the extension, renewal or refinancing of any of the above; (kk) "PERMITTED INDEBTEDNESS" means in respect of the Corporation and the Subsidiaries, (i) Indebtedness incurred pursuant to this Debenture: (ii) Indebtedness incurred pursuant to the Other Debenture(s); and (iii) Indebtedness secured by Permitted Encumbrances; (ll) "PERSON" includes any individual, corporation, company, partnership, association state, trust or government or any agency of political subdivision of any government; (mm) "PRINCIPAL" means the principal amount of indebtedness outstanding from time to time under this Debenture; (nn) "PROCEEDS", of any Collateral, means property in any form derived, directly or indirectly, from any dealing with such Collateral or the proceeds therefrom and includes any payment representing indemnity or compensation for loss or damage to such Collateral or proceeds therefrom, including, without limitation, insurance proceeds; -7- (oo) "PURCHASE MONEY SECURITY INTEREST" means any Encumbrance given, assumed or arising by operation of law, including Capital Leases, to provide or secure, or to provide the obligor with funds to pay, the whole or any part of the consideration for the acquisition of property where the principal amount of the obligation secured by such Encumbrance is secured only by the property being acquired by the obligor, and includes the renewal or refinancing of any such Encumbrance upon the same property provided that the indebtedness secured and the security therefore are not increased thereby; (pp) "REASONABLE EXPENSES" means any and all reasonable expenses incurred from time to time by the Holder or any Receiver in connection with the protection, perfection or preservation of the security and other rights constituted hereby, in enforcing payment or performance of the Obligations or any part thereof or in locating, taking possession of, transporting, holding, repairing, processing, preparing for and arranging for the disposition of and/or disposing of the Collateral or in contemplation of any of the foregoing and any and all other reasonable expenses incurred by the Holder or any Receiver as a result of the Holder or such Receiver exercising any of its rights or remedies hereunder or at law, including, without in any way limiting the generality of the foregoing, any and all legal expenses including those incurred in any legal action or proceeding or appeal therefrom commenced or taken in good faith by the Holder and any and all fees and disbursements of any counsel, accountant or valuator or any similar Person employed by the Holder in connection with any of the foregoing and the costs of insurance and payment of taxes (other than taxes relating to the income of the Holder) and other charges incurred in retaking, holding, repairing, processing and preparing for disposition and disposing of the Collateral (qq) "RECEIVER" means a receiver, a reorganization manager or any similar Person appointed in accordance with Section 3 of Schedule "C"; (rr) "SECURITY DOCUMENTS" has the meaning ascribed thereto in Section 8.1; (ss) "SECURITY INTEREST" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (tt) "SUBSIDIARY" means 20025 Yukon Inc. and "SUBSIDIARIES" means the Subsidiary and/or any other corporation of which more than 50% of the outstanding shares of any class carrying voting rights are beneficially owned, directly or indirectly, by the Corporation; (uu) "TRADE MARKS" means the trade marks, trade names, trade styles, service marks, certification marks, prints and labels identified in Appendix 2 to Schedule "C, and all similar, present or future marks, styles, prints or labels and all applications, registrations and recordings thereof in Canada, the United States of America or elsewhere, including every renewal, reissue or other extension of any registration or recording; (vv) "TSX" means the Toronto Stock Exchange; and -8- (ww) "UNITS" means the units comprised of one Common Share and one half of one Common Share Purchase Warrant to be issued upon the conversion of this Debenture; 1.2. INTERPRETATION For the purposes of this Debenture, except as expressly provided or unless the context requires otherwise: (a) the headings used throughout this Debenture are for ease of reference only and shall not in any way affect the meaning or interpretation of this Debenture; (b) any reference herein to a numbered or lettered part or section refers to the specified part or section of this Debenture; (c) "hereto", "herein", "hereof", "hereunder" and similar expressions refer to this Debenture and not to any particular part or section of this Debenture; (d) any words or expressions contained in this Debenture which impart the singular number include the plural number and vice versa; (e) any words or expressions contained in this Debenture which impart any gender include all genders; and (f) all dollar amounts expressed herein refer to lawful currency of Canada. 1.3. SCHEDULES The following schedules attached hereto are hereby incorporated into and form part of this Debenture:
Schedule "A" - Common Share Purchase Warrants Schedule "B" - Conversion Notice Schedule "C" - Security Interest Schedule "D" - Material Contracts
1.4. PROPER LAW AND ATTORNMENT This Debenture and all matters arising hereunder shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Each of the parties hereto, by the execution and delivery of this Debenture, irrevocably and unconditionally, with respect to any matter or thing arising out of or pertaining to this Debenture, hereby attorns and submits to the non-exclusive jurisdiction of the courts of the Province of Ontario for the determination of all matters arising pursuant to this Debenture. -9- 1.5. NON-BUSINESS DAYS Whenever any payment hereunder (whether in regard to Principal, Interest or otherwise) shall become due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day. During an extension under this Section 1.5 of any due date for payment of any Principal sum, Interest shall be payable to the date of actual payment of such Principal sum at the rate payable hereunder. 1.6. APPLICATION OF PAYMENTS All payments made in respect of the repayment of this Debenture shall be applied firstly to payment of costs, secondly to payment of Interest and thirdly to payment of Principal. ARTICLE 2. DEBENTURE 2.1. INDEBTEDNESS The Corporation for value received hereby promises to pay to or to the order of the Holder on the Maturity Date, the principal amount of Twelve Million, Five Hundred and Eighty-four Thousand, One Hundred and Forty-two Dollars and Forty-seven Cents ($12,584,142.47). On the Maturity Date, or earlier as required by Section 7.2 hereof, payment of Principal is to be made in lawful money of Canada at the address of the Holder set out in Section 9.1 or other location designated by the Holder by notice to the Corporation. The Obligations and the rights of the Holder and the Other Holder, as between themselves, are subject to the provisions of the Payment and Security Sharing Agreement. ARTICLE 3. INTEREST 3.1. INTEREST The Corporation shall pay interest ("Interest") on the Principal outstanding from time to time under this Debenture (including without limitation any capitalized interest), and any other monies due and payable hereunder, both before and after maturity, default or judgment, at four and one half per cent (4.5%) per annum, computed on a 365 day basis (the "Interest Rate"), accruing daily and compounded annually until the Principal has been paid in full or has been converted. For greater certainty, on November 3, 2005 all accrued interest shall be capitalized and added to the Principal. Interest shall accrue until full payment of the Principal has been received by the Holder or all of the Principal has been converted into Units in accordance with Article 4. ARTICLE 4. CONVERSION 4.1. OPTIONAL CONVERSION (a) Subject to the provisions of this Debenture, the Holder may, at its option, at any time from the date of issuance of this Debenture, in whole or in part, by delivering to the Corporation this Debenture together with the conversion notice attached as -10- Schedule "B" hereto (the "Conversion Notice") duly executed by the Holder, indicating what portion of the Principal and/or accrued Interest the Holder then wishes to convert, convert all or any of the Principal and/or accrued Interest into Units, and the Principal and/or accrued Interest will be deemed to be reduced accordingly. (b) The Principal will be converted into Units at the Conversion Price and the Conversion Price will be subject to adjustment in accordance with Article 5. Accrued Interest will be converted into Units at the Interest Conversion Price. (c) The completion by the Holder of a Conversion Notice and delivery of same to the Corporation for conversion shall be deemed to create and constitute a contract between the Holder and the Corporation whereby (i) the Holder or its nominee designated in the Conversion Notice subscribes for the number of Units which the Holder shall be entitled to receive upon such conversion of the Principal and Interest stated in the Conversion Notice; (ii) provided the Common Shares comprising the Units so subscribed for are issued as fully paid and non-assessable, the indebtedness under this Debenture is satisfied and discharged to the extent this Debenture is converted; and (iii) the Corporation and the Holder agree that the satisfaction and discharge of the Indebtedness under this Debenture evidenced by this Debenture, to the extent of the Principal and accrued Interest so converted, and completion of conversion, constitutes full payment of the subscription price for the Units issuable on such conversion and thereafter such portion of the Principal and accrued Interest under this Debenture shall not be considered outstanding hereunder and the Holder shall have no right with respect to such Principal and accrued Interest except to receive the certificate for Common Shares and Common Share Purchase Warrants comprising the Units. With respect to the Units, Common Shares and Common Share Purchase Warrants, as required from time to time under the securities legislation which governs the Corporation or any hold period imposed by a regulatory authority, the Holder agrees to be bound by any applicable hold period. The certificates evidencing the Common Shares and Common Share Purchase Warrants shall contain the following legend: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2004." (d) Concurrently with the surrender of this Debenture for conversion pursuant to this Article 4, the Corporation will provide to the Holder a receipt acknowledging the -11- Corporation's obligation to issue Units to the Holder. As promptly as practicable after the surrender or deemed surrender of this Debenture for conversion pursuant to this Section 4.1(d) (and in any event within three Business Days), the Corporation will issue and/or deliver, as the case may be, to the Holder or its nominee(s) a certificate or certificates representing the number of fully paid and non-assessable Common Shares and Common Share Purchase Warrants comprising the Units into which all or any portion of the Principal and accrued Interest has been converted. (e) Upon conversion pursuant to this Article 4, the Debenture shall be deemed cancelled and the Principal and accrued Interest evidenced hereby shall be and shall be deemed to be fully satisfied and discharged, and, if any Principal remains outstanding under this Debenture after giving effect to such conversion, the Corporation will issue a new Debenture, in form identical to this Debenture, except that it will be equal in principal amount to the amount of the Principal amount outstanding immediately following the conversion. (f) The conversion of this Debenture pursuant to this Article 4 will be deemed to have been made at the close of business on the date on which the certificate(s) referred to in Section 4.1(d) have been received by the Holder so that the Holder's rights in respect of the converted portion of the Principal and accrued Interest will terminate at that time and the Person or Persons entitled to receive Units into which the whole or any part of this Debenture is converted will be treated, as between the Corporation and that Person or Persons, as having become the holder or holders of record of the Common Shares and Common Share Purchase Warrants comprising those Units at that time. (g) As a condition precedent to taking any action which would require an adjustment or readjustment of the Conversion Price pursuant to Article 5, the Corporation will take any action which may, in the opinion of its counsel, be necessary for the Corporation to validly and legally issue, as fully paid and non-assessable common shares, all the Common Shares which the Holder is entitled to receive on the conversion of the Debenture. The Corporation agrees that it will at all times keep sufficient Common Shares reserved for the purpose of issue upon conversion of the Debenture. All Common Shares will be duly and validly issued as fully paid and non-assessable common shares in the capital of the Corporation. ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS 5.1. DEFINITIONS In this Article 5, the following terms have the following meanings: "CURRENT MARKET PRICE" at any particular date means the weighted average trading price of the Common Shares on the TSX (or, if the Common Shares are not then listed and posted for trading on the TSX, on any other stock exchange in Canada on which the Common Shares are listed and posted for trading as may be selected for that purpose by the Board) during the 20 consecutive trading days ending on a date not earlier than the fifth trading day -12- before the particular date or, if the Common Shares are not listed and posted for trading on any stock exchange, the current market price of the Common Shares as determined by the Board, which determination shall be conclusive; and for the purposes hereof, "trading day" means a day on which the relevant stock exchange is open for business and the Common Shares may be traded on that exchange on that day; "DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the Common Shares in any financial year of the Corporation, whether in (i) cash, (ii) securities of the Corporation, including rights, options or warrants to purchase any securities or property of the Corporation or other assets of the Corporation (but excluding rights, options or warrants referred to in Section 5.3(b) and rights, options or warrants referred to in parentheses in Section 5.3(c)(iv)), or (iii) property or other assets of the Corporation, in each case to the extent that the amount or value of such dividend together with the amount or value of all other such dividends theretofore paid in such financial year (any such securities, property or other assets so distributed to be valued at the fair market value of such securities, property or other assets, as the case may be, as determined by the board of directors of the Corporation, which determination shall be conclusive) does not exceed the greater of: (i) 150% of the greater of (A) the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year; and (B) one-third of the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of thirty-six (36) consecutive months ended immediately prior to the first day of such financial year; or (ii) 100% of the consolidated net income of the Corporation before extraordinary items (but after dividends payable on all shares ranking prior to, or on a parity with the Common Shares, with respect to the payment of dividends) for the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year, such consolidated net income, extraordinary items and dividends to be as shown in the audited consolidated financial statements of the Corporation for such period of twelve (12) consecutive months or if there are no audited consolidated financial statements for such period, computed in accordance with generally accepted accounting principles, consistent with those applied in the -13- preparation of the most recent audited consolidated financial statements of the Corporation; and "EQUITY SHARES" means the Common Shares and any shares of any other class or series of the Corporation which may from time to time be authorized for issue if by their terms such shares confer on the holders thereof the right to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation beyond a fixed sum or a fixed sum plus accrued dividends. 5.2. ADJUSTMENT IN RIGHTS (a) If, at any time after the date hereof and prior to the Maturity Date, there is a reclassification of the outstanding Common Shares or change of the Common Shares into other shares or securities or any other capital reorganization of the Corporation or a consolidation, merger or amalgamation of the Corporation with or into any other corporation (any such event being called a "Capital Reorganization"), the Holder shall be entitled to receive and shall accept for the same aggregate consideration, upon the conversion of this Debenture at any time after the record date on which the holders of Common Shares are determined for the purpose of the Capital Reorganization (the "relevant record date"), in lieu of the number of securities to which it was theretofore entitled upon such exercise, the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization that the Holder would have been entitled to receive as a result of such Capital Reorganization if, on the relevant record date, it had been the holder of record of the number of Common Shares in respect of which the Debenture is being converted, and such shares or other securities shall be subject to adjustment thereafter in accordance with provisions which are the same, as nearly as may be possible, as those contained in this Article 5; provided that no such Capital Reorganization shall be implemented unless all necessary steps have been taken so that the Holder shall be entitled to receive the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization as provided above. (b) If, at any time after the date hereof and prior to the Maturity Date, any adjustment in the Conversion Price shall occur as a result of: (i) an event referred to in Section 5.3(a); (ii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(b); or (iii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(c) if such event constitutes the issue or distribution to the holders of all of its outstanding Common Shares of (i) Equity Shares, or (ii) securities exchangeable for or convertible into Equity Shares at an exchange or conversion price per share less than the Current Market Price on such record date, or (iii) rights, options or warrants to acquire Equity Shares or securities exchangeable for or convertible into Equity Shares at an exercise, exchange -14- or conversion price per share less than the Current Market Price on such record date; then the number of securities purchasable upon the subsequent conversion of the Debenture shall be adjusted simultaneously with the adjustment to the Conversion Price provided in Section 5.3 by multiplying the number of securities issuable upon the conversion of the Debenture immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the adjustment of the Conversion Price. 5.3. ADJUSTMENT IN CONVERSION PRICE The Conversion Price shall be subject to adjustment from time to time as follows: (a) If, at any time after the date hereof and prior to the Maturity Date, the Corporation: (i) subdivides its outstanding Common Shares into a greater number of shares, (ii) consolidates its outstanding Common Shares into a smaller number of shares, or (iii) issues Common Shares to the holders of all of its outstanding Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, (any of such events being called a "Common Share Reorganization"), the Conversion Price shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Common Share Reorganization (the "relevant record date") by multiplying the Conversion Price in effect immediately prior to the relevant record date by a fraction: (A) the numerator of which shall be the number of Common Shares outstanding on the relevant record date before giving effect to the Common Share Reorganization; and (B) the denominator of which shall be the number of Common Shares outstanding on the relevant record date after giving effect to the Common Share Reorganization. (b) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date for the issue of rights, options or warrants to the holders of all of its outstanding Common Shares (the "relevant record date") under which such holders are entitled, during a period expiring not more than 45 days after the relevant record date (the "Rights Period"), to subscribe for or purchase Common Shares at a price per share, or securities exchangeable for or convertible into Common Shares at an exchange or conversion price per share less than 95% of the Current Market Price on the relevant record date (any of such events being called a "Rights Offering"), the Conversion Price shall be adjusted effective immediately after the end of the Rights -15- Period by multiplying the Conversion Price in effect immediately prior to the end of the Rights Period by a fraction: (i) the numerator of which shall be the aggregate of: (A) the number of Common Shares outstanding on the relevant record date, and (B) the number determined by dividing (1) either (a) the product of the number of Common Shares issued or subscribed for during the Rights Period under the Rights Offering and the price at which such Common Shares were offered, or, as the case may be, (b) the product of the exchange or conversion price of the securities exchangeable for or convertible into Common Shares and the number of Common Shares for, or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period, by (2) the Current Market Price on the relevant record date; and (ii) the denominator of which shall be, in the case of Section 5.3(b)(i)(B)(1)(a), the number of Common Shares outstanding on the relevant record date plus the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering and, in the case of Section 5.3(b)(i)(B)(1)(b), the number of Common Shares outstanding on the relevant record date plus the number of Common Share for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period. If the Debenture has been converted during the period beginning immediately after the record date for a Rights Offering and ending on the last day of the Rights Period for that Rights Offering then, in addition to the securities to which the Holder is otherwise entitled upon such exercise pursuant to this Debenture, the Holder shall be entitled to that number of additional securities which, when added to the number of securities to which the Holder is entitled upon such exercise, equals the number of securities to which the Holder would have been entitled upon exercise if the Holder had converted the Debenture immediately after the end of the Rights Period and after giving effect to the adjustment of the Conversion Price provided for in this Section 5.3(b). Such additional Common Shares shall be deemed to have been issued to the Holder immediately following the end of the Rights Period. (c) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date (the "relevant record date") for the issue or distribution to the holders of all of its outstanding Common Shares of: (i) shares of any class in its capital, (ii) evidences of its Indebtedness, -16- (iii) assets or property, or (iv) rights, options or warrants to subscribe for or purchase any of the foregoing (other than rights, options or warrants to purchase Common Shares exercisable within 45 days of the date of issue of the rights, options or warrants at a price per share equal to or greater than 95% of the Current Market Price), and if such issue or distribution does not constitute a Common Share Reorganization, a Rights Offering or a Dividend Paid in the Ordinary Course (any of such events referred to in Sections 5.3(c)(i) through 5.3(c)(iv) being called a "Special Distribution"), the Conversion Price shall be adjusted immediately after the relevant record date by multiplying the Conversion Price in effect on the relevant record date by a fraction: (A) the numerator of which shall be the difference obtained when (a) the amount by which the aggregate fair market value of the shares, rights, options, warrants, evidences of Indebtedness or assets or property, as the case may be, which are distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation, is subtracted from (b) the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; and (B) the denominator of which shall be the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; provided that no such adjustment shall be made if the result of such adjustment would be to increase the Conversion Price in effect immediately before the relevant record date. Any determination of fair market value shall be made by the Board and their determination shall be conclusive. To the extent that any Special Distribution is not made, the Conversion Price shall be readjusted effective immediately to the Conversion Price that would then be in effect based upon the shares, rights, options or warrants, evidences of Indebtedness, assets or property actually distributed. 5.4. RULES FOR ADJUSTMENT IN RIGHTS AND EXERCISE PRICE For the purpose of this Article 5: (a) The adjustments provided for in this Article 5 are cumulative and shall be made successively wherever an event referred to in a particular section of this Article occurs, subject to the following provisions of this Article. (b) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price and no adjustment shall be made in the number of securities issuable on conversion of the Debenture unless it would result in a change of at least one-hundredths of a -17- Common Share; provided, however, that any adjustments which, by reason of this section, are not required to be made shall be carried forward and taken into account in a subsequent adjustment and so on. (c) Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any computation under Section 5.3. (d) No adjustment to the Conversion Price shall be made in respect of any event described in Section 5.3 (other than the events referred to in Sections 5.3(a)(i) and 5.3(a)(ii)) if the Holder is entitled to participate in such event on the same terms as though, and to the same effect AS if, it had converted this Debenture in full prior to or on the effective date or record date of such event, provided that such participation is subject to all necessary regulatory approval. (e) In any case in which this Article 5 requires that an adjustment become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Holder in respect of the conversion of the Debenture after such record date and before the occurrence of such event the additional securities issuable upon such exercise by reason of the adjustment required by such event and delivering to the Holder any distributions declared with respect to such additional securities after such record date and before such event; provided, however, that the Corporation delivers to the Holder an appropriate instrument evidencing its right to receive such additional securities and such distributions upon the occurrence of the event requiring such adjustment. (f) If the Corporation fixes a record date to determine the holders of Common Shares entitled to receive any dividend or distribution or fixes a record date to take any other action and thereafter, but before the distribution to shareholders of any such dividend or distribution or the taking of such other action, the Corporation legally abandons its plan to pay such dividend or distribution or take such other action, then no adjustment pursuant to this paragraph shall be required by reason of the fixing of such record date. (g) If the Board does not fix a record date for a Common Share Reorganization, Special Distribution or Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the close of business on the day on which the Board authorizes the making of the Common Shares Reorganization, Special Distribution or Rights Offering, as the case may be. (h) If any question at any time arises with respect to the Conversion Price or the number of Common Shares issuable upon the conversion of this Debenture, such question shall be conclusively determined by the auditors from time to time of the Corporation, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the Corporation with the concurrence of the Holder, and any such determination shall be binding upon the Holder, the Corporation and all shareholders. If any such determination is made, the Corporation shall deliver a certificate to the Holder describing such determination. -18- (i) As a condition precedent to the taking of any action which would require any adjustment to the conversion Rights or Conversion Price, the Corporation must have taken all action which may be necessary in order that the Corporation shall have issued and reserved in its authorized capital and may validly and legally issue as fully-paid and non-assessable all of the Common Shares or other securities which the Holder is entitled to receive on full conversion hereof in accordance with the provisions hereof. (j) In the case the Corporation, after the date of issuance of this Debenture, takes any action affecting the Common Shares, other than an action described in Article 5, which in the opinion of the Board would materially affect the rights of the Holder, the Conversion Price will be adjusted in such manner, if any, and at such time by action by the Board but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the Board so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the Board has determined it to be equitable to make no adjustment. 5.5. NOTICE OF ADJUSTMENT IN EXERCISE PRICE AND RIGHTS (a) At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require an adjustment pursuant to this Article 5, the Corporation shall deliver to the Holder a certificate of the Corporation specifying the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. (b) In case any adjustment for which a notice in Section 5.5(a) has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to the Holder a certificate of the Corporation containing a computation of such adjustment. 5.6. CORPORATION TO RESERVE SHARES The Corporation covenants with the Holder that the Corporation will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon conversion of this Debenture as provided in this Article 5, and issue to the Holder or its nominee upon exercise of the conversion rights hereunder, such number of Common Shares as will then be issuable upon the conversion of this Debenture. 5.7. APPLICABLE SECURITIES LEGISLATION The Corporation will not, directly or indirectly, do any act or thing or, to the extent that it is able, permit any act or thing to be done, which would remove or deny any registration or prospectus exemption available under any applicable securities legislation with respect to the issuance of Common Shares upon the exercise of the conversion rights contained in this Debenture. -19- ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS 6.1. CORPORATION'S REPRESENTATIONS AND WARRANTIES The Corporation hereby represents, warrants and covenants to and with the Holder and acknowledges that the Holder is relying upon such representations, warranties and covenants (which representations, warranties and covenants shall survive the date hereof) that: (a) each of the Corporation and the Subsidiary is duly organized and validly existing under the laws of Ontario and Yukon, respectively; each is duly registered, licensed or qualified as an extra-provincial corporation in each jurisdiction where it carries on business or where the failure to be so registered, licensed or qualified will result in a Material Adverse Effect; other than the Subsidiary, a wholly-owned subsidiary of the Corporation, the Corporation has no Subsidiaries; (b) the Corporation has the corporate power, capacity and authority to enter into, and to perform its obligations under, this Debenture; this Debenture has been duly authorized, executed and delivered by the Corporation and is a valid and binding obligation of it, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; all agreements contemplated by this Debenture to which the Corporation is a party will be duly authorized, executed and delivered by the Corporation and will be valid and binding obligations of it, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; (c) each of the Corporation and the Subsidiary has the corporate power and capacity to own or lease its assets and to carry on its business as now conducted by it and as is presently intended to be conducted by it. The Corporation carries on business only at the Existing Locations and all Collateral is located at the Existing Locations; (d) the issue of this Debenture and the performance by the Corporation of its other obligations contemplated hereby does not require the approval or consent of any government authority having jurisdiction, except such as has already been obtained and will not result in a breach of, and does not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and does not and will not conflict with, (i) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the shareholders and directors of the Corporation or the Subsidiary, any Material Contract; (ii) to the knowledge of the Corporation, any statute, rule or regulation applicable to the Corporation or the Subsidiary; and (iii) to the knowledge of the Corporation, any judgment decree or order binding the Corporation, the Subsidiary or the property or assets of the Corporation or the Subsidiary; -20- (e) the authorized capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of preference shares, issuable in series, of which, as at the date hereof 29,186,465 Common Shares (and no other shares) are issued and outstanding as fully paid and non-assessable; the authorized capital of the Subsidiary consists of an unlimited number of class A shares of which, as at the date hereof, one class A share (and no other shares) is issued and outstanding as fully paid and non-assessable, and such share is owned by the Corporation; all such issued and outstanding securities have been validly issued and are outstanding as fully paid and non-assessable; there are no shareholders agreements, pooling agreements, voting trusts or other agreements or understandings with respect to the voting of any securities, or any of them, of the Corporation or of the Subsidiary; other than the convertible debentures issued on June 20, 2002 to the Holder and Other Holder which will be repaid on the date hereof, 11,447,113 share purchase warrants issued and outstanding and 1,596,992 options to purchase Common Shares, each of which entitles the holder to purchase one Common Share at varying exercise prices, there are no agreements, options, warrants, rights of conversion or other rights pursuant to which either the Corporation or the Subsidiary is, or may become, obligated to issue any shares or any securities convertible or exchangeable, directly or indirectly, into any shares of the Corporation or the Subsidiary, respectively. (f) the Common Shares to be delivered to the Holder, when delivered to the Holder, shall be fully-paid and non-assessable shares in the capital of the Corporation; (g) the Corporation will, at all times while the Common Share Purchase Warrants are outstanding, allot and maintain sufficient number of Common Shares to satisfy the exercise of Common Share Purchase Warrants comprising the Purchased Units; (h) each of the Corporation and the Subsidiary is current and up-to-date with all filings required to be made by it under the corporate laws of its jurisdiction of incorporation and the securities laws of the provinces of Canada where it is a reporting issuer or its equivalent, as applicable except where not filing would not have a Material Adverse Effect; (i) the Corporation is a reporting issuer not in default of its obligations under the securities laws of British Columbia, Alberta, Manitoba and Ontario (the "Provinces") and no material change relating to the Corporation has occurred with respect to which the requisite material change report has not been filed under the securities laws of the Provinces and no such disclosure has been made on a confidential basis; (j) none of the materials filed by or on behalf of the Corporation with the applicable securities commissions or the stock exchanges (the "Public Record") contained a misrepresentation as at the date of such filing which has not been corrected; (k) to the knowledge of the Corporation, each of the Corporation and the Subsidiary has conducted and is conducting its business in compliance with all applicable material licensing, anti-pollution and environmental protection legislation, regulations or by-laws or other similar legislation, laws, by-laws, rules and regulations of any governmental or regulatory bodies; to the knowledge of the Corporation, there is no -21- licensing, anti-pollution or environmental legislation, regulation, by-law or lawful requirement presently in force which the Corporation anticipates that it or the Subsidiary will be unable to comply with without adversely affecting its financial condition, results of operations, business or prospects in any jurisdiction in which its business is carried on; (l) to the knowledge of the Corporation, each of the Corporation and the Subsidiary holds all material licenses, certificates, registrations, permits, consents or qualifications required by the appropriate state, provincial, municipal or federal regulatory agencies or bodies necessary in order to enable its business to be carried on as now conducted and to the knowledge of the Corporation, all such licenses, certificates, registrations, permits, consents and qualifications are valid and subsisting and in good standing and do not contain any unusual burdensome provision, condition or limitation which has a Material Adverse Effect on the Corporation or the Subsidiary and, to the knowledge of the Corporation, neither the Corporation nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of any such licenses, certificates, registrations, permits, consents, or qualifications which, if the subject of an unfavorable decision, ruling or finding would materially and adversely affect the conduct of the business, operations, financial condition or income or future prospects of the Corporation or the Subsidiary; (m) to the knowledge of the Corporation, no legal or governmental proceedings have been instituted or threatened to which either the Corporation or the Subsidiary is a party or to which the property of the Corporation or the Subsidiary is subject that would result individually or in the aggregate in a Material Adverse Effect; (n) the audited consolidated annual financial statements of the Corporation as at and for the year ended December 31, 2003 contained in the Corporation's annual report for such year: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at the end of such fiscal year and the consolidated results of its operations and the changes in its financial position for the year then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, -22- and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal year other than as specified in the Public Record; (o) the unaudited consolidated interim financial statements of the Corporation as at and for the six months ended June 30, 2004: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at June 30, 2004 and the consolidated results of its operations and the changes in its financial position for the period then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal period other than as specified in the Public Record; (p) the auditors of the Corporation who audited the consolidated financial statements for the most recently completed fiscal year for which audited financial statements are available and who provided their audit report thereon are independent public accountants as required under applicable Canadian securities laws; (q) each of the Corporation and the Subsidiary has filed all necessary tax returns and has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and there are no tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon with respect to the Corporation or the Subsidiary which, in any of the above cases, might reasonably be expected to result in an adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Corporation or the Subsidiary, other than existing tax deficiencies not in excess of $50,000; (r) no order ceasing or suspending trading in securities of the Corporation or prohibiting the sale of securities by the Corporation has been issued and, to the knowledge of the Corporation, no proceedings for this purpose have been instituted or are pending; (s) to the knowledge of the Corporation, each of the Corporation and the Subsidiary is in compliance with all laws respecting employment and employment practices, terms -23- and conditions of employment, pay equity and wages, except where such non-compliance would not constitute an adverse material fact of the Corporation or the Subsidiary or result in an adverse material change to the Corporation or the Subsidiary, and has not and is not engaged in any unfair labour practice; (t) there is no requirement for the Corporation to make any filing with, give notice to or obtain any licence, permit, certificate, registration, authorization, consent or approval of any governmental or regulatory authority or third party as a condition to the execution, delivery and performance of this Debenture by the Corporation except for filing with the Ontario Securities Commission ("OSC") of a report on Form 45-501F1 or similar filings required on the issue of the Common Shares and Common Share Purchase Warrants issuable pursuant to this Debenture, each prepared and executed in accordance with OSC Rule 45-501 and accompanied by the prescribed fees, and complying with the requirements imposed by the TSX as a condition to the listing of the Common Shares issuable upon conversion of the Debenture and exercise of the Warrants; (u) each of the Corporation and the Subsidiary has good title to the assets which are subject to the Security Interest, free and clear of any Encumbrances other than Permitted Encumbrances, whether fixed or floating, on any such assets and no Person has any agreement or right to acquire an interest in such assets, other than as provided herein; (v) no Default or Event of Default has occurred and is continuing; (w) neither the Corporation nor the Subsidiary has any Indebtedness other than Permitted Indebtedness; and (x) Appendix 1 and Appendix 2 of Schedule C provide a complete and accurate description of all of the material Patents and Trade Marks of the Corporation, respectively, and the Corporation does not own, license or have any other interest in any other material Patents or Trademarks except as disclosed therein. 6.2. HOLDER REPRESENTATIONS AND WARRANTIES The Holder represents, warrants and certifies to the Corporation as follows and acknowledges that the Corporation is relying on such representations, warranties and certification in selling this Debenture: (a) the Holder is purchasing the Debenture as principal for the Holder's own account and not for the benefit of any other Person; (b) the Holder is a resident of the Province of Ontario; (c) this Debenture has been duly authorized, executed and delivered by, and constitutes a legal, valid, binding and enforceable obligation of, the Holder; (d) the Holder has not received any document purporting to describe the business and affairs of the Corporation that has been prepared primarily for delivery to and review -24- by prospective investors so as to assist those investors to make an investment decision in respect of the Debentures being sold; (e) the Holder has not been created or is not being used primarily for the purpose of acquiring or holding securities of the Corporation; (f) the Holder, if a company, either (i) had net assets of at least $5,000,000 as reflected in its most recently prepared financial statements; or (ii) is a wholly-owned subsidiary of an individual who beneficially owns, or who together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes, but net of any related liability (necessary liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets) exceeds $1,000,000; (g) the Holder, if an individual, beneficially owns, or together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000. 6.3. HOLDER'S ACKNOWLEDGMENTS The Holder acknowledges that: (a) the Debentures and any securities into which they are convertible will be subject to transfer and resale restrictions pursuant to the Securities Act (Ontario) and the regulation, rules, orders, instruments and published policy statements applicable thereunder, including Multilateral Instrument 45-102 Resale of Securities; (b) the Holder's purchase of the Debentures has not been made through or as a result of, and the distribution of the Debentures is not being accompanied by, an advertisement or general solicitation in printed or public media, or general or regular print circulation, radio or television or telecommunications, including electronic display of any other form of advertisement; (c) the Holder is responsible for obtaining such legal advice as the undersigned considers appropriate in connection with the execution, delivery and performance of this Debenture and any subsequent transfer or resale of Debentures or any securities into which they are convertible. 6.4. CORPORATION'S POSITIVE COVENANTS The Corporation covenants and agrees that so long as this Debenture is outstanding: (a) Punctual Payment. It will duly and punctually pay or cause to be paid all amounts payable by the Corporation to the Holder hereunder at the times and in the manner provided for herein; (b) Use of Proceeds. Principal amounts advanced under this Debenture shall only be used to finance discovery research and product development initiatives as approved by the Board; -25- (c) Conduct of Business. It will and will cause each of its Subsidiaries to do all things necessary or desirable to maintain its and their respective corporate existence in its and their respective present jurisdictions of incorporation, maintain its and their respective corporate power and capacity to own its and their respective properties and assets, and carry on its and their respective businesses in a commercially reasonable manner; (d) Maintain Property and Assets. It will maintain and cause each of its Subsidiaries to maintain all of its property and assets in good repair and working condition, consistent with the industry standards, reasonable wear and tear excepted, and continue to carry on its business as presently conducted and in compliance with all licences and permits and maintain its books and records in a manner consistent with good business practice and in a manner sufficient to permit the Holder to confirm compliance by the Corporation with the Corporation's covenants hereunder; (e) Inspection. It will at any reasonable time and from time to time upon reasonable prior notice, permit the Holder or representatives thereof to conduct inspections of the books and records of the Holder and its Subsidiaries and to make copies thereof, and to discuss the affairs, finances and accounts of the Corporation and its Subsidiaries with the auditors and officers of the Corporation; (f) Other Obligations. It will pay or cause to be paid and cause each of its Subsidiaries to pay or cause to be paid when required all amounts related to taxes, wages, workers' compensation obligations, government royalties or pension fund obligations and any other amount which may result in an Encumbrance against the assets of the Corporation or any of its Subsidiaries arising under any statute or regulation, other than a Permitted Encumbrance or to make adequate reserve for any such amount the payment of which is being contested; (g) Compliance with Applicable Law and Contracts. It will do or cause to be done or cause each of its Subsidiaries to do or cause to be done all acts necessary or desirable to comply with all applicable, federal, provincial and municipal laws, requirements, standards, the non-compliance with which could have a Material Adverse Effect upon it or any Subsidiary. It will and will cause each of its Subsidiaries to comply with the requirements of all Material Contracts to which it and they respectively are parties or by which respectively it and they or its and their properties are bound, non-compliance with which would, singly or in the aggregate, have a Material Adverse Effect upon its or any one of its Subsidiaries' respective business, property, financial condition or prospects; (h) Accounting Methods and Financial Records. It will and will cause each of its Subsidiaries to maintain a system of accounting which is established and administered in accordance with Canadian generally accepted accounting principles, keep adequate records and books of account in which accurate and complete entries shall be made in accordance with Canadian generally accepted accounting principles reflecting all transactions required to be reflected by such accounting principles and keep accurate and complete records of any property owned by it and each of them, respectively; -26- (i) Financial Statements. It will provide the Holder with its audited and unaudited financial statements for the Corporation in accordance with applicable corporate and securities laws together with such other financial information as the Holder may request from time to time; (j) Payment of Taxes and Claims. It will and will cause each of its Subsidiaries to: (i) pay and discharge all lawful claims for labour, material and supplies; (ii) pay and discharge all obligations which may result in liens on its assets; (iii) pay and discharge all taxes payable by it and each of them, respectively; and (iv) withhold and collect all taxes required to be withheld and collected by it and each of them, respectively, and remit such taxes to the appropriate governmental body at the time and in the manner required; provided that nothing in this Section 6.4(j) shall preclude the Corporation from contesting in good faith any of the matters referred to therein if it makes an adequate reserve for any such amount, the payment of which is being contested; (k) Notice of Event of Default. It will, as soon as it shall become aware of the same, give notice to the Holder of any Default, Event of Default, or the occurrence or non-occurrence of any event which constitutes, or which with the passage of time or giving of notice or both would constitute, a material default under any other agreement to which it is a party or by which it or any of its properties may be bound, giving in each case the details thereof and specifying the action proposed to be taken with respect thereto, regarding the Corporation or any Subsidiary of the Corporation; (l) Insurance. The Corporation shall maintain and cause its Subsidiaries to maintain insurance on its and their respective properties and assets and for the operation of its and their respective businesses in such amounts and against such risks as would be customarily obtained and maintained by a prudent owner of similar properties and assets operating a similar business (including without limitation appropriate liability insurance), and shall provide certified copies of such policies to the Holder upon request. Such policies of insurance shall include coverage against loss or damage of its property and assets by fire and other hazards, and business interruption insurance. All such insurance policies relating to properties and assets shall name the Holder and the Other Holder as loss payees as their interests may appear and copies thereof or certificates in respect of the coverage provided thereby shall be delivered to the Holder upon request. The Corporation shall pay all premiums in respect of such insurance when due and shall promptly furnish the Holder upon request with receipts or other satisfactory evidence of the payment thereof. Prior to any Event of Default any insurance proceeds in an amount (i) less than $25,000 shall be paid directly to the Corporation to be used to replace or repair the property in respect of which the proceeds have been paid, and (ii) equal to or greater than $25,000 shall be paid directly to the Holder and the Other Holder and may, at the option of the Holder and the Other Holder by joint written instruction to the Corporation, be applied against any Obligations hereunder and under the Other Debenture(s) or -27- released to the Corporation without prejudicing any rights or remedies of the Holder or Other Holder hereunder or under the Other Debenture(s) or affecting any Obligations; (m) Compliance with Securities Legislation and Matters. The Corporation shall comply with the requirements of all applicable securities laws and the regulations thereunder and shall take no step with a view to, or which would result in, the Corporation ceasing to be a reporting issuer in good standing under the Securities Act (Ontario) or the Regulation thereunder or under the securities laws of any other jurisdiction; (n) Maintain Listing. The Corporation shall continuously maintain the listing of its Common Shares on the TSX or upon such other stock exchange as may be acceptable to the Holder and shall use reasonable efforts to ensure that all Common Shares which are issuable upon the exercise of the conversion rights hereunder are listed on such stock exchange as and when issued; and (o) Secondary Offering. If, at any time, the Corporation undertakes a treasury offering of shares by way of prospectus, the Holder may participate by way of a secondary offering of which the Holder may sell all or any of the Common Shares beneficially owned by the Holder, unless this right would, in the opinion of the financial advisor and/or underwriter retained to complete such transaction, materially prejudice the offering. 6.5. CORPORATION'S NEGATIVE COVENANTS The Corporation hereby covenants and agrees with the Holder that it will not, so long as any amount owing hereunder shall remain unpaid, and it will not permit or cause any of its Subsidiaries to, without the prior written consent of the Holder: (a) Security Interests. Create, issue, incur, assume or permit to exist any Encumbrance on any of its property other than (i) Encumbrances in favour of the Holder; and (ii) Permitted Encumbrances, nor do or permit anything to adversely affect the ranking or validity of the Security Interest except by incurring a Permitted Encumbrance. (b) Change in Nature of Business. Make or permit or cause any Subsidiary to make any material change in the nature of its or their respective existing business. (c) Mergers. Enter into any transaction (whether by way of reconstruction, reorganization, consolidation, dissolution or otherwise) whereby all or any substantial part of its undertaking, property or assets would become the property of any other Person or, in the case of any such amalgamation, of the continuing corporation resulting therefrom. (d) Disposal of Assets. Directly or indirectly, sell, lease, assign, transfer, abandon, convey or otherwise dispose of any of its undertaking or assets (including any capital stock of any of its Subsidiaries or other corporation) except as follows: (i) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell any inventory or other assets that are customarily sold by the -28- Corporation or such Subsidiary as part of the normal operation of its respective business; and (ii) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell equipment, fixtures, materials or supplies that are no longer required in the business of the Corporation or such Subsidiary or that are worn-out or obsolete. (e) Distributions. Declare, make or pay any dividend or other distribution on any share in the capital of the Corporation or a Subsidiary other than a distribution made by a Subsidiary to the Corporation. (f) Alteration of Capital. Purchase, redeem or retire in any way any shares of its capital or otherwise reduce its issued or paid up capital in respect of such shares or otherwise permit a change in the authorized capital structure or in the terms of any of its classes of share. (g) Transactions Out of the Ordinary Course. Enter into or effect any transactions out of the ordinary course of business. (h) Financial Assistance. Provide any financial assistance to any Person except financial assistance provided to the Corporation by a Subsidiary of the Corporation or to a Subsidiary of the Corporation by the Corporation. (i) Maintenance and Ownership of Subsidiaries. In the case of the Corporation, sell or otherwise dispose of any shares of the capital of any of its Subsidiaries or permit any of such Subsidiaries to issue, sell or otherwise dispose of any shares of the capital or the capital of any other of such Subsidiaries, except to the Corporation. (j) Winding-up. Take or institute proceedings for the winding-up, reorganization or dissolution of the Corporation or any Subsidiary. (k) Changing Location etc. Change its name or the location of its chief executive office or remove or otherwise permit any Collateral (other than inventory in transit) to be located at any location other than Existing Locations, without providing the Holder with 30 days prior written notice thereof and promptly taking such other steps, if any, as the Holder may require to maintain the perfection of the Security Interest. (l) Additional Indebtedness. Incur any Indebtedness other than Permitted Indebtedness. (m) Subsidiaries. Have any Subsidiaries other than the Subsidiary without the consent of the Holder. -29- ARTICLE 7. EVENTS OF DEFAULT 7.1. EVENTS OF DEFAULT The occurrence of any one or more of the following events or conditions (each such event or condition being an "Event of Default") shall constitute a default under this Debenture: (a) except as otherwise provided in this Section, the Corporation does not observe or perform any of the Corporation's obligations under this Debenture or any other agreement or document existing at any time between the Corporation and the Holder and such default remains unremedied to the satisfaction of the Holder seven calendar days after written notice thereof is given to the Corporation by the Holder; (b) any representation, warranty or statement made by or on behalf of the Corporation to the Holder is untrue in any material respect at the time when or as of which it was made; (c) the Corporation ceases or threatens to cease to carry on in the normal course the Corporation's business or any material part thereof; (d) the holder of a charge takes possession of all or any part of the Corporation's property having a value in excess of $150,000, or a distress, execution or other similar process is levied against all or any part of such property having a value in excess of $150,000; (e) if an order ceasing or suspending or prohibiting trading in any securities of the Corporation shall be issued by any stock exchange or securities regulatory authority having jurisdiction and such situation continues in excess of two weeks; (f) default by the Corporation or any of its Subsidiaries in the performance or observance of any covenant, condition or obligation contained in any agreement between the Corporation or its Subsidiary, as the case may be, and any Person, where such default gives rise to a right to enforce security against the Corporation or its Subsidiary, as the case may be, where the default, or the cumulative defaults are in excess of $150,000; (g) the Corporation fails to pay to any Person any Indebtedness in excess of $250,000 in aggregate when due (whether at scheduled maturity or by required prepayment, acceleration, demand or otherwise) and such failure continues after any applicable grace period, except as the Holder and Other Holder have otherwise agreed; (h) an event of default occurs under the Other Debenture(s); (i) any event occurs which would have a Material Adverse Effect on the Corporation and its Subsidiaries taken as a whole; (j) if the Corporation or any of its Subsidiaries is in default under any Material Contract to which it is a party and such default is not cured before the earlier of (i) 30 days -30- after the occurrence of such default, and (ii) five Business Days prior to the expiry of the applicable cure period, if any, under such Material Contract; (k) if a final judgment or decree for the payment of money due shall have been obtained or entered against the Corporation or any of its Subsidiaries in an amount of $100,000 or more and such judgment or decree shall not have been and remain vacated, discharged or stayed pending appeal within the applicable appeal period; (l) if a decree or order of a court of competent jurisdiction is entered adjudging the Corporation or any of its Subsidiaries a bankrupt or insolvent or approving as properly filed a petition seeking the winding-up of the Corporation or any of its Subsidiaries under the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding-Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law or issuing sequestration or process of execution against any substantial part of the assets of the Corporation or any of its Subsidiaries or ordering the winding up or liquidation of its affairs and any such decree or order continues unstayed and in effect for a period of thirty (30) days; (m) if the Corporation or any of its Subsidiaries becomes insolvent, makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors, makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, seeks relief under the Companies' Creditors Arrangement Act (Canada), the Winding Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its assets, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors' rights or consents to, or acquiesces in, the filing of such a petition; or (n) if any Change of Control Event occurs. 7.2. RIGHTS UPON DEFAULT Upon the occurrence of an Event of Default the entire Principal amount outstanding hereunder shall at the option of the Holder forthwith become immediately due and payable, with Interest thereon, at the rate determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonour or any other notice of demand whatsoever, all of which are hereby expressly waived by the Corporation. In such event the Holder may in its discretion exercise any right or recourse and/or proceed by any action, suit, remedy or proceeding against the Corporation authorized or permitted by law for the recovery of all the Indebtedness and liabilities of the Corporation to the Holder and proceed to exercise any and all rights hereunder and under the security constituted by the Security Interest. No right will be exclusive of or dependent upon or merge in any other right, and one or more of such rights may be exercised independently or in combination from time to time. -31- 7.3. CHARGES AND EXPENSES The Corporation agrees to pay on demand all costs and expenses incurred (including among other things legal fees) and fees charged by the Holder in connection with obtaining or discharging this Debenture to and by the Holder or any Receiver in exercising any remedy under this Debenture and in carrying on the Corporation's business. All such amounts will bear interest from time to time at the rate equal to the rate payable on the Principal sum hereunder, and the Corporation will reimburse the Holder upon demand for any amount so paid. 7.4. FURTHER ASSURANCES The Corporation will from time to time as soon as practicable upon request by the Holder take such action as the Holder may consider necessary to give effect to this Debenture. 7.5. PERFORMANCE BY THE SECURED PARTY In the event that the Corporation fails to perform any obligations under this Debenture, including keeping the Collateral free and clear of all Encumbrances, other than Permitted Encumbrances, the Holder may, at its option and without being under any obligation to do so, perform such obligations and the Corporation shall pay to the Holder, immediately upon demand, all costs and expenses (including, without limitation, legal fees on a solicitor-client basis) incurred by the Holder in connection therewith and all such costs and expenses shall form part of the Obligations, bear interest at the Interest Rate, both before and after demand and judgment from the date incurred by the Holder and shall be secured by the Security Interest. The performance by the Holder of any obligation of the Corporation hereunder or the curing of any Event of Default by the Holder shall not constitute a waiver by the Holder of any of its rights, remedies or privileges hereunder or relieve the Corporation from its default or any consequences thereof. 7.6. DEALINGS BY THE HOLDER The Holder may grant renewals, extensions of time and other indulgences, take and give up securities, accept compositions, grant full, partial and conditional releases and discharges, perfect or fail to perfect any securities, release any Collateral to third parties and otherwise deal or fail to deal with the Corporation, debtors of the Corporation, guarantors, sureties and others and with the Collateral and other securities as the Holder may see fit, all without prejudice to any liability of the Corporation to the Holder or the Holder's rights and remedies under this Debenture, the Personal Property Security Act (Ontario) or otherwise at law. 7.7. NO SET-OFF The Obligations shall be paid by the Corporation without regard to any equities between the Corporation and the Holder or any right of set-off or cross-claim that the Corporation may have against the Holder. -32- ARTICLE 8. SECURITY 8.1. SECURITY As general and continuing security for the payment and performance of the Obligations, the Corporation hereby grants a security interest in favour of the Holder as set out in Schedule "C" and shall execute and deliver in favour of the Holder, all such further, security agreements, instruments and documents (collectively with this Debenture being the "SECURITY DOCUMENTS") and do all such other acts and things as the Holder may from time to time require, to create, grant and maintain a first perfected Encumbrance on the Collateral in favour of the Holder, subject only to Permitted Encumbrances. All Security Documents shall, in form and substance, be satisfactory to the Holder, acting reasonably. The Corporation acknowledges and agrees that as at the date hereof there are additional Security Documents that will have to be executed and delivered by the Corporation and additional registrations and other steps that will have to be taken by the Corporation and others in order for the Security Interest to constitute a first perfected Encumbrance on all of the Collateral, subject only to Permitted Encumbrances, and agrees that the right of the Holder to require such Security Documents and the performance of such other acts and things at any time and from time to time shall not be prejudiced by any delay on the part of the Holder in requesting same. The Corporation constitutes and appoints the Holder and any officer or agent of the Holder, with full power of substitution, as the Corporation's true and lawful attorney-in-fact with full power and authority in the place of the Corporation and in the name of the Corporation or in its own name, from time to time in the Holder's discretion after any Event of Default or any default under this section, to take any and all appropriate action and to execute any and all documents and instruments as, in the opinion of such attorney may be necessary or desirable to accomplish the purposes of this Debenture. These powers are coupled with an interest and are irrevocable until this Debenture and the Security Documents are terminated and released. Nothing in this section affects the right of the Holder as secured party or any other Person on the Holder's behalf, to sign and file or deliver (as applicable) all such financing statements, financing change statements, notices, verification agreements and other documents relating to the Collateral and this Debenture and any Security Documents as the Holder or such other Person considers appropriate ARTICLE 9. GENERAL PROVISIONS 9.1. NOTICES Any notice, communication, payment or demand required or permitted to be given under this Debenture shall be deemed to have been sufficiently given to the recipient if delivered personally, or (other than in the case of payment) if sent by facsimile or sent by ordinary first class mail within Canada, postage prepaid, addressed as follows: -33- (a) to the Corporation at: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto ON M9B 6H7 Attention: Michael Byrne, Chief Financial Officer and Corporate Secretary Facsimile: (416) 335-9306 (b) to the Holder at: 78 The Bridle Path Toronto, Ontario M3B 2B1 Attention: Leslie Dan Facsimile: (416) 291-2162 Any such mailing shall be deemed to be received on the date of delivery if delivered personally, on the next Business Day following the transmission by facsimile confirmed by the sender thereof or on the third Business Day following the date of mailing or, in the event of any disruption, strike or interruption in the Canadian postal service after mailing and prior to receipt, on the third Business Day following full resumption of such Canadian postal service. Either party hereto may change its facsimile number or address for the purpose of this Section 9.1 by giving written notice of such change to the other. 9.2. AMENDMENTS Neither this Debenture nor any provision hereof may be amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge, or termination is sought. No delay or omission by the Holder in exercising any rights or remedies hereunder or in respect of any Obligations or the performance by the Corporation of any Obligations in default shall operate as a waiver thereof or of any other rights or remedies of the Holder. No single or partial exercise of any rights or remedies by the Holder shall preclude any other or further exercise thereof or the exercise of any other rights or remedies. A written waiver of any right or remedy shall be effective only for the specific purpose and time, if any, stipulated therein and shall not operate as a waiver of any other rights or remedies of the Holder. This Debenture may not be amended, supplemented or otherwise modified without the prior written consent of the Other Holder. 9.3. TIME OF THE ESSENCE Time is expressly declared to be of the essence of this Debenture in respect of all payments to be made hereunder, the exercise of any redemption and conversion rights hereunder, and all covenants and agreements to be performed and fulfilled. -34- 9.4. SEVERABILITY If any covenant or obligation of any party contained herein, or if any provision of this Debenture or its application to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Debenture or the application of such covenant or obligation to Persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected, and each provision and each covenant and obligation contained in this Debenture shall be separately valid and enforceable, to the fullest extent permitted by law or at equity. 9.5. COUNTERPARTS This Debenture may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 9.6. FURTHER ASSURANCES Each of the Corporation and the Holder shall promptly cure any default by it in the execution and delivery of this Debenture or of any of the other agreements provided for hereunder to which it is a party. The Corporation, at its expense, shall promptly execute and deliver or cause to be executed and delivered to the Holder, upon request by the Holder, all such other and further documents, agreements, opinions, certificates and instruments in compliance with, or accomplishment of the covenants and agreements of the Corporation hereunder or more fully to state the obligations of the Corporation set out herein or under any other loan document or to make any recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith. The Corporation hereby irrevocably constitutes and appoints any officer for the time being of the Holder and each Receiver, the true and lawful attorney of the Corporation, at any time that an Event of Default shall have occurred and be continuing, with full power of substitution to execute and deliver all such agreements, instruments and documents and to do all such further acts and things with the right to use the name of the Corporation whenever and wherever it may be deemed necessary or expedient. 9.7. ENTIRE AGREEMENT This Debenture, the Payment and Security Sharing Agreement and the confirmations delivered in respect of the Security Interest constitute the whole and entire agreement between the parties hereto and cancel and supersede any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof. 9.8. TRANSFERABILITY Except for transfers provided for in the Payment and Security Sharing Agreement, this Debenture may only be transferred by the Holder with the prior written consent of the Corporation not to be unreasonably withheld or delayed. -35- 9.9. PARTIES IN INTEREST This Debenture shall be binding on the Corporation and its successors and will be binding on and will enure to the benefit of the Holder and its successors and assigns. IN WITNESS WHEREOF the Corporation and the Holder have executed this Debenture as of the 3rd day of November, 2004. VIVENTIA BIOTECH INC. By: /s/ Michael Byrne -------------------------------------- Name: Michael Byrne Title: Chief Financial Officer By: Name: Title: /s/ Leslie Dan -------------- LESLIE L. DAN SCHEDULE "A" FORM OF COMMON SHARE PURCHASE WARRANT SCHEDULE "B" CONVERSION NOTICE TO: Viventia Biotech Inc. (the "Corporation") FROM: Leslie L. Dan (the "Holder") RE: The Convertible Secured Debenture issued by the Corporation to the Holder as of November 3, 2004 (the "Debenture") All terms used in this Conversion Notice which are defined in the Debenture have the meanings attributed thereto in the Debenture. The Holder hereby irrevocably elects to convert $_________________ of the Principal outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Conversion Price and $_________________ of the Interest outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Interest Conversion Price. Please issue, register and deliver the Common Shares and Common Share Purchase Warrants comprising such Units in the name of: Name: ------------------------------------------ Address: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ DATED: , 200_. By: ------------------------------- LESLIE L. DAN SCHEDULE "C" SECURITY INTEREST 1. SECURITY (a) Security. Subject to Sections 1(c) and 1(d) of this Schedule "C", as continuing security for the due and timely payment and performance by the Corporation of its obligations hereunder, the Corporation hereby (i) grants a security interest in and conveys, assigns, hypothecates, mortgages and charges, as and by way of a first fixed and floating mortgage and charge to and in favour of the Holder (the "Security Interest"), all its undertaking and business and all its property and assets and rights for the time being, both present and future, of whatsoever nature and kind and wheresoever situate (the "Collateral") including, without limitation, (i) each of the Patents identified in Appendix 1, including all rights to receive royalty, licence or other payments due to the Corporation from any licensed user or other use of the Patents; (ii) each of the Trade Marks identified in Appendix 2, including all goodwill of the business of the Corporation symbolized by each of the Trade Marks and all rights of the Corporation as the registered owner of the Trade Marks, including the right to receive royalty, licence or other payments due to the Corporation from any registered user or other user of any Trade Marks; (iii) any present or future claim by, or right of action of, the Corporation against any Person with respect to the infringement of any of the Trade Marks or Patents; (b) Attachment. The parties acknowledge and agree that value has been given for the granting of the Security Interest and that they have not agreed to postpone the time for attachment, except for after-acquired property forming part of the Collateral, the attachment to which will occur forthwith upon the Corporation acquiring rights in such Collateral. (c) Exception for Last Day of Leases. The Security Interest granted hereby does not and shall not extend to, and the Collateral shall not include, the last day of the term of any lease or sub-lease, oral or written, or any agreement therefor, now held or hereafter acquired by the Corporation but, upon the sale of the leasehold interest or any part thereof, the Corporation shall stand possessed of such last day in trust to assign the same as the Holder shall direct. (d) Exception for Contractual Rights. The Security Interest hereby granted does not and shall not extend to, and the Collateral shall not include, any agreement, right, franchise, licence or permit (collectively, "Contractual Rights") to which the Corporation is a party or of which the Corporation has the benefit, to the extent that the creation of the Security Interest therein would constitute a breach of the terms of, or permit any Person to terminate, the Contractual Rights (the "Restricted Rights"), but the Corporation shall hold its interest therein in trust for the Holder -ii- and shall assign such Restricted Rights to the Holder forthwith upon obtaining the consent of the other party or parties thereto. Upon the request of the Holder, the Corporation shall use all commercially reasonable efforts to obtain any consent required to permit any Restricted Rights to be subject to the Security Interest. The Corporation shall use commercially reasonable efforts to provide that any agreement after the date hereof does not require any consent to permit the Contractual Rights created thereunder to become subject to the Security Interest and, except as disclosed to and approved by the Holder in writing, none of the existing Restricted Rights are Material Contracts. (e) Permitted Dealings with Collateral. Unless an Event of Default has occurred, the Corporation may, without the consent of the Holder: (i) deal with the Collateral as permitted by the Debenture; and (ii) subject to Section 2 of this Schedule "C", collect proceeds and accounts in the ordinary course of business. (f) Delivery of Instruments, Securities, Etc. (i) If an Event of Default has occurred the Corporation shall, upon request of the Holder, forthwith deliver to the Holder, to be held by the Holder hereunder, all instruments, securities, letters of credit, advances of credit and negotiable documents of title in its possession or control which pertain to or form part of the Collateral and shall, as required, duly endorse the same for transfer in blank or as the Holder may direct and shall use commercially reasonable efforts to deliver to the Holder any and all consents or other instruments or documents necessary to comply with any restrictions on the transfer thereof in order to transfer the same to the Holder. (ii) Subject to any other written agreements or instruments in effect from time to time between the parties, unless an Event of Default has occurred and is continuing the Corporation shall be entitled (i) to receive all distributions of any kind whatsoever at any time payable on or with respect to the Collateral and (ii) to vote the Collateral and to give consents, waivers, notices and ratifications and to take other action in respect of the Collateral; provided, however, that no vote shall be cast and no consent, waiver, notice or ratification shall be given and no action be taken which would impair the Collateral or which would be inconsistent with or violate any provision of this Debenture or any other written agreement or instrument in effect from time to time between the parties. (iii) Upon the occurrence of an Event of Default the Holder and during the continuance thereof shall be entitled to enjoy and exercise all of the rights referred to in Section (f)(ii) of this Schedule "C" in such manner as it sees fit. (g) Verification of Collateral. The Holder shall have the right at any time and from time to time to verify the existence and state of the Collateral in any manner the Holder -iii- may consider appropriate and the Corporation agrees to furnish all assistance and information and to perform al such acts as the Holder may reasonably request in connection therewith and for such purpose to grant to the Holder or its agents access to all places where Collateral may be located and to all premises occupied by the Corporation. 2. COLLECTION OF PROCEEDS AND ACCOUNTS (a) Control of Proceeds and Accounts. After the occurrence of an Event of Default the Holder, if demand has been made in accordance with Section 3(a) of this Schedule "C", may take control of any Proceeds and accounts and may notify any account debtor or any obligor under any instrument held by the Corporation or the Holder to make payment in respect of any Proceeds and accounts directly to the Holder, whether or not the Corporation has theretofore been making collections on the Collateral. (b) Proceeds and Accounts Received in Trust. After the occurrence of an Event of Default has occurred, if the Corporation shall collect or receive any accounts or shall be paid for any of the other Collateral or shall receive any Proceeds, all money so collected or received by the Corporation shall be received by the Corporation as trustee for the Holder and, if demand has been made in accordance with Section 3(a) of this Schedule "C", shall be paid to the Holder forthwith upon demand and the Holder may, in its discretion, apply the same in reduction of the Obligations or hold the same as further Collateral hereunder. 3. DEFAULT AND THE HOLDER'S REMEDIES (a) Remedies Upon Default. Upon the occurrence of an Event of Default, the Obligations shall, at the option of the Holder, forthwith become immediately due and payable by the Corporation to the Holder and the Holder may thereafter, without further notice to the Corporation except as provided at law or in this Debenture: (i) commence legal action to enforce payment or performance of the Obligations; (ii) require the Corporation, at the Corporation's expense, to assemble the Collateral at a place or places designated by notice in writing given by the Holder to the Corporation, and the Corporation agrees to so assemble the Collateral; (iii) require the Corporation, by notice in writing given by the Holder to the Corporation, to disclose to the Holder the location or locations of the Collateral, and the Corporation agrees to make such disclosure when so required by the Holder; (iv) without legal process, enter any premises where the Collateral may be situated and take possession of the Collateral by any method permitted by law; -iv- (v) repair, process, complete, modify or otherwise deal with the Collateral and prepare for the disposition of the Collateral, whether on the premises of the Corporation or otherwise and, in connection with any such action, utilize any of the Corporation's property without charge; (vi) dispose of the Collateral by private or public sale, lease or otherwise upon such terms and conditions as the Holder may determine and whether or not the Holder has taken possession of the Collateral; (vii) carry on all or any part of the business or businesses of the Corporation and, to the exclusion of all others (including the Corporation), enter upon, occupy and, subject to any requirements of law and subject to any leases or agreements then in place, use all or any of the premises, buildings, plant, undertaking and other property of, or used by, the Corporation for such time and in such manner as the Holder sees fit, free of charge, and, except to the extent required by law, the Holder shall not be liable to the Corporation for any act, omission or negligence in so doing or for any rent, charges, depreciation or damages or other amount incurred in connection therewith or resulting therefrom other than from the Holder's gross negligence or wilful misconduct; (viii) file such proofs of claim or other documents as may be necessary or desirable to have its claim lodged in any bankruptcy, winding-up, liquidation, dissolution or other proceedings (voluntary or otherwise) relating to the Corporation; (ix) borrow money for the purpose of carrying on the business of the Corporation or for the maintenance, preservation or protection of the Collateral and mortgage, charge, pledge or grant a security interest in the Collateral, whether or not in priority to this Debenture, to secure repayment of any money so borrowed; (x) where the Collateral has been disposed of by the Holder as provided in Section 3(a)(vi) of this Schedule "C", commence legal action against the Corporation for the Deficiency, if any; (xi) appoint, by an instrument in writing delivered to the Corporation, a Receiver of the Collateral and remove any Receiver so appointed and appoint another or others in its stead or institute proceedings in any court of competent jurisdiction for the appointment of a Receiver, it being understood and agreed that: (A) the Holder may appoint any Person as Receiver, including an officer or employee of the Holder, with such Person's prior written consent; (B) such appointment may be made at any time after an Event of Default, either before or after the Holder shall have taken possession of the Collateral; -v- (C) the Holder may, from time to time, fix the reasonable remuneration of the Receiver and direct the payment thereof out of the Collateral or any Proceeds; and (D) the Receiver shall be deemed to be the agent of the Corporation for all purposes, and, for greater certainty, the Holder shall not be, in any way, responsible for any actions, whether wilful, negligent or otherwise, of any Receiver, and the Corporation hereby agrees to indemnify and save harmless the Holder from and against any and all claims, demands, actions, costs, damages, expenses or payments which the Holder may hereafter suffer, incur or be required to pay as a result of, in whole or in part, any action taken by the Receiver or any failure of the Receiver to do any act or thing; (xii) pay or discharge any mortgage, charge, encumbrance, lien, adverse claim or security interest claimed by any Person in the Collateral ranking prior to or pari passu with the Security Interest and the amount so paid shall be added to the Obligations and shall bear interest calculated from the date of payment at the Interest Rate until paid; and (xiii) take any other action, suit, remedy or proceeding authorized or permitted by this Debenture or at law or equity. (b) Sale of Collateral. The parties acknowledge and agree that any sale referred to in Section 3(a)(vi) of this Schedule "C" may be either a sale of all or any portion of the Collateral and may be by way of public auction, public tender, private contract or otherwise without notice, advertisement or any other formality, except as required by law, all of which are hereby waived by the Corporation to the extent permitted by law. To the extent not prohibited by law, any such sale may be made with or without any special condition as to an upset price, reserve bid, title or evidence of title or other matter and, from time to time as the Holder in its sole discretion thinks fit, with power to vary or rescind any such sale or buy in at any public sale and resell. The Holder may sell the Collateral for a consideration payable by instalments either with or without taking security for the payment of such instalments and may make and deliver to any purchaser thereof good and sufficient deeds, assurances and conveyances of the Collateral and give receipts for the purchase money, and any such sale shall be a perpetual bar, both at law and in equity, against the Corporation and all those claiming an interest in the Collateral by, from, through or under the Corporation. (c) Reference to Secured Party Includes Receiver. For the purposes of Sections 3(a), 3(b) and 3(c)of this Schedule "C", a reference to the "Holder" shall, where the context permits, include any Receiver appointed in accordance with Section 3 of this Schedule "C". (d) Payment of Expenses. The amount of the Reasonable Expenses shall be paid by the Corporation to the Holder, as applicable, from time to time forthwith after demand therefor is given by the Holder, as applicable, to the Corporation, together with -vi- interest thereon from the date that is five Business Days from the date of such demand of such demand at the Interest Rate, and payment of such Reasonable Expenses together with such interest shall be secured by the Security Interest. (e) Payment of Deficiency. Where the Collateral has been disposed of by the Holder as provided herein, the Deficiency, if any, shall be paid by the Corporation to the Holder forthwith after demand therefor has been given by the Holder to the Corporation, together with interest thereon calculated from the date of such demand at the Interest Rate, and the payment of the Deficiency together with such interest shall be secured by the Security Interest. (f) Rights and Remedies Not Mutually Exclusive. To the fullest extent permitted by law, the Holder's rights and remedies, whether provided for in this Debenture or otherwise, are not mutually exclusive and are cumulative and not alternative and may be exercised independently or in any combination. (g) No Obligation to Enforce. The Holder shall not be under any obligation to, or liable or accountable for any failure to, enforce payment or performance of the Obligations or to seize, realize, take possession of or dispose of the Collateral and shall not be under any obligation to institute proceedings for any such purpose. (h) Exclusion of Liability of Holder and Receiver. The Holder shall not, nor shall any Receiver appointed by it, be liable for any failure to exercise its rights, powers or remedies arising hereunder or otherwise, including without limitation any failure to take possession of, collect, enforce, realize, sell, lease or otherwise dispose of, preserve or protect the Collateral, to carry on all or any part of the business of the Corporation relating to the Collateral or to take any steps or proceedings for any such purposes. Neither the Holder nor any Receiver appointed by it shall have any obligation to take any steps or proceedings to preserve rights against prior parties to or in respect of Collateral including without limitation any instrument, chattel paper or securities, whether or not in the Holder's or the Receiver's possession, and neither the Holder nor any Receiver appointed by it shall be liable for failure to do so. Subject to the foregoing, the Holder shall use reasonable care in the custody and preservation of the Collateral in its possession. 4. POSSESSION OF COLLATERAL BY THE DEBENTUREHOLDER Possession of Collateral. For so long as any Collateral is in the possession of the Holder: (a) the Holder may, at any time following the occurrence of an Event of Default, grant or otherwise create a security interest in such Collateral upon any terms, whether or not such terms impair the Corporation's right to redeem such Collateral; (b) the Holder may, at any time following the occurrence of an Event of Default use such Collateral in any manner and to such extent as it deems necessary; and (c) the Holder shall have no duty of care whatsoever with respect to such Collateral other than to use reasonable care in the custody and preservation thereof, provided that the Holder need not take any steps of any nature to defend or preserve the -vii- rights of the Corporation therein against the claims or demands of others or to preserve rights therein against prior parties. APPENDIX 1 AND APPENDIX 2 LIST OF PATENTS AND TRADE MARKS See attached list Updated September 2004 Page 1
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 95 922 373.6 A6 Human Monoclonal Antibodies Specific to June 16, 1995 Cell Cycle Independent Glioma Surface Antigen (A6) 695 22 689.4-08 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) 08/264.093 A6 Human Monoclonal Antibodies Specific to June 21, 1994 Cell Cycle Independent Glioma Surface Antigen (A6) 33696/97 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers PI 9710811-1 H11 Antigen Binding Fragments (H11) that November 10, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 95 922 373.6 Europe EP 0 766 736 September 12, 2001 695 22 689.4-08 Germany DE 695 22 689.4-08 April 12, 2002 EP 0 766 736 France EP(FR) 0766736 April 2002 EP 0 766 736 U.K. EP(UK) 0766736 April 2002 08/264.093 U.S. 5,639,863 June 17, 1997 33696/97 Australia AU 725238 January 25, 2001 PI 9710811-1 Brazil
Updated September 2004 Page 2
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 255,540 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers CN 97194815.1 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 97929703.3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers P9902713 H11 Antigen Binding Fragments (H11) that May 22, 1987 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 127193 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 255,540 Canada CN 97194815.1 China 97929703.3 Europe P9902713 Hungary 127193 Israel
Updated September 2004 Page 3
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 9-542853 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 989695 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 332566 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 985,150 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 9805601-3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 9-542853 Japan 989695 Mexico 332566 New Zealand 332566 December 07, 2000 985,150 Norway 9805601-3 Singapore 60444 April 18, 2000
Updated September 2004 Page 4
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ------------------ ------- ----- ----- 09/194,164 H11 Antigen Binding Fragments (H11) that November 20, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 101,108 H11 Antigen Binding Fragments (H11) that May 22, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 505305 (Divisional of 332566) H11 Antigen Binding Fragments (H11) that June 21, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 72432/00 (Divisional of AU H11 Antigen Binding Fragments (H11) that December 20, 2000 Patent 725238) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 08/862,124 (Priority over H11 Antigen Binding Fragments (H11) that May 22, 1997 08/657,449 CIP) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 09/194,164 US 101,108 Hong Kong 505305 (Divisional of 332566) N. Zealand NZ 505305 October 7, 2002 72432/00 (Divisional of AU Australia Patent 725238) 08/862,124 (Priority US 6,207,153 March 27, 2001 over 08/657,449 CIP)
Updated September 2004 Page 5
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 10/651,453 (Further H11 Antigen Binding Fragments (H11) that August 29, 2003 Continuation of US Specifically Detect Cancer Cells, App.09/782,397 Nucleotides Encoding the Fragments, and (US-2003-0021779-A1) which is Use Thereof for the Prophylaxis and a Continuation of Detection of Cancers App.08/862,124) PCT/CA00/01027 Camel A6 Enhanced Phage Display Libraries of September 07, 2000 Human VH Fragments and Methods for Producing Same 10/070,503 (National Phase Camel A6 Enhanced Phage Display Libraries of October 23, 2003 Entry in the U.S.) Human VH Fragments and Methods for Producing Same 2384388 (National Phase Entry Camel A6 Enhanced Phage Display Libraries of March 03, 2002 in Canada) Human VH Fragments and Methods for Producing Same PCT/CA01/01845 (based on U.S. Llama A6 Phage Display Libraries of Human VH December 21, 2001 Provisional 60/258,031 filed Fragments November 22, 2000) 10/451,585 (National Phase Llama A6 Phage Display Libraries of Human VH June 21, 2003 Entry in the U.S.) Fragments VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 10/651,453 (Further U.S. Continuation of US App.09/782,397 (US-2003-0021779-A1) which is a Continuation of App.08/862,124) PCT/CA00/01027 Canada WO 01/18058 A2 March 15, 2001 10/070,503 (National Phase U.S. Entry in the U.S.) 2384388 (National Phase Entry Canada in Canada) PCT/CA01/01845 (based on U.S. Canada WO 02-051870 July 04, 2002 Provisional 60/258,031 filed November 22, 2000) 10/451,585 (National Phase U.S. Entry in the U.S.)
Updated September 2004 Page 6
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 2,447,832 (National Phase Llama A6 Phage Display Libraries of Human VH June 20, 2003 Entry in Canada) Fragments EP 01 27 1932.4 Llama A6 Phage Display Libraries of Human VH July 22, 2003 Fragments PCT/CA2004/000637 Proxinium Methods for Treating Cancer Using an April 30, 2004 (V84-845) Immunotoxin 60/554,580 (Provisional) T-Cell Epitopes in March 19, 2004 60/578,291 (Provisional) VB1-008 Tumor Specific Antibody June 10, 2004 VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 2,447,832 (National Phase Canada Entry in Canada) EP 01 27 1932.4 Europe PCT/CA2004/000637 U.S. 60/554,580 (Provisional) U.S. 60/578,291 (Provisional) U.S.
Updated September 2004 Page 1 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION
- ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,070,975 VIVENTIA(TM) August 14, 2000 Canada TMA573,326 January 9, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 865627 VIVENTIA(TM) February 9, 2001 Australia 885627 January 30, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 2093110 VIVENTIA(TM) February 14, 2001 Europe 2093110 February 19, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/205555 VIVENTIA(TM) February 5, 2001 U.S. 2,745,868 August 5, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 1,117,077 HYBRIDOMICS(TM) September 28, 2001 Canada TMA601,345 February 4, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/382,011 HYBRIDOMICS(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,117,078 IMMUNO MINING(TM) September 28, 2001 Canada TMA591,709 October 7, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 2 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 76/382,289 IMMUNO MINING(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,107,351 VBI Design Logo June 21, 2001 Canada TMA591,802 October 8, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 898237 VBI Design Logo December 17, 2001 Australia 898237 July 22, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 76/350,349 VBI Design Logo December 19, 2001 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 301 72 865.8/01 VBI Design Logo December 21, 2001 Germany 30172865 August 20, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 1,128,376 ARMED ANTIBODIES(TM) January 16, 2002 Canada TMA607,930 April 19, 2004 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 3 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 6/424,575 ARMED ANTIBODIES(TM) June 26, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,128,377 IMMUNOMINE(TM) January 16, 2002 Canada TMA 591,451 October 3, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/428,124 IMMUNOMINE(TM) June 27, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,140,763 UnLock(TM) May 13, 2002 Canada TMA607,270 April 7, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/467,853 UnLock(TM) November 8, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 30254575.1/05 UnLock(TM) November 7, 2002 Germany 30254575 August 25, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 4 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,211,855 Proxinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,609 Proxinium(TM) April 1, 2004 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,211,862 Vicinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,619 Vicinium(TM) April 1, 2004 U.S. - -----------------------------------------------------------------------------------------------------------------------------
SCHEDULE "D" MATERIAL CONTRACTS See attached list. MATERIAL AGREEMENTS 1. Exclusive License Agreement between Biovation Limited and Viventia Biotech Inc., dated March 8, 2004 2. Exclusive License Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated December 19, 2003 3. Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated March 1, 2002 4. License Agreement between McGill University and Novopharm Limited, dated April 28, 1994 5. License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated August 20, 2002 6. License Agreement between University of Zurich and Viventia Biotech Inc., dated January 9, 2003 7. Non-exclusive License Agreement between XOMA Ireland Limited and Viventia Biotech Inc., dated November 30, 2001 8. Property Lease between Almad Investments Limited and Viventia Biotech Inc., dated January 26, 2004 9. Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech Inc., dated November 20, 2000 EX-3.2 9 t17062exv3w2.txt EXHIBIT 3.2 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT 3.2 CONVERTIBLE SECURED DEBENTURE I S S U E D B Y: VIVENTIA BIOTECH INC. I S S U E D T O: ADH INVESTMENTS (1999) INC. NOVEMBER 3, 2004 TABLE OF CONTENTS
ARTICLE 1. INTERPRETATION.........................................................................................1 1.1. Definitions.....................................................................................1 1.2. Interpretation..................................................................................8 1.3. Schedules.......................................................................................8 1.4. Proper Law and Attornment.......................................................................8 1.5. Non-Business Days...............................................................................9 1.6. Application of Payments.........................................................................9 ARTICLE 2. DEBENTURE..............................................................................................9 2.1. Indebtedness....................................................................................9 ARTICLE 3. INTEREST...............................................................................................9 3.1. Interest........................................................................................9 ARTICLE 4. CONVERSION.............................................................................................9 4.1. Optional Conversion.............................................................................9 ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS.......................................................................11 5.1. Definitions....................................................................................11 5.2. Adjustment in Rights...........................................................................13 5.3. Adjustment in Conversion Price.................................................................14 5.4. Rules for Adjustment in Rights and Exercise Price..............................................16 5.5. Notice of Adjustment in Exercise Price and Rights..............................................18 5.6. Corporation to Reserve Shares..................................................................18 5.7. Applicable Securities Legislation..............................................................18 ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................................19 6.1. Corporation's Representations and Warranties...................................................19
ii
6.2. Holder Representations and Warranties..........................................................23 6.3. Holder's Acknowledgments.......................................................................24 6.4. Corporation's Positive Covenants...............................................................24 6.5. Corporation's Negative Covenants...............................................................27 ARTICLE 7. EVENTS OF DEFAULT.....................................................................................29 7.1. Events of Default..............................................................................29 7.2. Rights Upon Default............................................................................30 7.3. Charges and Expenses...........................................................................31 7.4. Further Assurances.............................................................................31 7.5. Performance by the Secured Party...............................................................31 7.6. Dealings by the Holder.........................................................................31 7.7. No Set-Off.....................................................................................31 ARTICLE 8. SECURITY..............................................................................................32 8.1. Security.......................................................................................32 ARTICLE 9. GENERAL PROVISIONS....................................................................................32 9.1. Notices........................................................................................32 9.2. Amendments.....................................................................................33 9.3. Time of the Essence............................................................................33 9.4. Severability...................................................................................34 9.5. Counterparts...................................................................................34 9.6. Further Assurances.............................................................................34 9.7. Entire Agreement...............................................................................34 9.8. Transferability................................................................................34 9.9. Parties In Interest............................................................................35
iii SCHEDULE A........Common Share Purchase Warrants SCHEDULE B........Conversion Notice SCHEDULE C........Security Interest SCHEDULE D........Material Contracts THIS INDENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005. CONVERTIBLE SECURED DEBENTURE THIS DEBENTURE issued as of the 3rd day of November, 2004. ISSUED BY: VIVENTIA BIOTECH INC., a corporation governed by the laws of the Province of Ontario (hereinafter, the "Corporation") ISSUED TO: ADH INVESTMENTS (1999) INC., a corporation governed by the laws of the Province of Ontario (hereinafter the "Holder") WHEREAS the Holder has agreed to purchase and the Corporation has agreed to sell a convertible secured debenture on the terms and conditions set out herein in the principal amount of $5,000,000; NOW THEREFORE this Debenture witnesses that in consideration of $1.00 and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation agrees as follows: ARTICLE 1. INTERPRETATION 1.1. DEFINITIONS For the purposes of this Debenture, unless otherwise defined herein, the following terms shall have the following meanings ascribed to them: (a) "BOARD" means the board of directors of the Corporation; (b) "BUSINESS DAY" means a day other than a Saturday, Sunday or any other day that is a statutory or civic holiday in the Province of Ontario; -2- (c) "CAPITAL LEASE" means a capital lease or a lease, which should be treated as a capital lease, in each case under generally accepted accounting principles; (d) "CHANGE OF CONTROL EVENT" means an event or series of related events whereby the Dan Family ceases to Control the Corporation; (e) "COLLATERAL" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (f) "COMMON SHARES" means the common shares in the capital of the Corporation, provided that if a change referred to in Sections 5.2 or 5.3 occurs in respect of or affecting the Common Shares, then thereafter "Common Shares" means the shares or other securities or property purchasable or receivable on the conversion of this Debenture as a result of any such change; (g) "COMMON SHARE PURCHASE WARRANTS" means the common share purchase warrants issued upon the conversion of this Debenture evidenced by a certificate in the form attached hereto as Schedule "A"; (h) "CONTRACTS" means agreements, franchises, leases, easements, servitudes, privileges and other rights acquired from persons; (i) "CONTROL" has the meaning given thereto in the Business Corporations Act (Ontario) on the date hereof; (j) "CONVERSION DATE" means 10:00 a.m. (Toronto time) on the effective date of conversion as provided in Section 4.1; (k) "CONVERSION NOTICE" has the meaning ascribed thereto in Section 4.1(a); (l) "CONVERSION PRICE" means $1.50, subject to adjustment as provided in Article 5; (m) "CURRENT MARKET PRICE" has the meaning ascribed thereto in Section 5.1; (n) "DAN FAMILY" means Leslie Dan, Andrea Dan-Hytman and their respective associates and affiliates, as defined in the Securities Act (Ontario); (o) "DEBENTURE" means this interest bearing convertible secured debenture of the Corporation in the principal amount of $5,000,000; (p) "DEFAULT" means an event, which, with the giving of notice, lapse of time or otherwise would constitute an Event of Default; (q) "DEFICIENCY" means, at any time, the difference, if any between: (i) the aggregate of: (A) the amount of the Obligations at that time; and (B) the Reasonable Expenses incurred up that time; and -3- (ii) the proceeds of disposition received by the Holder from a disposition of the Collateral in accordance with Section 3.1a(vi) of Schedule "C"; (r) "DIVIDEND PAID IN THE ORDINARY COURSE" has the meaning ascribed thereto in Section 5.1; (s) "ENCUMBRANCE" means, in respect of any Person, any mortgage, debenture, pledge, hypothec, lien, charge, assignment by way of security, consignment, lease, hypothecation, security interest granted or permitted by such Person or arising by operation of law, in respect of any such Person's property or assets, or any consignment or Capital Lease of property by such Person as consignee or lessee or any other security agreement, trust or arrangement having the effect of security for the payment of any debt, liability or obligation, or any title defect, adverse claim or other encumbrance and "ENCUMBRANCES", "ENCUMBER" and "ENCUMBERED" shall have corresponding meanings; (t) "EQUITY SHARES" has the meaning ascribed thereto in Section 5.1; (u) "EVENT OF DEFAULT" means any of the events described in Section 7.1; (v) "EXISTING LOCATIONS" means 147 Hamelin Street, Winnipeg, Manitoba and 10 Four Seasons Place, Suite 501, Toronto, Ontario; (w) "HOLDER'S COUNSEL" means the firm of Cassels Brock & Blackwell LLP or such other firm of legal counsel as the Holder may from time to time designate; (x) "INDEBTEDNESS" means, without duplication, with respect to any Person and calculated on a consolidated or combined basis, as applicable, (i) indebtedness for borrowed money, (ii) obligations under Capital Leases, (iii) obligations under letters of credit, guarantees, legally binding comfort letters or indemnities issued in connection therewith, whether issued for the benefit of the Corporation or a Subsidiary of the Corporation or another or others, (vi) obligations arising pursuant to bankers' acceptance facilities or indemnities issued in connection therewith, and (v) all other contingent obligations incurred for the purpose of or having the effect of providing financial assistance to another entity, including, without limitation, guarantees, endorsements of bills of exchange (other than for collection or deposit in the ordinary course of business), obligations to purchase assets regardless of the delivery or non-delivery thereof and obligations to make advances or otherwise provide financial assistance to any other entity, (y) "INTEREST" has the meaning ascribed thereto in Section 3.1; (z) "INTEREST CONVERSION PRICE" means the ten (10) day weighted average trading price of the Corporation's Common Shares on the TSX for the ten (10) consecutive trading days preceding the giving of a Conversion Notice less the maximum discount permitted by the TSX; (aa) "INTEREST RATE" has the meaning ascribed thereto in Section 3.1; -4- (bb) "MATERIAL ADVERSE EFFECT" means, (i) a material adverse effect on the business, assets, liabilities, operations, results of operations or condition (financial or other) of the Corporation on a consolidated basis, or the ability of the Corporation to carry on its business or a significant part of its business, (ii) any impairment of the ability of the Corporation to perform any of its obligations hereunder or otherwise, or (iii) any material impairment of any lien granted by the Corporation to the Holder, in each case as determined by the Holder; (cc) "MATERIAL CONTRACT" means all Contracts, the breach or default of which could have a Material Adverse Effect, all such Material Contracts of the Corporation and its Subsidiaries as of the date hereof being listed on Schedule "D" all as may be amended, supplemented, restated or replaced from time to time; and when used in relation to any Person, the term "Material Contracts" shall mean and refer to Material Contracts to which such Person is a party or by which it or any of its assets is bound and includes any Material Contract to which such Person may hereafter become a party or be bound, and "Material Contract" means any one of them; (dd) "MATURITY DATE" means 10:00 a.m. (Toronto time) on November 3, 2006; (ee) "OBLIGATION" means all indebtedness, liabilities and obligations (whether direct, indirect, absolute, contingent or otherwise) of the Corporation from time to time, under or in respect of this Debenture; (ff) "OTHER DEBENTURE(s)" means the interest bearing convertible secured debenture(s) of the Corporation being on the same terms and conditions as this Debenture in favour of Leslie L. Dan; (gg) "OTHER HOLDER" means Leslie L. Dan; (hh) "PATENTS" means the patents and patent applications identified in Appendix 1 to Schedule "C", and all registrations and recordings of those patents in Canada, the United States of America or elsewhere, including any reissue, continuation or other extension in whole or in part of any such patent; (ii) "PAYMENT AND SECURITY SHARING AGREEMENT" means the agreement of even date herewith among the Corporation, the Holder and the Other Holder dealing with payment and security sharing among the Holder and Other Holder; (jj) "PERMITTED ENCUMBRANCES" means, in respect of any Person, (i) undetermined or inchoate Encumbrances and charges incidental to construction, maintenance or operations which have not at the time been filed pursuant to law or which relate to obligations not yet due and delinquent; (ii) the Encumbrance of taxes and assessments for the then current year, the Encumbrance for taxes and assessments not at the time overdue and Encumbrances securing worker's compensation assessments and the lien for specified taxes and assessments which are overdue but the validity of which -5- is being contested at the time in good faith, if such Person shall have made on its books provision reasonably deemed by it to be adequate therefor; (iii) any Encumbrance or any right of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease provided that such obligations are not in default; (iv) any Encumbrance resulting from cash or governmental obligations deposited in the ordinary course of business in connection with contracts, bids, tenders or to secure worker's compensation, unemployment insurance, surety or appeal bonds, costs of litigation, when required by law, public and statutory obligations, liens or claims incidental to current construction, mechanics', warehousemen's, carriers' and other similar liens; (v) any Encumbrance resulting from security given in the ordinary course of business to a public utility or any governmental authority when required by such utility or governmental authority in connection with the operations of the Corporation; (vi) easements, rights of way and servitudes and other similar rights in real property which in the opinion of Holder's Counsel, acting reasonably, will not in the aggregate materially impair the use of the land concerned for the purpose for which it is held or used by such Person; (vii) title defects or irregularities which in the opinion of Holder's Counsel, acting reasonably, are of a minor nature and in the aggregate will not materially impair the use of the property for the purposes for which it is held by such person or materially affect the Security Interest; (viii) any Encumbrance resulting from any judgment rendered or claim filed against such Person which such Person shall be contesting in good faith and by appropriate proceedings, if such Person shall have made on its books provisions reasonably deemed by it to be adequate therefor; (ix) construction, contractors', mechanics', carriers', warehousemen's, suppliers' and materialmen's liens and liens in respect of vacation pay, workers' compensation, unemployment insurance or similar statutory obligations, provided the obligations secured by such liens are not yet due and payable and, in the case of construction liens, which have not yet been filed or for which the Corporation has not received written notice of a lien; (x) liens arising from court or arbitral proceedings, provided that the claims secured thereby are being contested in good faith by the Corporation or a subsidiary; execution thereon has been stayed and continues to be stayed; and such liens do not, in the aggregate, materially detract from the value of the assets of the Corporation or materially impair the use thereof in the business of the Corporation; -6- (xi) any Encumbrance resulting from the excess of the amount of any taxes, rates, assessments or governmental charges or levies for which final assessments have not been received over and above the amount of such taxes, rates, assessments or governmental charges or levies as estimated by a responsible officer of such Person; (xii) all rights reserved to or vested in any governmental authority by the terms of any lease, licence, franchise, grant or permit held by such Person or by any statutory provision to terminate any such lease, licence, franchise grant or permit or to require annual or periodic payments as a condition of the continuance thereof or to distrain against or to obtain a lien on any property or assets of such Person in the event of failure to make such annual or other periodic payments; (xiii) liens in connection with any Capital Lease to the extent they are limited to the assets which are the subject of such Capital Leases (or other agreement carrying the right to use); (xiv) Purchase Money Security Interests; (xv) the Security Interest; (xvi) the security interest in the Other Debenture(s); (xvii) such other liens as may be consented to in writing by the Holder; and (xviii) the extension, renewal or refinancing of any of the above; (kk) "PERMITTED INDEBTEDNESS" means in respect of the Corporation and the Subsidiaries, (i) Indebtedness incurred pursuant to this Debenture: (ii) Indebtedness incurred pursuant to the Other Debenture(s); and (iii) Indebtedness secured by Permitted Encumbrances; (ll) "PERSON" includes any individual, corporation, company, partnership, association state, trust or government or any agency of political subdivision of any government; (mm) "PRINCIPAL" means the principal amount of indebtedness outstanding from time to time under this Debenture; (nn) "PROCEEDS", of any Collateral, means property in any form derived, directly or indirectly, from any dealing with such Collateral or the proceeds therefrom and includes any payment representing indemnity or compensation for loss or damage to such Collateral or proceeds therefrom, including, without limitation, insurance proceeds; -7- (oo) "PURCHASE MONEY SECURITY INTEREST" means any Encumbrance given, assumed or arising by operation of law, including Capital Leases, to provide or secure, or to provide the obligor with funds to pay, the whole or any part of the consideration for the acquisition of property where the principal amount of the obligation secured by such Encumbrance is secured only by the property being acquired by the obligor, and includes the renewal or refinancing of any such Encumbrance upon the same property provided that the indebtedness secured and the security therefore are not increased thereby; (pp) "REASONABLE EXPENSES" means any and all reasonable expenses incurred from time to time by the Holder or any Receiver in connection with the protection, perfection or preservation of the security and other rights constituted hereby, in enforcing payment or performance of the Obligations or any part thereof or in locating, taking possession of, transporting, holding, repairing, processing, preparing for and arranging for the disposition of and/or disposing of the Collateral or in contemplation of any of the foregoing and any and all other reasonable expenses incurred by the Holder or any Receiver as a result of the Holder or such Receiver exercising any of its rights or remedies hereunder or at law, including, without in any way limiting the generality of the foregoing, any and all legal expenses including those incurred in any legal action or proceeding or appeal therefrom commenced or taken in good faith by the Holder and any and all fees and disbursements of any counsel, accountant or valuator or any similar Person employed by the Holder in connection with any of the foregoing and the costs of insurance and payment of taxes (other than taxes relating to the income of the Holder) and other charges incurred in retaking, holding, repairing, processing and preparing for disposition and disposing of the Collateral (qq) "RECEIVER" means a receiver, a reorganization manager or any similar Person appointed in accordance with Section 3 of Schedule "C"; (rr) "SECURITY DOCUMENTS" has the meaning ascribed thereto in Section 8.1; (ss) "SECURITY INTEREST" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (tt) "SUBSIDIARY" means 20025 Yukon Inc. and "SUBSIDIARIES" means the Subsidiary and/or any other corporation of which more than 50% of the outstanding shares of any class carrying voting rights are beneficially owned, directly or indirectly, by the Corporation; (uu) "TRADE MARKS" means the trade marks, trade names, trade styles, service marks, certification marks, prints and labels identified in Appendix 2 to Schedule "C, and all similar, present or future marks, styles, prints or labels and all applications, registrations and recordings thereof in Canada, the United States of America or elsewhere, including every renewal, reissue or other extension of any registration or recording; (vv) "TSX" means the Toronto Stock Exchange; and -8- (ww) "UNITS" means the units comprised of one Common Share and one half of one Common Share Purchase Warrant to be issued upon the conversion of this Debenture; 1.2. INTERPRETATION For the purposes of this Debenture, except as expressly provided or unless the context requires otherwise: (a) the headings used throughout this Debenture are for ease of reference only and shall not in any way affect the meaning or interpretation of this Debenture; (b) any reference herein to a numbered or lettered part or section refers to the specified part or section of this Debenture; (c) "hereto", "herein", "hereof", "hereunder" and similar expressions refer to this Debenture and not to any particular part or section of this Debenture; (d) any words or expressions contained in this Debenture which impart the singular number include the plural number and vice versa; (e) any words or expressions contained in this Debenture which impart any gender include all genders; and (f) all dollar amounts expressed herein refer to lawful currency of Canada. 1.3. SCHEDULES The following schedules attached hereto are hereby incorporated into and form part of this Debenture:
Schedule "A" - Common Share Purchase Warrants Schedule "B" - Conversion Notice Schedule "C" - Security Interest Schedule "D" - Material Contracts
1.4. PROPER LAW AND ATTORNMENT This Debenture and all matters arising hereunder shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Each of the parties hereto, by the execution and delivery of this Debenture, irrevocably and unconditionally, with respect to any matter or thing arising out of or pertaining to this Debenture, hereby attorns and submits to the non-exclusive jurisdiction of the courts of the Province of Ontario for the determination of all matters arising pursuant to this Debenture. -9- 1.5. NON-BUSINESS DAYS Whenever any payment hereunder (whether in regard to Principal, Interest or otherwise) shall become due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day. During an extension under this Section 1.5 of any due date for payment of any Principal sum, Interest shall be payable to the date of actual payment of such Principal sum at the rate payable hereunder. 1.6. APPLICATION OF PAYMENTS All payments made in respect of the repayment of this Debenture shall be applied firstly to payment of costs, secondly to payment of Interest and thirdly to payment of Principal. ARTICLE 2. DEBENTURE 2.1. INDEBTEDNESS The Corporation for value received hereby promises to pay to or to the order of the Holder on the Maturity Date, the principal amount of Five Million Dollars ($5,000,000). On the Maturity Date, or earlier as required by Section 7.2 hereof, payment of Principal is to be made in lawful money of Canada at the address of the Holder set out in Section 9.1 or other location designated by the Holder by notice to the Corporation. The Obligations and the rights of the Holder and the Other Holder, as between themselves, are subject to the provisions of the Payment and Security Sharing Agreement. ARTICLE 3. INTEREST 3.1. INTEREST The Corporation shall pay interest ("Interest") on the Principal outstanding from time to time under this Debenture (including without limitation any capitalized interest), and any other monies due and payable hereunder, both before and after maturity, default or judgment, at four and one half per cent (4.5%) per annum, computed on a 365 day basis (the "Interest Rate"), accruing daily and compounded annually until the Principal has been paid in full or has been converted. For greater certainty, on November 3, 2005 all accrued interest shall be capitalized and added to the Principal. Interest shall accrue until full payment of the Principal has been received by the Holder or all of the Principal has been converted into Units in accordance with Article 4. ARTICLE 4. CONVERSION 4.1. OPTIONAL CONVERSION (a) Subject to the provisions of this Debenture, the Holder may, at its option, at any time from the date of issuance of this Debenture, in whole or in part, by delivering to the Corporation this Debenture together with the conversion notice attached as Schedule "B" hereto (the "Conversion Notice") duly executed by the Holder, -10- indicating what portion of the Principal and/or accrued Interest the Holder then wishes to convert, convert all or any of the Principal and/or accrued Interest into Units, and the Principal and/or accrued Interest will be deemed to be reduced accordingly. (b) The Principal will be converted into Units at the Conversion Price and the Conversion Price will be subject to adjustment in accordance with Article 5. Accrued Interest will be converted into Units at the Interest Conversion Price. (c) The completion by the Holder of a Conversion Notice and delivery of same to the Corporation for conversion shall be deemed to create and constitute a contract between the Holder and the Corporation whereby (i) the Holder or its nominee designated in the Conversion Notice subscribes for the number of Units which the Holder shall be entitled to receive upon such conversion of the Principal and Interest stated in the Conversion Notice; (ii) provided the Common Shares comprising the Units so subscribed for are issued as fully paid and non-assessable, the indebtedness under this Debenture is satisfied and discharged to the extent this Debenture is converted; and (iii) the Corporation and the Holder agree that the satisfaction and discharge of the Indebtedness under this Debenture evidenced by this Debenture, to the extent of the Principal and accrued Interest so converted, and completion of conversion, constitutes full payment of the subscription price for the Units issuable on such conversion and thereafter such portion of the Principal and accrued Interest under this Debenture shall not be considered outstanding hereunder and the Holder shall have no right with respect to such Principal and accrued Interest except to receive the certificate for Common Shares and Common Share Purchase Warrants comprising the Units. With respect to the Units, Common Shares and Common Share Purchase Warrants, as required from time to time under the securities legislation which governs the Corporation or any hold period imposed by a regulatory authority, the Holder agrees to be bound by any applicable hold period. The certificates evidencing the Common Shares and Common Share Purchase Warrants shall contain the following legend: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005." (d) Concurrently with the surrender of this Debenture for conversion pursuant to this Article 4, the Corporation will provide to the Holder a receipt acknowledging the Corporation's obligation to issue Units to the Holder. As promptly as practicable -11- after the surrender or deemed surrender of this Debenture for conversion pursuant to this Section 4.1(d) (and in any event within three Business Days), the Corporation will issue and/or deliver, as the case may be, to the Holder or its nominee(s) a certificate or certificates representing the number of fully paid and non-assessable Common Shares and Common Share Purchase Warrants comprising the Units into which all or any portion of the Principal and accrued Interest has been converted. (e) Upon conversion pursuant to this Article 4, the Debenture shall be deemed cancelled and the Principal and accrued Interest evidenced hereby shall be and shall be deemed to be fully satisfied and discharged, and, if any Principal remains outstanding under this Debenture after giving effect to such conversion, the Corporation will issue a new Debenture, in form identical to this Debenture, except that it will be equal in principal amount to the amount of the Principal amount outstanding immediately following the conversion. (f) The conversion of this Debenture pursuant to this Article 4 will be deemed to have been made at the close of business on the date on which the certificate(s) referred to in Section 4.1(d) have been received by the Holder so that the Holder's rights in respect of the converted portion of the Principal and accrued Interest will terminate at that time and the Person or Persons entitled to receive Units into which the whole or any part of this Debenture is converted will be treated, as between the Corporation and that Person or Persons, as having become the holder or holders of record of the Common Shares and Common Share Purchase Warrants comprising those Units at that time. (g) As a condition precedent to taking any action which would require an adjustment or readjustment of the Conversion Price pursuant to Article 5, the Corporation will take any action which may, in the opinion of its counsel, be necessary for the Corporation to validly and legally issue, as fully paid and non-assessable common shares, all the Common Shares which the Holder is entitled to receive on the conversion of the Debenture. The Corporation agrees that it will at all times keep sufficient Common Shares reserved for the purpose of issue upon conversion of the Debenture. All Common Shares will be duly and validly issued as fully paid and non-assessable common shares in the capital of the Corporation. ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS 5.1. DEFINITIONS In this Article 5, the following terms have the following meanings: "CURRENT MARKET PRICE" at any particular date means the weighted average trading price of the Common Shares on the TSX (or, if the Common Shares are not then listed and posted for trading on the TSX, on any other stock exchange in Canada on which the Common Shares are listed and posted for trading as may be selected for that purpose by the Board) during the 20 consecutive trading days ending on a date not earlier than the fifth trading day before the particular date or, if the Common Shares are not listed and posted for trading on -12- any stock exchange, the current market price of the Common Shares as determined by the Board, which determination shall be conclusive; and for the purposes hereof, "trading day" means a day on which the relevant stock exchange is open for business and the Common Shares may be traded on that exchange on that day; "DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the Common Shares in any financial year of the Corporation, whether in (i) cash, (ii) securities of the Corporation, including rights, options or warrants to purchase any securities or property of the Corporation or other assets of the Corporation (but excluding rights, options or warrants referred to in Section 5.3(b) and rights, options or warrants referred to in parentheses in Section 5.3(c)(iv)), or (iii) property or other assets of the Corporation, in each case to the extent that the amount or value of such dividend together with the amount or value of all other such dividends theretofore paid in such financial year (any such securities, property or other assets so distributed to be valued at the fair market value of such securities, property or other assets, as the case may be, as determined by the board of directors of the Corporation, which determination shall be conclusive) does not exceed the greater of: (i) 150% of the greater of (A) the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year; and (B) one-third of the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of thirty-six (36) consecutive months ended immediately prior to the first day of such financial year; or (ii) 100% of the consolidated net income of the Corporation before extraordinary items (but after dividends payable on all shares ranking prior to, or on a parity with the Common Shares, with respect to the payment of dividends) for the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year, such consolidated net income, extraordinary items and dividends to be as shown in the audited consolidated financial statements of the Corporation for such period of twelve (12) consecutive months or if there are no audited consolidated financial statements for such period, computed in accordance with generally accepted accounting principles, consistent with those applied in the -13- preparation of the most recent audited consolidated financial statements of the Corporation; and "EQUITY SHARES" means the Common Shares and any shares of any other class or series of the Corporation which may from time to time be authorized for issue if by their terms such shares confer on the holders thereof the right to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation beyond a fixed sum or a fixed sum plus accrued dividends. 5.2. ADJUSTMENT IN RIGHTS (a) If, at any time after the date hereof and prior to the Maturity Date, there is a reclassification of the outstanding Common Shares or change of the Common Shares into other shares or securities or any other capital reorganization of the Corporation or a consolidation, merger or amalgamation of the Corporation with or into any other corporation (any such event being called a "Capital Reorganization"), the Holder shall be entitled to receive and shall accept for the same aggregate consideration, upon the conversion of this Debenture at any time after the record date on which the holders of Common Shares are determined for the purpose of the Capital Reorganization (the "relevant record date"), in lieu of the number of securities to which it was theretofore entitled upon such exercise, the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization that the Holder would have been entitled to receive as a result of such Capital Reorganization if, on the relevant record date, it had been the holder of record of the number of Common Shares in respect of which the Debenture is being converted, and such shares or other securities shall be subject to adjustment thereafter in accordance with provisions which are the same, as nearly as may be possible, as those contained in this Article 5; provided that no such Capital Reorganization shall be implemented unless all necessary steps have been taken so that the Holder shall be entitled to receive the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization as provided above. (b) If, at any time after the date hereof and prior to the Maturity Date, any adjustment in the Conversion Price shall occur as a result of: (i) an event referred to in Section 5.3(a); (ii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(b); or (iii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(c) if such event constitutes the issue or distribution to the holders of all of its outstanding Common Shares of (i) Equity Shares, or (ii) securities exchangeable for or convertible into Equity Shares at an exchange or conversion price per share less than the Current Market Price on such record date, or (iii) rights, options or warrants to acquire Equity Shares or securities exchangeable for or convertible into Equity Shares at an exercise, exchange -14- or conversion price per share less than the Current Market Price on such record date; then the number of securities purchasable upon the subsequent conversion of the Debenture shall be adjusted simultaneously with the adjustment to the Conversion Price provided in Section 5.3 by multiplying the number of securities issuable upon the conversion of the Debenture immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the adjustment of the Conversion Price. 5.3. ADJUSTMENT IN CONVERSION PRICE The Conversion Price shall be subject to adjustment from time to time as follows: (a) If, at any time after the date hereof and prior to the Maturity Date, the Corporation: (i) subdivides its outstanding Common Shares into a greater number of shares, (ii) consolidates its outstanding Common Shares into a smaller number of shares, or (iii) issues Common Shares to the holders of all of its outstanding Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, (any of such events being called a "Common Share Reorganization"), the Conversion Price shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Common Share Reorganization (the "relevant record date") by multiplying the Conversion Price in effect immediately prior to the relevant record date by a fraction: (A) the numerator of which shall be the number of Common Shares outstanding on the relevant record date before giving effect to the Common Share Reorganization; and (B) the denominator of which shall be the number of Common Shares outstanding on the relevant record date after giving effect to the Common Share Reorganization. (b) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date for the issue of rights, options or warrants to the holders of all of its outstanding Common Shares (the "relevant record date") under which such holders are entitled, during a period expiring not more than 45 days after the relevant record date (the "Rights Period"), to subscribe for or purchase Common Shares at a price per share, or securities exchangeable for or convertible into Common Shares at an exchange or conversion price per share less than 95% of the Current Market Price on the relevant record date (any of such events being called a "Rights Offering"), the Conversion Price shall be adjusted effective immediately after the end of the Rights -15- Period by multiplying the Conversion Price in effect immediately prior to the end of the Rights Period by a fraction: (i) the numerator of which shall be the aggregate of: (A) the number of Common Shares outstanding on the relevant record date, and (B) the number determined by dividing (1) either (a) the product of the number of Common Shares issued or subscribed for during the Rights Period under the Rights Offering and the price at which such Common Shares were offered, or, as the case may be, (b) the product of the exchange or conversion price of the securities exchangeable for or convertible into Common Shares and the number of Common Shares for, or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period, by (2) the Current Market Price on the relevant record date; and (ii) the denominator of which shall be, in the case of Section 5.3(b)(i)(B)(1)(a), the number of Common Shares outstanding on the relevant record date plus the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering and, in the case of Section 5.3(b)(i)(B)(1)(b), the number of Common Shares outstanding on the relevant record date plus the number of Common Share for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period. If the Debenture has been converted during the period beginning immediately after the record date for a Rights Offering and ending on the last day of the Rights Period for that Rights Offering then, in addition to the securities to which the Holder is otherwise entitled upon such exercise pursuant to this Debenture, the Holder shall be entitled to that number of additional securities which, when added to the number of securities to which the Holder is entitled upon such exercise, equals the number of securities to which the Holder would have been entitled upon exercise if the Holder had converted the Debenture immediately after the end of the Rights Period and after giving effect to the adjustment of the Conversion Price provided for in this Section 5.3(b). Such additional Common Shares shall be deemed to have been issued to the Holder immediately following the end of the Rights Period. (c) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date (the "relevant record date") for the issue or distribution to the holders of all of its outstanding Common Shares of: (i) shares of any class in its capital, (ii) evidences of its Indebtedness, -16- (iii) assets or property, or (iv) rights, options or warrants to subscribe for or purchase any of the foregoing (other than rights, options or warrants to purchase Common Shares exercisable within 45 days of the date of issue of the rights, options or warrants at a price per share equal to or greater than 95% of the Current Market Price), and if such issue or distribution does not constitute a Common Share Reorganization, a Rights Offering or a Dividend Paid in the Ordinary Course (any of such events referred to in Sections 5.3(c)(i) through 5.3(c)(iv) being called a "Special Distribution"), the Conversion Price shall be adjusted immediately after the relevant record date by multiplying the Conversion Price in effect on the relevant record date by a fraction: (A) the numerator of which shall be the difference obtained when (a) the amount by which the aggregate fair market value of the shares, rights, options, warrants, evidences of Indebtedness or assets or property, as the case may be, which are distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation, is subtracted from (b) the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; and (B) the denominator of which shall be the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; provided that no such adjustment shall be made if the result of such adjustment would be to increase the Conversion Price in effect immediately before the relevant record date. Any determination of fair market value shall be made by the Board and their determination shall be conclusive. To the extent that any Special Distribution is not made, the Conversion Price shall be readjusted effective immediately to the Conversion Price that would then be in effect based upon the shares, rights, options or warrants, evidences of Indebtedness, assets or property actually distributed. 5.4. RULES FOR ADJUSTMENT IN RIGHTS AND EXERCISE PRICE For the purpose of this Article 5: (a) The adjustments provided for in this Article 5 are cumulative and shall be made successively wherever an event referred to in a particular section of this Article occurs, subject to the following provisions of this Article. (b) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price and no adjustment shall be made in the number of securities issuable on conversion of the Debenture unless it would result in a change of at least one-hundredths of a -17- Common Share; provided, however, that any adjustments which, by reason of this section, are not required to be made shall be carried forward and taken into account in a subsequent adjustment and so on. (c) Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any computation under Section 5.3. (d) No adjustment to the Conversion Price shall be made in respect of any event described in Section 5.3 (other than the events referred to in Sections 5.3(a)(i) and 5.3(a)(ii)) if the Holder is entitled to participate in such event on the same terms as though, and to the same effect as if, it had converted this Debenture in full prior to or on the effective date or record date of such event, provided that such participation is subject to all necessary regulatory approval. (e) In any case in which this Article 5 requires that an adjustment become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Holder in respect of the conversion of the Debenture after such record date and before the occurrence of such event the additional securities issuable upon such exercise by reason of the adjustment required by such event and delivering to the Holder any distributions declared with respect to such additional securities after such record date and before such event; provided, however, that the Corporation delivers to the Holder an appropriate instrument evidencing its right to receive such additional securities and such distributions upon the occurrence of the event requiring such adjustment. (f) If the Corporation fixes a record date to determine the holders of Common Shares entitled to receive any dividend or distribution or fixes a record date to take any other action and thereafter, but before the distribution to shareholders of any such dividend or distribution or the taking of such other action, the Corporation legally abandons its plan to pay such dividend or distribution or take such other action, then no adjustment pursuant to this paragraph shall be required by reason of the fixing of such record date. (g) If the Board does not fix a record date for a Common Share Reorganization, Special Distribution or Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the close of business on the day on which the Board authorizes the making of the Common Shares Reorganization, Special Distribution or Rights Offering, as the case may be. (h) If any question at any time arises with respect to the Conversion Price or the number of Common Shares issuable upon the conversion of this Debenture, such question shall be conclusively determined by the auditors from time to time of the Corporation, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the Corporation with the concurrence of the Holder, and any such determination shall be binding upon the Holder, the Corporation and all shareholders. If any such determination is made, the Corporation shall deliver a certificate to the Holder describing such determination. -18- (i) As a condition precedent to the taking of any action which would require any adjustment to the conversion Rights or Conversion Price, the Corporation must have taken all action which may be necessary in order that the Corporation shall have issued and reserved in its authorized capital and may validly and legally issue as fully-paid and non-assessable all of the Common Shares or other securities which the Holder is entitled to receive on full conversion hereof in accordance with the provisions hereof. (j) In the case the Corporation, after the date of issuance of this Debenture, takes any action affecting the Common Shares, other than an action described in Article 5, which in the opinion of the Board would materially affect the rights of the Holder, the Conversion Price will be adjusted in such manner, if any, and at such time by action by the Board but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the Board so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the Board has determined it to be equitable to make no adjustment. 5.5. NOTICE OF ADJUSTMENT IN EXERCISE PRICE AND RIGHTS (a) At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require an adjustment pursuant to this Article 5, the Corporation shall deliver to the Holder a certificate of the Corporation specifying the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. (b) In case any adjustment for which a notice in Section 5.5(a) has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to the Holder a certificate of the Corporation containing a computation of such adjustment. 5.6. CORPORATION TO RESERVE SHARES The Corporation covenants with the Holder that the Corporation will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon conversion of this Debenture as provided in this Article 5, and issue to the Holder or its nominee upon exercise of the conversion rights hereunder, such number of Common Shares as will then be issuable upon the conversion of this Debenture. 5.7. APPLICABLE SECURITIES LEGISLATION The Corporation will not, directly or indirectly, do any act or thing or, to the extent that it is able, permit any act or thing to be done, which would remove or deny any registration or prospectus exemption available under any applicable securities legislation with respect to the issuance of Common Shares upon the exercise of the conversion rights contained in this Debenture. -19- ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS 6.1. CORPORATION'S REPRESENTATIONS AND WARRANTIES The Corporation hereby represents, warrants and covenants to and with the Holder and acknowledges that the Holder is relying upon such representations, warranties and covenants (which representations, warranties and covenants shall survive the date hereof) that: (a) each of the Corporation and the Subsidiary is duly organized and validly existing under the laws of Ontario and Yukon, respectively; each is duly registered, licensed or qualified as an extra-provincial corporation in each jurisdiction where it carries on business or where the failure to be so registered, licensed or qualified will result in a Material Adverse Effect; other than the Subsidiary, a wholly-owned subsidiary of the Corporation, the Corporation has no Subsidiaries; (b) the Corporation has the corporate power, capacity and authority to enter into, and to perform its obligations under, this Debenture; this Debenture has been duly authorized, executed and delivered by the Corporation and is a valid and binding obligation of it, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; all agreements contemplated by this Debenture to which the Corporation is a party will be duly authorized, executed and delivered by the Corporation and will be valid and binding obligations of it, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; (c) each of the Corporation and the Subsidiary has the corporate power and capacity to own or lease its assets and to carry on its business as now conducted by it and as is presently intended to be conducted by it. The Corporation carries on business only at the Existing Locations and all Collateral is located at the Existing Locations; (d) the issue of this Debenture and the performance by the Corporation of its other obligations contemplated hereby does not require the approval or consent of any government authority having jurisdiction, except such as has already been obtained and will not result in a breach of, and does not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and does not and will not conflict with, (i) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the shareholders and directors of the Corporation or the Subsidiary, any Material Contract; (ii) to the knowledge of the Corporation, any statute, rule or regulation applicable to the Corporation or the Subsidiary; and (iii) to the knowledge of the Corporation, any judgment decree or order binding the Corporation, the Subsidiary or the property or assets of the Corporation or the Subsidiary; -20- (e) the authorized capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of preference shares, issuable in series, of which, as at the date hereof 29,186,465 Common Shares (and no other shares) are issued and outstanding as fully paid and non-assessable; the authorized capital of the Subsidiary consists of an unlimited number of class A shares of which, as at the date hereof, one class A share (and no other shares) is issued and outstanding as fully paid and non-assessable, and such share is owned by the Corporation; all such issued and outstanding securities have been validly issued and are outstanding as fully paid and non-assessable; there are no shareholders agreements, pooling agreements, voting trusts or other agreements or understandings with respect to the voting of any securities, or any of them, of the Corporation or of the Subsidiary; other than the convertible debentures issued on June 20, 2002 to the Holder and Other Holder which will be repaid on the date hereof, 11,447,113 share purchase warrants issued and outstanding and 1,596,992 options to purchase Common Shares, each of which entitles the holder to purchase one Common Share at varying exercise prices, there are no agreements, options, warrants, rights of conversion or other rights pursuant to which either the Corporation or the Subsidiary is, or may become, obligated to issue any shares or any securities convertible or exchangeable, directly or indirectly, into any shares of the Corporation or the Subsidiary, respectively. (f) the Common Shares to be delivered to the Holder, when delivered to the Holder, shall be fully-paid and non-assessable shares in the capital of the Corporation; (g) the Corporation will, at all times while the Common Share Purchase Warrants are outstanding, allot and maintain sufficient number of Common Shares to satisfy the exercise of Common Share Purchase Warrants comprising the Purchased Units; (h) each of the Corporation and the Subsidiary is current and up-to-date with all filings required to be made by it under the corporate laws of its jurisdiction of incorporation and the securities laws of the provinces of Canada where it is a reporting issuer or its equivalent, as applicable except where not filing would not have a Material Adverse Effect; (i) the Corporation is a reporting issuer not in default of its obligations under the securities laws of British Columbia, Alberta, Manitoba and Ontario (the "Provinces") and no material change relating to the Corporation has occurred with respect to which the requisite material change report has not been filed under the securities laws of the Provinces and no such disclosure has been made on a confidential basis; (j) none of the materials filed by or on behalf of the Corporation with the applicable securities commissions or the stock exchanges (the "Public Record") contained a misrepresentation as at the date of such filing which has not been corrected; (k) to the knowledge of the Corporation, each of the Corporation and the Subsidiary has conducted and is conducting its business in compliance with all applicable material licensing, anti-pollution and environmental protection legislation, regulations or by-laws or other similar legislation, laws, by-laws, rules and regulations of any governmental or regulatory bodies; to the knowledge of the Corporation, there is no -21- licensing, anti-pollution or environmental legislation, regulation, by-law or lawful requirement presently in force which the Corporation anticipates that it or the Subsidiary will be unable to comply with without adversely affecting its financial condition, results of operations, business or prospects in any jurisdiction in which its business is carried on; (l) to the knowledge of the Corporation, each of the Corporation and the Subsidiary holds all material licenses, certificates, registrations, permits, consents or qualifications required by the appropriate state, provincial, municipal or federal regulatory agencies or bodies necessary in order to enable its business to be carried on as now conducted and to the knowledge of the Corporation, all such licenses, certificates, registrations, permits, consents and qualifications are valid and subsisting and in good standing and do not contain any unusual burdensome provision, condition or limitation which has a Material Adverse Effect on the Corporation or the Subsidiary and, to the knowledge of the Corporation, neither the Corporation nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of any such licenses, certificates, registrations, permits, consents, or qualifications which, if the subject of an unfavorable decision, ruling or finding would materially and adversely affect the conduct of the business, operations, financial condition or income or future prospects of the Corporation or the Subsidiary; (m) to the knowledge of the Corporation, no legal or governmental proceedings have been instituted or threatened to which either the Corporation or the Subsidiary is a party or to which the property of the Corporation or the Subsidiary is subject that would result individually or in the aggregate in a Material Adverse Effect; (n) the audited consolidated annual financial statements of the Corporation as at and for the year ended December 31, 2003 contained in the Corporation's annual report for such year: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at the end of such fiscal year and the consolidated results of its operations and the changes in its financial position for the year then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, -22- and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal year other than as specified in the Public Record; (o) the unaudited consolidated interim financial statements of the Corporation as at and for the six months ended June 30, 2004: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at June 30, 2004 and the consolidated results of its operations and the changes in its financial position for the period then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal period other than as specified in the Public Record; (p) the auditors of the Corporation who audited the consolidated financial statements for the most recently completed fiscal year for which audited financial statements are available and who provided their audit report thereon are independent public accountants as required under applicable Canadian securities laws; (q) each of the Corporation and the Subsidiary has filed all necessary tax returns and has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and there are no tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon with respect to the Corporation or the Subsidiary which, in any of the above cases, might reasonably be expected to result in an adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Corporation or the Subsidiary, other than existing tax deficiencies not in excess of $50,000; (r) no order ceasing or suspending trading in securities of the Corporation or prohibiting the sale of securities by the Corporation has been issued and, to the knowledge of the Corporation, no proceedings for this purpose have been instituted or are pending; (s) to the knowledge of the Corporation, each of the Corporation and the Subsidiary is in compliance with all laws respecting employment and employment practices, terms -23- and conditions of employment, pay equity and wages, except where such non-compliance would not constitute an adverse material fact of the Corporation or the Subsidiary or result in an adverse material change to the Corporation or the Subsidiary, and has not and is not engaged in any unfair labour practice; (t) there is no requirement for the Corporation to make any filing with, give notice to or obtain any licence, permit, certificate, registration, authorization, consent or approval of any governmental or regulatory authority or third party as a condition to the execution, delivery and performance of this Debenture by the Corporation except for filing with the Ontario Securities Commission ("OSC") of a report on Form 45-501F1 or similar filings required on the issue of the Common Shares and Common Share Purchase Warrants issuable pursuant to this Debenture, each prepared and executed in accordance with OSC Rule 45-501 and accompanied by the prescribed fees, and complying with the requirements imposed by the TSX as a condition to the listing of the Common Shares issuable upon conversion of the Debenture and exercise of the Warrants; (u) each of the Corporation and the Subsidiary has good title to the assets which are subject to the Security Interest, free and clear of any Encumbrances other than Permitted Encumbrances, whether fixed or floating, on any such assets and no Person has any agreement or right to acquire an interest in such assets, other than as provided herein; (v) no Default or Event of Default has occurred and is continuing; (w) neither the Corporation nor the Subsidiary has any Indebtedness other than Permitted Indebtedness; and (x) Appendix 1 and Appendix 2 of Schedule C provide a complete and accurate description of all of the material Patents and Trade Marks of the Corporation, respectively, and the Corporation does not own, license or have any other interest in any other material Patents or Trademarks except as disclosed therein. 6.2. HOLDER REPRESENTATIONS AND WARRANTIES The Holder represents, warrants and certifies to the Corporation as follows and acknowledges that the Corporation is relying on such representations, warranties and certification in selling this Debenture: (a) the Holder is purchasing the Debenture as principal for the Holder's own account and not for the benefit of any other Person; (b) the Holder is a resident of the Province of Ontario; (c) this Debenture has been duly authorized, executed and delivered by, and constitutes a legal, valid, binding and enforceable obligation of, the Holder; (d) the Holder has not received any document purporting to describe the business and affairs of the Corporation that has been prepared primarily for delivery to and review -24- by prospective investors so as to assist those investors to make an investment decision in respect of the Debentures being sold; (e) the Holder has not been created or is not being used primarily for the purpose of acquiring or holding securities of the Corporation; (f) the Holder, if a company, either (i) had net assets of at least $5,000,000 as reflected in its most recently prepared financial statements; or (ii) is a wholly-owned subsidiary of an individual who beneficially owns, or who together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes, but net of any related liability (necessary liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets) exceeds $1,000,000; (g) the Holder, if an individual, beneficially owns, or together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000. 6.3. HOLDER'S ACKNOWLEDGMENTS The Holder acknowledges that: (a) the Debentures and any securities into which they are convertible will be subject to transfer and resale restrictions pursuant to the Securities Act (Ontario) and the regulation, rules, orders, instruments and published policy statements applicable thereunder, including Multilateral Instrument 45-102 Resale of Securities; (b) the Holder's purchase of the Debentures has not been made through or as a result of, and the distribution of the Debentures is not being accompanied by, an advertisement or general solicitation in printed or public media, or general or regular print circulation, radio or television or telecommunications, including electronic display of any other form of advertisement; (c) the Holder is responsible for obtaining such legal advice as the undersigned considers appropriate in connection with the execution, delivery and performance of this Debenture and any subsequent transfer or resale of Debentures or any securities into which they are convertible. 6.4. CORPORATION'S POSITIVE COVENANTS The Corporation covenants and agrees that so long as this Debenture is outstanding: (a) Punctual Payment. It will duly and punctually pay or cause to be paid all amounts payable by the Corporation to the Holder hereunder at the times and in the manner provided for herein; (b) Use of Proceeds. Principal amounts advanced under this Debenture shall only be used to finance discovery research and product development initiatives as approved by the Board; -25- (c) Conduct of Business. It will and will cause each of its Subsidiaries to do all things necessary or desirable to maintain its and their respective corporate existence in its and their respective present jurisdictions of incorporation, maintain its and their respective corporate power and capacity to own its and their respective properties and assets, and carry on its and their respective businesses in a commercially reasonable manner; (d) Maintain Property and Assets. It will maintain and cause each of its Subsidiaries to maintain all of its property and assets in good repair and working condition, consistent with the industry standards, reasonable wear and tear excepted, and continue to carry on its business as presently conducted and in compliance with all licences and permits and maintain its books and records in a manner consistent with good business practice and in a manner sufficient to permit the Holder to confirm compliance by the Corporation with the Corporation's covenants hereunder; (e) Inspection. It will at any reasonable time and from time to time upon reasonable prior notice, permit the Holder or representatives thereof to conduct inspections of the books and records of the Holder and its Subsidiaries and to make copies thereof, and to discuss the affairs, finances and accounts of the Corporation and its Subsidiaries with the auditors and officers of the Corporation; (f) Other Obligations. It will pay or cause to be paid and cause each of its Subsidiaries to pay or cause to be paid when required all amounts related to taxes, wages, workers' compensation obligations, government royalties or pension fund obligations and any other amount which may result in an Encumbrance against the assets of the Corporation or any of its Subsidiaries arising under any statute or regulation, other than a Permitted Encumbrance or to make adequate reserve for any such amount the payment of which is being contested; (g) Compliance with Applicable Law and Contracts. It will do or cause to be done or cause each of its Subsidiaries to do or cause to be done all acts necessary or desirable to comply with all applicable, federal, provincial and municipal laws, requirements, standards, the non-compliance with which could have a Material Adverse Effect upon it or any Subsidiary. It will and will cause each of its Subsidiaries to comply with the requirements of all Material Contracts to which it and they respectively are parties or by which respectively it and they or its and their properties are bound, non-compliance with which would, singly or in the aggregate, have a Material Adverse Effect upon its or any one of its Subsidiaries' respective business, property, financial condition or prospects; (h) Accounting Methods and Financial Records. It will and will cause each of its Subsidiaries to maintain a system of accounting which is established and administered in accordance with Canadian generally accepted accounting principles, keep adequate records and books of account in which accurate and complete entries shall be made in accordance with Canadian generally accepted accounting principles reflecting all transactions required to be reflected by such accounting principles and keep accurate and complete records of any property owned by it and each of them, respectively; -26- (i) Financial Statements. It will provide the Holder with its audited and unaudited financial statements for the Corporation in accordance with applicable corporate and securities laws together with such other financial information as the Holder may request from time to time; (j) Payment of Taxes and Claims. It will and will cause each of its Subsidiaries to: (i) pay and discharge all lawful claims for labour, material and supplies; (ii) pay and discharge all obligations which may result in liens on its assets; (iii) pay and discharge all taxes payable by it and each of them, respectively; and (iv) withhold and collect all taxes required to be withheld and collected by it and each of them, respectively, and remit such taxes to the appropriate governmental body at the time and in the manner required; provided that nothing in this Section 6.4(j) shall preclude the Corporation from contesting in good faith any of the matters referred to therein if it makes an adequate reserve for any such amount, the payment of which is being contested; (k) Notice of Event of Default. It will, as soon as it shall become aware of the same, give notice to the Holder of any Default, Event of Default, or the occurrence or non-occurrence of any event which constitutes, or which with the passage of time or giving of notice or both would constitute, a material default under any other agreement to which it is a party or by which it or any of its properties may be bound, giving in each case the details thereof and specifying the action proposed to be taken with respect thereto, regarding the Corporation or any Subsidiary of the Corporation; (l) Insurance. The Corporation shall maintain and cause its Subsidiaries to maintain insurance on its and their respective properties and assets and for the operation of its and their respective businesses in such amounts and against such risks as would be customarily obtained and maintained by a prudent owner of similar properties and assets operating a similar business (including without limitation appropriate liability insurance), and shall provide certified copies of such policies to the Holder upon request. Such policies of insurance shall include coverage against loss or damage of its property and assets by fire and other hazards, and business interruption insurance. All such insurance policies relating to properties and assets shall name the Holder and the Other Holder as loss payees as their interests may appear and copies thereof or certificates in respect of the coverage provided thereby shall be delivered to the Holder upon request. The Corporation shall pay all premiums in respect of such insurance when due and shall promptly furnish the Holder upon request with receipts or other satisfactory evidence of the payment thereof. Prior to any Event of Default any insurance proceeds in an amount (i) less than $25,000 shall be paid directly to the Corporation to be used to replace or repair the property in respect of which the proceeds have been paid, and (ii) equal to or greater than $25,000 shall be paid directly to the Holder and the Other Holder and may, at the option of the Holder and the Other Holder by joint written instruction to the Corporation, be applied against any Obligations hereunder and under the Other Debenture(s) or -27- released to the Corporation without prejudicing any rights or remedies of the Holder or Other Holder hereunder or under the Other Debenture(s) or affecting any Obligations; (m) Compliance with Securities Legislation and Matters. The Corporation shall comply with the requirements of all applicable securities laws and the regulations thereunder and shall take no step with a view to, or which would result in, the Corporation ceasing to be a reporting issuer in good standing under the Securities Act (Ontario) or the Regulation thereunder or under the securities laws of any other jurisdiction; (n) Maintain Listing. The Corporation shall continuously maintain the listing of its Common Shares on the TSX or upon such other stock exchange as may be acceptable to the Holder and shall use reasonable efforts to ensure that all Common Shares which are issuable upon the exercise of the conversion rights hereunder are listed on such stock exchange as and when issued; and (o) Secondary Offering. If, at any time, the Corporation undertakes a treasury offering of shares by way of prospectus, the Holder may participate by way of a secondary offering of which the Holder may sell all or any of the Common Shares beneficially owned by the Holder, unless this right would, in the opinion of the financial advisor and/or underwriter retained to complete such transaction, materially prejudice the offering. 6.5. CORPORATION'S NEGATIVE COVENANTS The Corporation hereby covenants and agrees with the Holder that it will not, so long as any amount owing hereunder shall remain unpaid, and it will not permit or cause any of its Subsidiaries to, without the prior written consent of the Holder: (a) Security Interests. Create, issue, incur, assume or permit to exist any Encumbrance on any of its property other than (i) Encumbrances in favour of the Holder; and (ii) Permitted Encumbrances, nor do or permit anything to adversely affect the ranking or validity of the Security Interest except by incurring a Permitted Encumbrance. (b) Change in Nature of Business. Make or permit or cause any Subsidiary to make any material change in the nature of its or their respective existing business. (c) Mergers. Enter into any transaction (whether by way of reconstruction, reorganization, consolidation, dissolution or otherwise) whereby all or any substantial part of its undertaking, property or assets would become the property of any other Person or, in the case of any such amalgamation, of the continuing corporation resulting therefrom. (d) Disposal of Assets. Directly or indirectly, sell, lease, assign, transfer, abandon, convey or otherwise dispose of any of its undertaking or assets (including any capital stock of any of its Subsidiaries or other corporation) except as follows: (i) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell any inventory or other assets that are customarily sold by the -28- Corporation or such Subsidiary as part of the normal operation of its respective business; and (ii) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell equipment, fixtures, materials or supplies that are no longer required in the business of the Corporation or such Subsidiary or that are worn-out or obsolete. (e) Distributions. Declare, make or pay any dividend or other distribution on any share in the capital of the Corporation or a Subsidiary other than a distribution made by a Subsidiary to the Corporation. (f) Alteration of Capital. Purchase, redeem or retire in any way any shares of its capital or otherwise reduce its issued or paid up capital in respect of such shares or otherwise permit a change in the authorized capital structure or in the terms of any of its classes of share. (g) Transactions Out of the Ordinary Course. Enter into or effect any transactions out of the ordinary course of business. (h) Financial Assistance. Provide any financial assistance to any Person except financial assistance provided to the Corporation by a Subsidiary of the Corporation or to a Subsidiary of the Corporation by the Corporation. (i) Maintenance and Ownership of Subsidiaries. In the case of the Corporation, sell or otherwise dispose of any shares of the capital of any of its Subsidiaries or permit any of such Subsidiaries to issue, sell or otherwise dispose of any shares of the capital or the capital of any other of such Subsidiaries, except to the Corporation. (j) Winding-up. Take or institute proceedings for the winding-up, reorganization or dissolution of the Corporation or any Subsidiary. (k) Changing Location etc. Change its name or the location of its chief executive office or remove or otherwise permit any Collateral (other than inventory in transit) to be located at any location other than Existing Locations, without providing the Holder with 30 days prior written notice thereof and promptly taking such other steps, if any, as the Holder may require to maintain the perfection of the Security Interest. (l) Additional Indebtedness. Incur any Indebtedness other than Permitted Indebtedness. (m) Subsidiaries. Have any Subsidiaries other than the Subsidiary without the consent of the Holder. -29- ARTICLE 7. EVENTS OF DEFAULT 7.1. EVENTS OF DEFAULT The occurrence of any one or more of the following events or conditions (each such event or condition being an "Event of Default") shall constitute a default under this Debenture: (a) except as otherwise provided in this Section, the Corporation does not observe or perform any of the Corporation's obligations under this Debenture or any other agreement or document existing at any time between the Corporation and the Holder and such default remains unremedied to the satisfaction of the Holder seven calendar days after written notice thereof is given to the Corporation by the Holder; (b) any representation, warranty or statement made by or on behalf of the Corporation to the Holder is untrue in any material respect at the time when or as of which it was made; (c) the Corporation ceases or threatens to cease to carry on in the normal course the Corporation's business or any material part thereof; (d) the holder of a charge takes possession of all or any part of the Corporation's property having a value in excess of $150,000, or a distress, execution or other similar process is levied against all or any part of such property having a value in excess of $150,000; (e) if an order ceasing or suspending or prohibiting trading in any securities of the Corporation shall be issued by any stock exchange or securities regulatory authority having jurisdiction and such situation continues in excess of two weeks; (f) default by the Corporation or any of its Subsidiaries in the performance or observance of any covenant, condition or obligation contained in any agreement between the Corporation or its Subsidiary, as the case may be, and any Person, where such default gives rise to a right to enforce security against the Corporation or its Subsidiary, as the case may be, where the default, or the cumulative defaults are in excess of $150,000; (g) the Corporation fails to pay to any Person any Indebtedness in excess of $250,000 in aggregate when due (whether at scheduled maturity or by required prepayment, acceleration, demand or otherwise) and such failure continues after any applicable grace period, except as the Holder and Other Holder have otherwise agreed; (h) an event of default occurs under the Other Debenture(s); (i) any event occurs which would have a Material Adverse Effect on the Corporation and its Subsidiaries taken as a whole; (j) if the Corporation or any of its Subsidiaries is in default under any Material Contract to which it is a party and such default is not cured before the earlier of (i) 30 days -30- after the occurrence of such default, and (ii) five Business Days prior to the expiry of the applicable cure period, if any, under such Material Contract; (k) if a final judgment or decree for the payment of money due shall have been obtained or entered against the Corporation or any of its Subsidiaries in an amount of $100,000 or more and such judgment or decree shall not have been and remain vacated, discharged or stayed pending appeal within the applicable appeal period; (l) if a decree or order of a court of competent jurisdiction is entered adjudging the Corporation or any of its Subsidiaries a bankrupt or insolvent or approving as properly filed a petition seeking the winding-up of the Corporation or any of its Subsidiaries under the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding-Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law or issuing sequestration or process of execution against any substantial part of the assets of the Corporation or any of its Subsidiaries or ordering the winding up or liquidation of its affairs and any such decree or order continues unstayed and in effect for a period of thirty (30) days; (m) if the Corporation or any of its Subsidiaries becomes insolvent, makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors, makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, seeks relief under the Companies' Creditors Arrangement Act (Canada), the Winding Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its assets, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors' rights or consents to, or acquiesces in, the filing of such a petition; or (n) if any Change of Control Event occurs. 7.2. RIGHTS UPON DEFAULT Upon the occurrence of an Event of Default the entire Principal amount outstanding hereunder shall at the option of the Holder forthwith become immediately due and payable, with Interest thereon, at the rate determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonour or any other notice of demand whatsoever, all of which are hereby expressly waived by the Corporation. In such event the Holder may in its discretion exercise any right or recourse and/or proceed by any action, suit, remedy or proceeding against the Corporation authorized or permitted by law for the recovery of all the Indebtedness and liabilities of the Corporation to the Holder and proceed to exercise any and all rights hereunder and under the security constituted by the Security Interest. No right will be exclusive of or dependent upon or merge in any other right, and one or more of such rights may be exercised independently or in combination from time to time. -31- 7.3. CHARGES AND EXPENSES The Corporation agrees to pay on demand all costs and expenses incurred (including among other things legal fees) and fees charged by the Holder in connection with obtaining or discharging this Debenture to and by the Holder or any Receiver in exercising any remedy under this Debenture and in carrying on the Corporation's business. All such amounts will bear interest from time to time at the rate equal to the rate payable on the Principal sum hereunder, and the Corporation will reimburse the Holder upon demand for any amount so paid. 7.4. FURTHER ASSURANCES The Corporation will from time to time as soon as practicable upon request by the Holder take such action as the Holder may consider necessary to give effect to this Debenture. 7.5. PERFORMANCE BY THE SECURED PARTY In the event that the Corporation fails to perform any obligations under this Debenture, including keeping the Collateral free and clear of all Encumbrances, other than Permitted Encumbrances, the Holder may, at its option and without being under any obligation to do so, perform such obligations and the Corporation shall pay to the Holder, immediately upon demand, all costs and expenses (including, without limitation, legal fees on a solicitor-client basis) incurred by the Holder in connection therewith and all such costs and expenses shall form part of the Obligations, bear interest at the Interest Rate, both before and after demand and judgment from the date incurred by the Holder and shall be secured by the Security Interest. The performance by the Holder of any obligation of the Corporation hereunder or the curing of any Event of Default by the Holder shall not constitute a waiver by the Holder of any of its rights, remedies or privileges hereunder or relieve the Corporation from its default or any consequences thereof. 7.6. DEALINGS BY THE HOLDER The Holder may grant renewals, extensions of time and other indulgences, take and give up securities, accept compositions, grant full, partial and conditional releases and discharges, perfect or fail to perfect any securities, release any Collateral to third parties and otherwise deal or fail to deal with the Corporation, debtors of the Corporation, guarantors, sureties and others and with the Collateral and other securities as the Holder may see fit, all without prejudice to any liability of the Corporation to the Holder or the Holder's rights and remedies under this Debenture, the Personal Property Security Act (Ontario) or otherwise at law. 7.7. NO SET-OFF The Obligations shall be paid by the Corporation without regard to any equities between the Corporation and the Holder or any right of set-off or cross-claim that the Corporation may have against the Holder. -32- ARTICLE 8. SECURITY 8.1. SECURITY As general and continuing security for the payment and performance of the Obligations, the Corporation hereby grants a security interest in favour of the Holder as set out in Schedule "C" and shall execute and deliver in favour of the Holder, all such further, security agreements, instruments and documents (collectively with this Debenture being the "SECURITY DOCUMENTS") and do all such other acts and things as the Holder may from time to time require, to create, grant and maintain a first perfected Encumbrance on the Collateral in favour of the Holder, subject only to Permitted Encumbrances. All Security Documents shall, in form and substance, be satisfactory to the Holder, acting reasonably. The Corporation acknowledges and agrees that as at the date hereof there are additional Security Documents that will have to be executed and delivered by the Corporation and additional registrations and other steps that will have to be taken by the Corporation and others in order for the Security Interest to constitute a first perfected Encumbrance on all of the Collateral, subject only to Permitted Encumbrances, and agrees that the right of the Holder to require such Security Documents and the performance of such other acts and things at any time and from time to time shall not be prejudiced by any delay on the part of the Holder in requesting same. The Corporation constitutes and appoints the Holder and any officer or agent of the Holder, with full power of substitution, as the Corporation's true and lawful attorney-in-fact with full power and authority in the place of the Corporation and in the name of the Corporation or in its own name, from time to time in the Holder's discretion after any Event of Default or any default under this section, to take any and all appropriate action and to execute any and all documents and instruments as, in the opinion of such attorney may be necessary or desirable to accomplish the purposes of this Debenture. These powers are coupled with an interest and are irrevocable until this Debenture and the Security Documents are terminated and released. Nothing in this section affects the right of the Holder as secured party or any other Person on the Holder's behalf, to sign and file or deliver (as applicable) all such financing statements, financing change statements, notices, verification agreements and other documents relating to the Collateral and this Debenture and any Security Documents as the Holder or such other Person considers appropriate ARTICLE 9. GENERAL PROVISIONS 9.1. NOTICES Any notice, communication, payment or demand required or permitted to be given under this Debenture shall be deemed to have been sufficiently given to the recipient if delivered personally, or (other than in the case of payment) if sent by facsimile or sent by ordinary first class mail within Canada, postage prepaid, addressed as follows: -33- (a) to the Corporation at: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto ON M9B 6H7 Attention: Michael Byrne, Chief Financial Officer and Corporate Secretary Facsimile: (416) 335-9306 (b) to the Holder at: 386 Cortleigh Blvd. Toronto, Ontario M5N 1R5 Attention: Andrea Dan-Hytman Facsimile: (416) 787-0311 Any such mailing shall be deemed to be received on the date of delivery if delivered personally, on the next Business Day following the transmission by facsimile confirmed by the sender thereof or on the third Business Day following the date of mailing or, in the event of any disruption, strike or interruption in the Canadian postal service after mailing and prior to receipt, on the third Business Day following full resumption of such Canadian postal service. Either party hereto may change its facsimile number or address for the purpose of this Section 9.1 by giving written notice of such change to the other. 9.2. AMENDMENTS Neither this Debenture nor any provision hereof may be amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge, or termination is sought. No delay or omission by the Holder in exercising any rights or remedies hereunder or in respect of any Obligations or the performance by the Corporation of any Obligations in default shall operate as a waiver thereof or of any other rights or remedies of the Holder. No single or partial exercise of any rights or remedies by the Holder shall preclude any other or further exercise thereof or the exercise of any other rights or remedies. A written waiver of any right or remedy shall be effective only for the specific purpose and time, if any, stipulated therein and shall not operate as a waiver of any other rights or remedies of the Holder. This Debenture may not be amended, supplemented or otherwise modified without the prior written consent of the Other Holder. 9.3. TIME OF THE ESSENCE Time is expressly declared to be of the essence of this Debenture in respect of all payments to be made hereunder, the exercise of any redemption and conversion rights hereunder, and all covenants and agreements to be performed and fulfilled. -34- 9.4. SEVERABILITY If any covenant or obligation of any party contained herein, or if any provision of this Debenture or its application to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Debenture or the application of such covenant or obligation to Persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected, and each provision and each covenant and obligation contained in this Debenture shall be separately valid and enforceable, to the fullest extent permitted by law or at equity. 9.5. COUNTERPARTS This Debenture may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 9.6. FURTHER ASSURANCES Each of the Corporation and the Holder shall promptly cure any default by it in the execution and delivery of this Debenture or of any of the other agreements provided for hereunder to which it is a party. The Corporation, at its expense, shall promptly execute and deliver or cause to be executed and delivered to the Holder, upon request by the Holder, all such other and further documents, agreements, opinions, certificates and instruments in compliance with, or accomplishment of the covenants and agreements of the Corporation hereunder or more fully to state the obligations of the Corporation set out herein or under any other loan document or to make any recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith. The Corporation hereby irrevocably constitutes and appoints any officer for the time being of the Holder and each Receiver, the true and lawful attorney of the Corporation, at any time that an Event of Default shall have occurred and be continuing, with full power of substitution to execute and deliver all such agreements, instruments and documents and to do all such further acts and things with the right to use the name of the Corporation whenever and wherever it may be deemed necessary or expedient. 9.7. ENTIRE AGREEMENT This Debenture, the Payment and Security Sharing Agreement and the confirmations delivered in respect of the Security Interest constitute the whole and entire agreement between the parties hereto and cancel and supersede any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof. 9.8. TRANSFERABILITY Except for transfers provided for in the Payment and Security Sharing Agreement, this Debenture may only be transferred by the Holder with the prior written consent of the Corporation not to be unreasonably withheld or delayed. -35- 9.9. PARTIES IN INTEREST This Debenture shall be binding on the Corporation and its successors and will be binding on and will enure to the benefit of the Holder and its successors and assigns. IN WITNESS WHEREOF the Corporation and the Holder have executed this Debenture as of the 3rd day of November, 2004. VIVENTIA BIOTECH INC. By: /s/ Michael Byrne ------------------------------------ Name: Michael Byrne Title: Chief Financial Officer By: ------------------------------------ Name: Title: ADH INVESTMENTS (1999) INC. By: /s/ Andrea Dan Hytman ------------------------------------ Name: Andrea Dan Hytman Title: SCHEDULE "A" FORM OF COMMON SHARE PURCHASE WARRANT SCHEDULE "B" CONVERSION NOTICE TO: Viventia Biotech Inc. (the "Corporation") FROM: ADH Investments (1999) Inc. (the "Holder") RE: The Convertible Secured Debenture issued by the Corporation to the Holder as of November 3, 2004 (the "Debenture") All terms used in this Conversion Notice which are defined in the Debenture have the meanings attributed thereto in the Debenture. The Holder hereby irrevocably elects to convert $_________________ of the Principal outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Conversion Price and $_________________ of the Interest outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Interest Conversion Price. Please issue, register and deliver the Common Shares and Common Share Purchase Warrants comprising such Units in the name of: Name: ------------------------------------------ Address: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ DATED: , 200_. ADH INVESTMENTS (1999) INC. By: ------------------------------- Name: Title: SCHEDULE "C" SECURITY INTEREST 1. SECURITY (a) Security. Subject to Sections 1(c) and 1(d) of this Schedule "C", as continuing security for the due and timely payment and performance by the Corporation of its obligations hereunder, the Corporation hereby (i) grants a security interest in and conveys, assigns, hypothecates, mortgages and charges, as and by way of a first fixed and floating mortgage and charge to and in favour of the Holder (the "Security Interest"), all its undertaking and business and all its property and assets and rights for the time being, both present and future, of whatsoever nature and kind and wheresoever situate (the "Collateral") including, without limitation, (i) each of the Patents identified in Appendix 1, including all rights to receive royalty, licence or other payments due to the Corporation from any licensed user or other use of the Patents; (ii) each of the Trade Marks identified in Appendix 2, including all goodwill of the business of the Corporation symbolized by each of the Trade Marks and all rights of the Corporation as the registered owner of the Trade Marks, including the right to receive royalty, licence or other payments due to the Corporation from any registered user or other user of any Trade Marks; (iii) any present or future claim by, or right of action of, the Corporation against any Person with respect to the infringement of any of the Trade Marks or Patents; (b) Attachment. The parties acknowledge and agree that value has been given for the granting of the Security Interest and that they have not agreed to postpone the time for attachment, except for after-acquired property forming part of the Collateral, the attachment to which will occur forthwith upon the Corporation acquiring rights in such Collateral. (c) Exception for Last Day of Leases. The Security Interest granted hereby does not and shall not extend to, and the Collateral shall not include, the last day of the term of any lease or sub-lease, oral or written, or any agreement therefor, now held or hereafter acquired by the Corporation but, upon the sale of the leasehold interest or any part thereof, the Corporation shall stand possessed of such last day in trust to assign the same as the Holder shall direct. (d) Exception for Contractual Rights. The Security Interest hereby granted does not and shall not extend to, and the Collateral shall not include, any agreement, right, franchise, licence or permit (collectively, "Contractual Rights") to which the Corporation is a party or of which the Corporation has the benefit, to the extent that the creation of the Security Interest therein would constitute a breach of the terms of, or permit any Person to terminate, the Contractual Rights (the "Restricted Rights"), but the Corporation shall hold its interest therein in trust for the Holder -ii- and shall assign such Restricted Rights to the Holder forthwith upon obtaining the consent of the other party or parties thereto. Upon the request of the Holder, the Corporation shall use all commercially reasonable efforts to obtain any consent required to permit any Restricted Rights to be subject to the Security Interest. The Corporation shall use commercially reasonable efforts to provide that any agreement after the date hereof does not require any consent to permit the Contractual Rights created thereunder to become subject to the Security Interest and, except as disclosed to and approved by the Holder in writing, none of the existing Restricted Rights are Material Contracts. (e) Permitted Dealings with Collateral. Unless an Event of Default has occurred, the Corporation may, without the consent of the Holder: (i) deal with the Collateral as permitted by the Debenture; and (ii) subject to Section 2 of this Schedule "C", collect proceeds and accounts in the ordinary course of business. (f) Delivery of Instruments, Securities, Etc. (i) If an Event of Default has occurred the Corporation shall, upon request of the Holder, forthwith deliver to the Holder, to be held by the Holder hereunder, all instruments, securities, letters of credit, advances of credit and negotiable documents of title in its possession or control which pertain to or form part of the Collateral and shall, as required, duly endorse the same for transfer in blank or as the Holder may direct and shall use commercially reasonable efforts to deliver to the Holder any and all consents or other instruments or documents necessary to comply with any restrictions on the transfer thereof in order to transfer the same to the Holder. (ii) Subject to any other written agreements or instruments in effect from time to time between the parties, unless an Event of Default has occurred and is continuing the Corporation shall be entitled (i) to receive all distributions of any kind whatsoever at any time payable on or with respect to the Collateral and (ii) to vote the Collateral and to give consents, waivers, notices and ratifications and to take other action in respect of the Collateral; provided, however, that no vote shall be cast and no consent, waiver, notice or ratification shall be given and no action be taken which would impair the Collateral or which would be inconsistent with or violate any provision of this Debenture or any other written agreement or instrument in effect from time to time between the parties. (iii) Upon the occurrence of an Event of Default the Holder and during the continuance thereof shall be entitled to enjoy and exercise all of the rights referred to in Section (f)(ii) of this Schedule "C" in such manner as it sees fit. (g) Verification of Collateral. The Holder shall have the right at any time and from time to time to verify the existence and state of the Collateral in any manner the Holder -iii- may consider appropriate and the Corporation agrees to furnish all assistance and information and to perform all such acts as the Holder may reasonably request in connection therewith and for such purpose to grant to the Holder or its agents access to all places where Collateral may be located and to all premises occupied by the Corporation. 2. COLLECTION OF PROCEEDS AND ACCOUNTS (a) Control of Proceeds and Accounts. After the occurrence of an Event of Default the Holder, if demand has been made in accordance with Section 3(a) of this Schedule "C", may take control of any Proceeds and accounts and may notify any account debtor or any obligor under any instrument held by the Corporation or the Holder to make payment in respect of any Proceeds and accounts directly to the Holder, whether or not the Corporation has theretofore been making collections on the Collateral. (b) Proceeds and Accounts Received in Trust. After the occurrence of an Event of Default has occurred, if the Corporation shall collect or receive any accounts or shall be paid for any of the other Collateral or shall receive any Proceeds, all money so collected or received by the Corporation shall be received by the Corporation as trustee for the Holder and, if demand has been made in accordance with Section 3(a) of this Schedule "C", shall be paid to the Holder forthwith upon demand and the Holder may, in its discretion, apply the same in reduction of the Obligations or hold the same as further Collateral hereunder. 3. DEFAULT AND THE HOLDER'S REMEDIES (a) Remedies Upon Default. Upon the occurrence of an Event of Default, the Obligations shall, at the option of the Holder, forthwith become immediately due and payable by the Corporation to the Holder and the Holder may thereafter, without further notice to the Corporation except as provided at law or in this Debenture: (i) commence legal action to enforce payment or performance of the Obligations; (ii) require the Corporation, at the Corporation's expense, to assemble the Collateral at a place or places designated by notice in writing given by the Holder to the Corporation, and the Corporation agrees to so assemble the Collateral; (iii) require the Corporation, by notice in writing given by the Holder to the Corporation, to disclose to the Holder the location or locations of the Collateral, and the Corporation agrees to make such disclosure when so required by the Holder; (iv) without legal process, enter any premises where the Collateral may be situated and take possession of the Collateral by any method permitted by law; -iv- (v) repair, process, complete, modify or otherwise deal with the Collateral and prepare for the disposition of the Collateral, whether on the premises of the Corporation or otherwise and, in connection with any such action, utilize any of the Corporation's property without charge; (vi) dispose of the Collateral by private or public sale, lease or otherwise upon such terms and conditions as the Holder may determine and whether or not the Holder has taken possession of the Collateral; (vii) carry on all or any part of the business or businesses of the Corporation and, to the exclusion of all others (including the Corporation), enter upon, occupy and, subject to any requirements of law and subject to any leases or agreements then in place, use all or any of the premises, buildings, plant, undertaking and other property of, or used by, the Corporation for such time and in such manner as the Holder sees fit, free of charge, and, except to the extent required by law, the Holder shall not be liable to the Corporation for any act, omission or negligence in so doing or for any rent, charges, depreciation or damages or other amount incurred in connection therewith or resulting therefrom other than from the Holder's gross negligence or wilful misconduct; (viii) file such proofs of claim or other documents as may be necessary or desirable to have its claim lodged in any bankruptcy, winding-up, liquidation, dissolution or other proceedings (voluntary or otherwise) relating to the Corporation; (ix) borrow money for the purpose of carrying on the business of the Corporation or for the maintenance, preservation or protection of the Collateral and mortgage, charge, pledge or grant a security interest in the Collateral, whether or not in priority to this Debenture, to secure repayment of any money so borrowed; (x) where the Collateral has been disposed of by the Holder as provided in Section 3(a)(vi) of this Schedule "C", commence legal action against the Corporation for the Deficiency, if any; (xi) appoint, by an instrument in writing delivered to the Corporation, a Receiver of the Collateral and remove any Receiver so appointed and appoint another or others in its stead or institute proceedings in any court of competent jurisdiction for the appointment of a Receiver, it being understood and agreed that: (A) the Holder may appoint any Person as Receiver, including an officer or employee of the Holder, with such Person's prior written consent; (B) such appointment may be made at any time after an Event of Default, either before or after the Holder shall have taken possession of the Collateral; -v- (C) the Holder may, from time to time, fix the reasonable remuneration of the Receiver and direct the payment thereof out of the Collateral or any Proceeds; and (D) the Receiver shall be deemed to be the agent of the Corporation for all purposes, and, for greater certainty, the Holder shall not be, in any way, responsible for any actions, whether wilful, negligent or otherwise, of any Receiver, and the Corporation hereby agrees to indemnify and save harmless the Holder from and against any and all claims, demands, actions, costs, damages, expenses or payments which the Holder may hereafter suffer, incur or be required to pay as a result of, in whole or in part, any action taken by the Receiver or any failure of the Receiver to do any act or thing; (xii) pay or discharge any mortgage, charge, encumbrance, lien, adverse claim or security interest claimed by any Person in the Collateral ranking prior to or pari passu with the Security Interest and the amount so paid shall be added to the Obligations and shall bear interest calculated from the date of payment at the Interest Rate until paid; and (xiii) take any other action, suit, remedy or proceeding authorized or permitted by this Debenture or at law or equity. (b) Sale of Collateral. The parties acknowledge and agree that any sale referred to in Section 3(a)(vi) of this Schedule "C" may be either a sale of all or any portion of the Collateral and may be by way of public auction, public tender, private contract or otherwise without notice, advertisement or any other formality, except as required by law, all of which are hereby waived by the Corporation to the extent permitted by law. To the extent not prohibited by law, any such sale may be made with or without any special condition as to an upset price, reserve bid, title or evidence of title or other matter and, from time to time as the Holder in its sole discretion thinks fit, with power to vary or rescind any such sale or buy in at any public sale and resell. The Holder may sell the Collateral for a consideration payable by instalments either with or without taking security for the payment of such instalments and may make and deliver to any purchaser thereof good and sufficient deeds, assurances and conveyances of the Collateral and give receipts for the purchase money, and any such sale shall be a perpetual bar, both at law and in equity, against the Corporation and all those claiming an interest in the Collateral by, from, through or under the Corporation. (c) Reference to Secured Party Includes Receiver. For the purposes of Sections 3(a), 3(b) and 3(c)of this Schedule "C", a reference to the "Holder" shall, where the context permits, include any Receiver appointed in accordance with Section 3 of this Schedule "C". (d) Payment of Expenses. The amount of the Reasonable Expenses shall be paid by the Corporation to the Holder, as applicable, from time to time forthwith after demand therefor is given by the Holder, as applicable, to the Corporation, together with -vi- interest thereon from the date that is five Business Days from the date of such demand of such demand at the Interest Rate, and payment of such Reasonable Expenses together with such interest shall be secured by the Security Interest. (e) Payment of Deficiency. Where the Collateral has been disposed of by the Holder as provided herein, the Deficiency, if any, shall be paid by the Corporation to the Holder forthwith after demand therefor has been given by the Holder to the Corporation, together with interest thereon calculated from the date of such demand at the Interest Rate, and the payment of the Deficiency together with such interest shall be secured by the Security Interest. (f) Rights and Remedies Not Mutually Exclusive. To the fullest extent permitted by law, the Holder's rights and remedies, whether provided for in this Debenture or otherwise, are not mutually exclusive and are cumulative and not alternative and may be exercised independently or in any combination. (g) No Obligation to Enforce. The Holder shall not be under any obligation to, or liable or accountable for any failure to, enforce payment or performance of the Obligations or to seize, realize, take possession of or dispose of the Collateral and shall not be under any obligation to institute proceedings for any such purpose. (h) Exclusion of Liability of Holder and Receiver. The Holder shall not, nor shall any Receiver appointed by it, be liable for any failure to exercise its rights, powers or remedies arising hereunder or otherwise, including without limitation any failure to take possession of, collect, enforce, realize, sell, lease or otherwise dispose of, preserve or protect the Collateral, to carry on all or any part of the business of the Corporation relating to the Collateral or to take any steps or proceedings for any such purposes. Neither the Holder nor any Receiver appointed by it shall have any obligation to take any steps or proceedings to preserve rights against prior parties to or in respect of Collateral including without limitation any instrument, chattel paper or securities, whether or not in the Holder's or the Receiver's possession, and neither the Holder nor any Receiver appointed by it shall be liable for failure to do so. Subject to the foregoing, the Holder shall use reasonable care in the custody and preservation of the Collateral in its possession. 4. POSSESSION OF COLLATERAL BY THE DEBENTUREHOLDER Possession of Collateral. For so long as any Collateral is in the possession of the Holder: (a) the Holder may, at any time following the occurrence of an Event of Default, grant or otherwise create a security interest in such Collateral upon any terms, whether or not such terms impair the Corporation's right to redeem such Collateral; (b) the Holder may, at any time following the occurrence of an Event of Default use such Collateral in any manner and to such extent as it deems necessary; and (c) the Holder shall have no duty of care whatsoever with respect to such Collateral other than to use reasonable care in the custody and preservation thereof, provided that the Holder need not take any steps of any nature to defend or preserve the -vii- rights of the Corporation therein against the claims or demands of others or to preserve rights therein against prior parties. APPENDIX 1 AND APPENDIX 2 LIST OF PATENTS AND TRADE MARKS See attached list Updated September 2004 Page 1
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 95 922 373.6 A6 Human Monoclonal Antibodies Specific to June 16, 1995 Cell Cycle Independent Glioma Surface Antigen (A6) 695 22 689.4-08 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) 08/264.093 A6 Human Monoclonal Antibodies Specific to June 21, 1994 Cell Cycle Independent Glioma Surface Antigen (A6) 33696/97 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers PI 9710811-1 H11 Antigen Binding Fragments (H11) that November 10, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 95 922 373.6 Europe EP 0 766 736 September 12, 2001 695 22 689.4-08 Germany DE 695 22 689.4-08 April 12, 2002 EP 0 766 736 France EP(FR) 0766736 April 2002 EP 0 766 736 U.K. EP(UK) 0766736 April 2002 08/264.093 U.S. 5,639,863 June 17, 1997 33696/97 Australia AU 725238 January 25, 2001 PI 9710811-1 Brazil
Updated September 2004 Page 2
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 255,540 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers CN 97194815.1 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 97929703.3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers P9902713 H11 Antigen Binding Fragments (H11) that May 22, 1987 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 127193 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 255,540 Canada CN 97194815.1 China 97929703.3 Europe P9902713 Hungary 127193 Israel
Updated September 2004 Page 3
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 9-542853 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 989695 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 332566 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 985,150 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 9805601-3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 9-542853 Japan 989695 Mexico 332566 New Zealand 332566 December 07, 2000 985,150 Norway 9805601-3 Singapore 60444 April 18, 2000
Updated September 2004 Page 4
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ------------------ ------- ----- ----- 09/194,164 H11 Antigen Binding Fragments (H11) that November 20, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 101,108 H11 Antigen Binding Fragments (H11) that May 22, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 505305 (Divisional of 332566) H11 Antigen Binding Fragments (H11) that June 21, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 72432/00 (Divisional of AU H11 Antigen Binding Fragments (H11) that December 20, 2000 Patent 725238) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 08/862,124 (Priority over H11 Antigen Binding Fragments (H11) that May 22, 1997 08/657,449 CIP) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 09/194,164 US 101,108 Hong Kong 505305 (Divisional of 332566) N. Zealand NZ 505305 October 7, 2002 72432/00 (Divisional of AU Australia Patent 725238) 08/862,124 (Priority US 6,207,153 March 27, 2001 over 08/657,449 CIP)
Updated September 2004 Page 5
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 10/651,453 (Further H11 Antigen Binding Fragments (H11) that August 29, 2003 Continuation of US Specifically Detect Cancer Cells, App.09/782,397 Nucleotides Encoding the Fragments, and (US-2003-0021779-A1) which is Use Thereof for the Prophylaxis and a Continuation of Detection of Cancers App.08/862,124) PCT/CA00/01027 Camel A6 Enhanced Phage Display Libraries of September 07, 2000 Human VH Fragments and Methods for Producing Same 10/070,503 (National Phase Camel A6 Enhanced Phage Display Libraries of October 23, 2003 Entry in the U.S.) Human VH Fragments and Methods for Producing Same 2384388 (National Phase Entry Camel A6 Enhanced Phage Display Libraries of March 03, 2002 in Canada) Human VH Fragments and Methods for Producing Same PCT/CA01/01845 (based on U.S. Llama A6 Phage Display Libraries of Human VH December 21, 2001 Provisional 60/258,031 filed Fragments November 22, 2000) 10/451,585 (National Phase Llama A6 Phage Display Libraries of Human VH June 21, 2003 Entry in the U.S.) Fragments VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 10/651,453 (Further U.S. Continuation of US App.09/782,397 (US-2003-0021779-A1) which is a Continuation of App.08/862,124) PCT/CA00/01027 Canada WO 01/18058 A2 March 15, 2001 10/070,503 (National Phase U.S. Entry in the U.S.) 2384388 (National Phase Entry Canada in Canada) PCT/CA01/01845 (based on U.S. Canada WO 02-051870 July 04, 2002 Provisional 60/258,031 filed November 22, 2000) 10/451,585 (National Phase U.S. Entry in the U.S.)
Updated September 2004 Page 6
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 2,447,832 (National Phase Llama A6 Phage Display Libraries of Human VH June 20, 2003 Entry in Canada) Fragments EP 01 27 1932.4 Llama A6 Phage Display Libraries of Human VH July 22, 2003 Fragments PCT/CA2004/000637 Proxinium Methods for Treating Cancer Using an April 30, 2004 (V84-845) Immunotoxin 60/554,580 (Provisional) T-Cell Epitopes in March 19, 2004 60/578,291 (Provisional) VB1-008 Tumor Specific Antibody June 10, 2004 VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 2,447,832 (National Phase Canada Entry in Canada) EP 01 27 1932.4 Europe PCT/CA2004/000637 U.S. 60/554,580 (Provisional) U.S. 60/578,291 (Provisional) U.S.
Updated September 2004 Page 1 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION
- ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,070,975 VIVENTIA(TM) August 14, 2000 Canada TMA573,326 January 9, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 865627 VIVENTIA(TM) February 9, 2001 Australia 885627 January 30, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 2093110 VIVENTIA(TM) February 14, 2001 Europe 2093110 February 19, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/205555 VIVENTIA(TM) February 5, 2001 U.S. 2,745,868 August 5, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 1,117,077 HYBRIDOMICS(TM) September 28, 2001 Canada TMA601,345 February 4, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/382,011 HYBRIDOMICS(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,117,078 IMMUNO MINING(TM) September 28, 2001 Canada TMA591,709 October 7, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 2 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 76/382,289 IMMUNO MINING(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,107,351 VBI Design Logo June 21, 2001 Canada TMA591,802 October 8, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 898237 VBI Design Logo December 17, 2001 Australia 898237 July 22, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 76/350,349 VBI Design Logo December 19, 2001 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 301 72 865.8/01 VBI Design Logo December 21, 2001 Germany 30172865 August 20, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 1,128,376 ARMED ANTIBODIES(TM) January 16, 2002 Canada TMA607,930 April 19, 2004 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 3 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 6/424,575 ARMED ANTIBODIES(TM) June 26, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,128,377 IMMUNOMINE(TM) January 16, 2002 Canada TMA 591,451 October 3, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/428,124 IMMUNOMINE(TM) June 27, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,140,763 UnLock(TM) May 13, 2002 Canada TMA607,270 April 7, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/467,853 UnLock(TM) November 8, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 30254575.1/05 UnLock(TM) November 7, 2002 Germany 30254575 August 25, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 4 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,211,855 Proxinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,609 Proxinium(TM) April 1, 2004 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,211,862 Vicinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,619 Vicinium(TM) April 1, 2004 U.S. - -----------------------------------------------------------------------------------------------------------------------------
SCHEDULE "D" MATERIAL CONTRACTS See attached list. MATERIAL AGREEMENTS 1. Exclusive License Agreement between Biovation Limited and Viventia Biotech Inc., dated March 8, 2004 2. Exclusive License Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated December 19, 2003 3. Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated March 1, 2002 4. License Agreement between McGill University and Novopharm Limited, dated April 28, 1994 5. License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated August 20, 2002 6. License Agreement between University of Zurich and Viventia Biotech Inc., dated January 9, 2003 7. Non-exclusive License Agreement between XOMA Ireland Limited and Viventia Biotech Inc., dated November 30, 2001 8. Property Lease between Almad Investments Limited and Viventia Biotech Inc., dated January 26, 2004 9. Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech Inc., dated November 20, 2000 EX-3.3 10 t17062exv3w3.txt EXHIBIT 3.3 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT 3.3 CONVERTIBLE SECURED DEBENTURE I S S U E D B Y: VIVENTIA BIOTECH INC. I S S U E D T O: ADH INVESTMENTS (1999) INC. NOVEMBER 3, 2004 TABLE OF CONTENTS ARTICLE 1. INTERPRETATION......................................................1 1.1. Definitions..................................................1 1.2. Interpretation...............................................8 1.3. Schedules....................................................8 1.4. Proper Law and Attornment....................................8 1.5. Non-Business Days............................................9 1.6. Application of Payments......................................9 ARTICLE 2. DEBENTURE...........................................................9 2.1. Indebtedness.................................................9 ARTICLE 3. INTEREST............................................................9 3.1. Interest.....................................................9 ARTICLE 4. CONVERSION..........................................................9 4.1. Optional Conversion..........................................9 ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS....................................11 5.1. Definitions.................................................11 5.2. Adjustment in Rights........................................13 5.3. Adjustment in Conversion Price..............................14 5.4. Rules for Adjustment in Rights and Exercise Price...........16 5.5. Notice of Adjustment in Exercise Price and Rights...........18 5.6. Corporation to Reserve Shares...............................18 5.7. Applicable Securities Legislation...........................18 ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS..........................19 6.1. Corporation's Representations and Warranties................19
ii 6.2. Holder Representations and Warranties.......................23 6.3. Holder's Acknowledgments....................................24 6.4. Corporation's Positive Covenants............................24 6.5. Corporation's Negative Covenants............................27 ARTICLE 7. EVENTS OF DEFAULT..................................................29 7.1. Events of Default...........................................29 7.2. Rights Upon Default.........................................30 7.3. Charges and Expenses........................................31 7.4. Further Assurances..........................................31 7.5. Performance by the Secured Party............................31 7.6. Dealings by the Holder......................................31 7.7. No Set-Off..................................................31 ARTICLE 8. SECURITY...........................................................32 8.1. Security....................................................32 ARTICLE 9. GENERAL PROVISIONS.................................................32 9.1. Notices.....................................................32 9.2. Amendments..................................................33 9.3. Time of the Essence.........................................33 9.4. Severability................................................34 9.5. Counterparts................................................34 9.6. Further Assurances..........................................34 9.7. Entire Agreement............................................34 9.8. Transferability.............................................34 9.9. Parties In Interest.........................................35
iii SCHEDULE A Common Share Purchase Warrants SCHEDULE B Conversion Notice SCHEDULE C Security Interest SCHEDULE D Material Contracts THIS INDENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005. CONVERTIBLE SECURED DEBENTURE THIS DEBENTURE issued as of the 3rd day of November, 2004. ISSUED BY: VIVENTIA BIOTECH INC., a corporation governed by the laws of the Province of Ontario (hereinafter, the "Corporation") ISSUED TO: ADH INVESTMENTS (1999) INC., a corporation governed by the laws of the Province of Ontario (hereinafter the "Holder") WHEREAS the Holder has agreed to purchase and the Corporation has agreed to sell a convertible secured debenture on the terms and conditions set out herein in the principal amount of $5,562,568.49; NOW THEREFORE this Debenture witnesses that in consideration of $1.00 and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation agrees as follows: ARTICLE 1. INTERPRETATION 1.1. DEFINITIONS For the purposes of this Debenture, unless otherwise defined herein, the following terms shall have the following meanings ascribed to them: (a) "BOARD" means the board of directors of the Corporation; (b) "BUSINESS DAY" means a day other than a Saturday, Sunday or any other day that is a statutory or civic holiday in the Province of Ontario; -2- (c) "CAPITAL LEASE" means a capital lease or a lease, which should be treated as a capital lease, in each case under generally accepted accounting principles; (d) "CHANGE OF CONTROL EVENT" means an event or series of related events whereby the Dan Family ceases to Control the Corporation; (e) "COLLATERAL" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (f) "COMMON SHARES" means the common shares in the capital of the Corporation, provided that if a change referred to in Sections 5.2 or 5.3 occurs in respect of or affecting the Common Shares, then thereafter "Common Shares" means the shares or other securities or property purchasable or receivable on the conversion of this Debenture as a result of any such change; (g) "COMMON SHARE PURCHASE WARRANTS" means the common share purchase warrants issued upon the conversion of this Debenture evidenced by a certificate in the form attached hereto as Schedule "A"; (h) "CONTRACTS" means agreements, franchises, leases, easements, servitudes, privileges and other rights acquired from persons; (i) "CONTROL" has the meaning given thereto in the Business Corporations Act (Ontario) on the date hereof; (j) "CONVERSION DATE" means 10:00 a.m. (Toronto time) on the effective date of conversion as provided in Section 4.1; (k) "CONVERSION NOTICE" has the meaning ascribed thereto in Section 4.1(a); (l) "CONVERSION PRICE" means $1.50, subject to adjustment as provided in Article 5; (m) "CURRENT MARKET PRICE" has the meaning ascribed thereto in Section 5.1; (n) "DAN FAMILY" means Leslie Dan, Andrea Dan-Hytman and their respective associates and affiliates, as defined in the Securities Act (Ontario); (o) "DEBENTURE" means this interest bearing convertible secured debenture of the Corporation in the principal amount of $5,562,568.49; (p) "DEFAULT" means an event, which, with the giving of notice, lapse of time or otherwise would constitute an Event of Default; (q) "DEFICIENCY" means, at any time, the difference, if any between: (i) the aggregate of: (A) the amount of the Obligations at that time; and (B) the Reasonable Expenses incurred up that time; and -3- (ii) the proceeds of disposition received by the Holder from a disposition of the Collateral in accordance with Section 3.1a(vi) of Schedule "C"; (r) "DIVIDEND PAID IN THE ORDINARY COURSE" has the meaning ascribed thereto in Section 5.1; (s) "ENCUMBRANCE" means, in respect of any Person, any mortgage, debenture, pledge, hypothec, lien, charge, assignment by way of security, consignment, lease, hypothecation, security interest granted or permitted by such Person or arising by operation of law, in respect of any such Person's property or assets, or any consignment or Capital Lease of property by such Person as consignee or lessee or any other security agreement, trust or arrangement having the effect of security for the payment of any debt, liability or obligation, or any title defect, adverse claim or other encumbrance and "ENCUMBRANCES", "ENCUMBER" and "ENCUMBERED" shall have corresponding meanings; (t) "EQUITY SHARES" has the meaning ascribed thereto in Section 5.1; (u) "EVENT OF DEFAULT" means any of the events described in Section 7.1; (v) "EXISTING LOCATIONS" means 147 Hamelin Street, Winnipeg, Manitoba and 10 Four Seasons Place, Suite 501, Toronto, Ontario; (w) "HOLDER'S COUNSEL" means the firm of Cassels Brock & Blackwell LLP or such other firm of legal counsel as the Holder may from time to time designate; (x) "INDEBTEDNESS" means, without duplication, with respect to any Person and calculated on a consolidated or combined basis, as applicable, (i) indebtedness for borrowed money, (ii) obligations under Capital Leases, (iii) obligations under letters of credit, guarantees, legally binding comfort letters or indemnities issued in connection therewith, whether issued for the benefit of the Corporation or a Subsidiary of the Corporation or another or others, (vi) obligations arising pursuant to bankers' acceptance facilities or indemnities issued in connection therewith, and (v) all other contingent obligations incurred for the purpose of or having the effect of providing financial assistance to another entity, including, without limitation, guarantees, endorsements of bills of exchange (other than for collection or deposit in the ordinary course of business), obligations to purchase assets regardless of the delivery or non-delivery thereof and obligations to make advances or otherwise provide financial assistance to any other entity, (y) "INTEREST" has the meaning ascribed thereto in Section 3.1; (z) "INTEREST CONVERSION PRICE" means the ten (10) day weighted average trading price of the Corporation's Common Shares on the TSX for the ten (10) consecutive trading days preceding the giving of a Conversion Notice less the maximum discount permitted by the TSX; (aa) "INTEREST RATE" has the meaning ascribed thereto in Section 3.1; -4- (bb) "MATERIAL ADVERSE EFFECT" means, (i) a material adverse effect on the business, assets, liabilities, operations, results of operations or condition (financial or other) of the Corporation on a consolidated basis, or the ability of the Corporation to carry on its business or a significant part of its business, (ii) any impairment of the ability of the Corporation to perform any of its obligations hereunder or otherwise, or (iii) any material impairment of any lien granted by the Corporation to the Holder, in each case as determined by the Holder; (cc) "MATERIAL CONTRACT" means all Contracts, the breach or default of which could have a Material Adverse Effect, all such Material Contracts of the Corporation and its Subsidiaries as of the date hereof being listed on Schedule "D" all as may be amended, supplemented, restated or replaced from time to time; and when used in relation to any Person, the term "Material Contracts" shall mean and refer to Material Contracts to which such Person is a party or by which it or any of its assets is bound and includes any Material Contract to which such Person may hereafter become a party or be bound, and "Material Contract" means any one of them; (dd) "MATURITY DATE" means 10:00 a.m. (Toronto time) on November 3, 2006; (ee) "OBLIGATION" means all indebtedness, liabilities and obligations (whether direct, indirect, absolute, contingent or otherwise) of the Corporation from time to time, under or in respect of this Debenture; (ff) "OTHER DEBENTURE(s)" means the interest bearing convertible secured debenture(s) of the Corporation being on the same terms and conditions as this Debenture in favour of Leslie L. Dan; (gg) "OTHER HOLDER" means Leslie L. Dan; (hh) "PATENTS" means the patents and patent applications identified in Appendix 1 to Schedule "C", and all registrations and recordings of those patents in Canada, the United States of America or elsewhere, including any reissue, continuation or other extension in whole or in part of any such patent; (ii) "PAYMENT AND SECURITY SHARING AGREEMENT" means the agreement of even date herewith among the Corporation, the Holder and the Other Holder dealing with payment and security sharing among the Holder and Other Holder; (jj) "PERMITTED ENCUMBRANCES" means, in respect of any Person, (i) undetermined or inchoate Encumbrances and charges incidental to construction, maintenance or operations which have not at the time been filed pursuant to law or which relate to obligations not yet due and delinquent; (ii) the Encumbrance of taxes and assessments for the then current year, the Encumbrance for taxes and assessments not at the time overdue and Encumbrances securing worker's compensation assessments and the lien for specified taxes and assessments which are overdue but the validity of which -5- is being contested at the time in good faith, if such Person shall have made on its books provision reasonably deemed by it to be adequate therefor; (iii) any Encumbrance or any right of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease provided that such obligations are not in default; (iv) any Encumbrance resulting from cash or governmental obligations deposited in the ordinary course of business in connection with contracts, bids, tenders or to secure worker's compensation, unemployment insurance, surety or appeal bonds, costs of litigation, when required by law, public and statutory obligations, liens or claims incidental to current construction, mechanics', warehousemen's, carriers' and other similar liens; (v) any Encumbrance resulting from security given in the ordinary course of business to a public utility or any governmental authority when required by such utility or governmental authority in connection with the operations of the Corporation; (vi) easements, rights of way and servitudes and other similar rights in real property which in the opinion of Holder's Counsel, acting reasonably, will not in the aggregate materially impair the use of the land concerned for the purpose for which it is held or used by such Person; (vii) title defects or irregularities which in the opinion of Holder's Counsel, acting reasonably, are of a minor nature and in the aggregate will not materially impair the use of the property for the purposes for which it is held by such person or materially affect the Security Interest; (viii) any Encumbrance resulting from any judgment rendered or claim filed against such Person which such Person shall be contesting in good faith and by appropriate proceedings, if such Person shall have made on its books provisions reasonably deemed by it to be adequate therefor; (ix) construction, contractors', mechanics', carriers', warehousemen's, suppliers' and materialmen's liens and liens in respect of vacation pay, workers' compensation, unemployment insurance or similar statutory obligations, provided the obligations secured by such liens are not yet due and payable and, in the case of construction liens, which have not yet been filed or for which the Corporation has not received written notice of a lien; (x) liens arising from court or arbitral proceedings, provided that the claims secured thereby are being contested in good faith by the Corporation or a subsidiary; execution thereon has been stayed and continues to be stayed; and such liens do not, in the aggregate, materially detract from the value of the assets of the Corporation or materially impair the use thereof in the business of the Corporation; -6- (xi) any Encumbrance resulting from the excess of the amount of any taxes, rates, assessments or governmental charges or levies for which final assessments have not been received over and above the amount of such taxes, rates, assessments or governmental charges or levies as estimated by a responsible officer of such Person; (xii) all rights reserved to or vested in any governmental authority by the terms of any lease, licence, franchise, grant or permit held by such Person or by any statutory provision to terminate any such lease, licence, franchise grant or permit or to require annual or periodic payments as a condition of the continuance thereof or to distrain against or to obtain a lien on any property or assets of such Person in the event of failure to make such annual or other periodic payments; (xiii) liens in connection with any Capital Lease to the extent they are limited to the assets which are the subject of such Capital Leases (or other agreement carrying the right to use); (xiv) Purchase Money Security Interests; (xv) the Security Interest; (xvi) the security interest in the Other Debenture(s); (xvii) such other liens as may be consented to in writing by the Holder; and (xviii) the extension, renewal or refinancing of any of the above; (kk) "PERMITTED INDEBTEDNESS" means in respect of the Corporation and the Subsidiaries, (i) Indebtedness incurred pursuant to this Debenture: (ii) Indebtedness incurred pursuant to the Other Debenture(s); and (iii) Indebtedness secured by Permitted Encumbrances; (ll) "PERSON" includes any individual, corporation, company, partnership, association state, trust or government or any agency of political subdivision of any government; (mm) "PRINCIPAL" means the principal amount of indebtedness outstanding from time to time under this Debenture; (nn) "PROCEEDS", of any Collateral, means property in any form derived, directly or indirectly, from any dealing with such Collateral or the proceeds therefrom and includes any payment representing indemnity or compensation for loss or damage to such Collateral or proceeds therefrom, including, without limitation, insurance proceeds; -7- (oo) "PURCHASE MONEY SECURITY INTEREST" means any Encumbrance given, assumed or arising by operation of law, including Capital Leases, to provide or secure, or to provide the obligor with funds to pay, the whole or any part of the consideration for the acquisition of property where the principal amount of the obligation secured by such Encumbrance is secured only by the property being acquired by the obligor, and includes the renewal or refinancing of any such Encumbrance upon the same property provided that the indebtedness secured and the security therefore are not increased thereby; (pp) "REASONABLE EXPENSES" means any and all reasonable expenses incurred from time to time by the Holder or any Receiver in connection with the protection, perfection or preservation of the security and other rights constituted hereby, in enforcing payment or performance of the Obligations or any part thereof or in locating, taking possession of, transporting, holding, repairing, processing, preparing for and arranging for the disposition of and/or disposing of the Collateral or in contemplation of any of the foregoing and any and all other reasonable expenses incurred by the Holder or any Receiver as a result of the Holder or such Receiver exercising any of its rights or remedies hereunder or at law, including, without in any way limiting the generality of the foregoing, any and all legal expenses including those incurred in any legal action or proceeding or appeal therefrom commenced or taken in good faith by the Holder and any and all fees and disbursements of any counsel, accountant or valuator or any similar Person employed by the Holder in connection with any of the foregoing and the costs of insurance and payment of taxes (other than taxes relating to the income of the Holder) and other charges incurred in retaking, holding, repairing, processing and preparing for disposition and disposing of the Collateral (qq) "RECEIVER" means a receiver, a reorganization manager or any similar Person appointed in accordance with Section 3 of Schedule "C"; (rr) "SECURITY DOCUMENTS" has the meaning ascribed thereto in Section 8.1; (ss) "SECURITY INTEREST" has the meaning ascribed thereto in Section 1(a) of Schedule "C"; (tt) "SUBSIDIARY" means 20025 Yukon Inc. and "SUBSIDIARIES" means the Subsidiary and/or any other corporation of which more than 50% of the outstanding shares of any class carrying voting rights are beneficially owned, directly or indirectly, by the Corporation; (uu) "TRADE MARKS" means the trade marks, trade names, trade styles, service marks, certification marks, prints and labels identified in Appendix 2 to Schedule "C, and all similar, present or future marks, styles, prints or labels and all applications, registrations and recordings thereof in Canada, the United States of America or elsewhere, including every renewal, reissue or other extension of any registration or recording; (vv) "TSX" means the Toronto Stock Exchange; and -8- (ww) "UNITS" means the units comprised of one Common Share and one half of one Common Share Purchase Warrant to be issued upon the conversion of this Debenture; 1.2. INTERPRETATION For the purposes of this Debenture, except as expressly provided or unless the context requires otherwise: (a) the headings used throughout this Debenture are for ease of reference only and shall not in any way affect the meaning or interpretation of this Debenture; (b) any reference herein to a numbered or lettered part or section refers to the specified part or section of this Debenture; (c) "hereto", "herein", "hereof", "hereunder" and similar expressions refer to this Debenture and not to any particular part or section of this Debenture; (d) any words or expressions contained in this Debenture which impart the singular number include the plural number and vice versa; (e) any words or expressions contained in this Debenture which impart any gender include all genders; and (f) all dollar amounts expressed herein refer to lawful currency of Canada. 1.3. SCHEDULES The following schedules attached hereto are hereby incorporated into and form part of this Debenture:
Schedule "A" - Common Share Purchase Warrants Schedule "B" - Conversion Notice Schedule "C" - Security Interest Schedule "D" - Material Contracts
1.4. PROPER LAW AND ATTORNMENT This Debenture and all matters arising hereunder shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Each of the parties hereto, by the execution and delivery of this Debenture, irrevocably and unconditionally, with respect to any matter or thing arising out of or pertaining to this Debenture, hereby attorns and submits to the non- exclusive jurisdiction of the courts of the Province of Ontario for the determination of all matters arising pursuant to this Debenture. -9- 1.5. NON-BUSINESS DAYS Whenever any payment hereunder (whether in regard to Principal, Interest or otherwise) shall become due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day. During an extension under this Section 1.5 of any due date for payment of any Principal sum, Interest shall be payable to the date of actual payment of such Principal sum at the rate payable hereunder. 1.6. APPLICATION OF PAYMENTS All payments made in respect of the repayment of this Debenture shall be applied firstly to payment of costs, secondly to payment of Interest and thirdly to payment of Principal. ARTICLE 2. DEBENTURE 2.1. INDEBTEDNESS The Corporation for value received hereby promises to pay to or to the order of the Holder on the Maturity Date, the principal amount of Five Million, Five Hundred and Sixty-two Thousand, Five Hundred and Sixty-eight Dollars and Forty-nine Cents ($5,562,568.49). On the Maturity Date, or earlier as required by Section 7.2 hereof, payment of Principal is to be made in lawful money of Canada at the address of the Holder set out in Section 9.1 or other location designated by the Holder by notice to the Corporation. The Obligations and the rights of the Holder and the Other Holder, as between themselves, are subject to the provisions of the Payment and Security Sharing Agreement. ARTICLE 3. INTEREST 3.1. INTEREST The Corporation shall pay interest ("Interest") on the Principal outstanding from time to time under this Debenture (including without limitation any capitalized interest), and any other monies due and payable hereunder, both before and after maturity, default or judgment, at four and one half per cent (4.5%) per annum, computed on a 365 day basis (the "Interest Rate"), accruing daily and compounded annually until the Principal has been paid in full or has been converted. For greater certainty, on November 3, 2005 all accrued interest shall be capitalized and added to the Principal. Interest shall accrue until full payment of the Principal has been received by the Holder or all of the Principal has been converted into Units in accordance with Article 4. ARTICLE 4. CONVERSION 4.1. OPTIONAL CONVERSION (a) Subject to the provisions of this Debenture, the Holder may, at its option, at any time from the date of issuance of this Debenture, in whole or in part, by delivering to the Corporation this Debenture together with the conversion notice attached -10- as Schedule "B" hereto (the "Conversion Notice") duly executed by the Holder, indicating what portion of the Principal and/or accrued Interest the Holder then wishes to convert, convert all or any of the Principal and/or accrued Interest into Units, and the Principal and/or accrued Interest will be deemed to be reduced accordingly. (b) The Principal will be converted into Units at the Conversion Price and the Conversion Price will be subject to adjustment in accordance with Article 5. Accrued Interest will be converted into Units at the Interest Conversion Price. (c) The completion by the Holder of a Conversion Notice and delivery of same to the Corporation for conversion shall be deemed to create and constitute a contract between the Holder and the Corporation whereby (i) the Holder or its nominee designated in the Conversion Notice subscribes for the number of Units which the Holder shall be entitled to receive upon such conversion of the Principal and Interest stated in the Conversion Notice; (ii) provided the Common Shares comprising the Units so subscribed for are issued as fully paid and non-assessable, the indebtedness under this Debenture is satisfied and discharged to the extent this Debenture is converted; and (iii) the Corporation and the Holder agree that the satisfaction and discharge of the Indebtedness under this Debenture evidenced by this Debenture, to the extent of the Principal and accrued Interest so converted, and completion of conversion, constitutes full payment of the subscription price for the Units issuable on such conversion and thereafter such portion of the Principal and accrued Interest under this Debenture shall not be considered outstanding hereunder and the Holder shall have no right with respect to such Principal and accrued Interest except to receive the certificate for Common Shares and Common Share Purchase Warrants comprising the Units. With respect to the Units, Common Shares and Common Share Purchase Warrants, as required from time to time under the securities legislation which governs the Corporation or any hold period imposed by a regulatory authority, the Holder agrees to be bound by any applicable hold period. The certificates evidencing the Common Shares and Common Share Purchase Warrants shall contain the following legend: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005." (d) Concurrently with the surrender of this Debenture for conversion pursuant to this Article 4, the Corporation will provide to the Holder a receipt acknowledging the -11- Corporation's obligation to issue Units to the Holder. As promptly as practicable after the surrender or deemed surrender of this Debenture for conversion pursuant to this Section 4.1(d) (and in any event within three Business Days), the Corporation will issue and/or deliver, as the case may be, to the Holder or its nominee(s) a certificate or certificates representing the number of fully paid and non-assessable Common Shares and Common Share Purchase Warrants comprising the Units into which all or any portion of the Principal and accrued Interest has been converted. (e) Upon conversion pursuant to this Article 4, the Debenture shall be deemed cancelled and the Principal and accrued Interest evidenced hereby shall be and shall be deemed to be fully satisfied and discharged, and, if any Principal remains outstanding under this Debenture after giving effect to such conversion, the Corporation will issue a new Debenture, in form identical to this Debenture, except that it will be equal in principal amount to the amount of the Principal amount outstanding immediately following the conversion. (f) The conversion of this Debenture pursuant to this Article 4 will be deemed to have been made at the close of business on the date on which the certificate(s) referred to in Section 4.1(d) have been received by the Holder so that the Holder's rights in respect of the converted portion of the Principal and accrued Interest will terminate at that time and the Person or Persons entitled to receive Units into which the whole or any part of this Debenture is converted will be treated, as between the Corporation and that Person or Persons, as having become the holder or holders of record of the Common Shares and Common Share Purchase Warrants comprising those Units at that time. (g) As a condition precedent to taking any action which would require an adjustment or readjustment of the Conversion Price pursuant to Article 5, the Corporation will take any action which may, in the opinion of its counsel, be necessary for the Corporation to validly and legally issue, as fully paid and non-assessable common shares, all the Common Shares which the Holder is entitled to receive on the conversion of the Debenture. The Corporation agrees that it will at all times keep sufficient Common Shares reserved for the purpose of issue upon conversion of the Debenture. All Common Shares will be duly and validly issued as fully paid and non-assessable common shares in the capital of the Corporation. ARTICLE 5. ADJUSTMENT OF CONVERSION RIGHTS 5.1. DEFINITIONS In this Article 5, the following terms have the following meanings: "CURRENT MARKET PRICE" at any particular date means the weighted average trading price of the Common Shares on the TSX (or, if the Common Shares are not then listed and posted for trading on the TSX, on any other stock exchange in Canada on which the Common Shares are listed and posted for trading as may be selected for that purpose by the Board) during the 20 consecutive trading days ending on a date not earlier than the fifth trading day -12- before the particular date or, if the Common Shares are not listed and posted for trading on any stock exchange, the current market price of the Common Shares as determined by the Board, which determination shall be conclusive; and for the purposes hereof, "trading day" means a day on which the relevant stock exchange is open for business and the Common Shares may be traded on that exchange on that day; "DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the Common Shares in any financial year of the Corporation, whether in (i) cash, (ii) securities of the Corporation, including rights, options or warrants to purchase any securities or property of the Corporation or other assets of the Corporation (but excluding rights, options or warrants referred to in Section 5.3(b) and rights, options or warrants referred to in parentheses in Section 5.3(c)(iv)), or (iii) property or other assets of the Corporation, in each case to the extent that the amount or value of such dividend together with the amount or value of all other such dividends theretofore paid in such financial year (any such securities, property or other assets so distributed to be valued at the fair market value of such securities, property or other assets, as the case may be, as determined by the board of directors of the Corporation, which determination shall be conclusive) does not exceed the greater of: (i) 150% of the greater of (A) the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year; and (B) one-third of the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of thirty-six (36) consecutive months ended immediately prior to the first day of such financial year; or (ii) 100% of the consolidated net income of the Corporation before extraordinary items (but after dividends payable on all shares ranking prior to, or on a parity with the Common Shares, with respect to the payment of dividends) for the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year, such consolidated net income, extraordinary items and dividends to be as shown in the audited consolidated financial statements of the Corporation for such period of twelve (12) consecutive months or if there are no audited consolidated financial statements for such period, computed in accordance with generally accepted accounting principles, consistent with those applied in the -13- preparation of the most recent audited consolidated financial statements of the Corporation; and "EQUITY SHARES" means the Common Shares and any shares of any other class or series of the Corporation which may from time to time be authorized for issue if by their terms such shares confer on the holders thereof the right to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation beyond a fixed sum or a fixed sum plus accrued dividends. 5.2. ADJUSTMENT IN RIGHTS (a) If, at any time after the date hereof and prior to the Maturity Date, there is a reclassification of the outstanding Common Shares or change of the Common Shares into other shares or securities or any other capital reorganization of the Corporation or a consolidation, merger or amalgamation of the Corporation with or into any other corporation (any such event being called a "Capital Reorganization"), the Holder shall be entitled to receive and shall accept for the same aggregate consideration, upon the conversion of this Debenture at any time after the record date on which the holders of Common Shares are determined for the purpose of the Capital Reorganization (the "relevant record date"), in lieu of the number of securities to which it was theretofore entitled upon such exercise, the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization that the Holder would have been entitled to receive as a result of such Capital Reorganization if, on the relevant record date, it had been the holder of record of the number of Common Shares in respect of which the Debenture is being converted, and such shares or other securities shall be subject to adjustment thereafter in accordance with provisions which are the same, as nearly as may be possible, as those contained in this Article 5; provided that no such Capital Reorganization shall be implemented unless all necessary steps have been taken so that the Holder shall be entitled to receive the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization as provided above. (b) If, at any time after the date hereof and prior to the Maturity Date, any adjustment in the Conversion Price shall occur as a result of: (i) an event referred to in Section 5.3(a); (ii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(b); or (iii) the fixing by the Corporation of a record date for an event referred to in Section 5.3(c) if such event constitutes the issue or distribution to the holders of all of its outstanding Common Shares of (i) Equity Shares, or (ii) securities exchangeable for or convertible into Equity Shares at an exchange or conversion price per share less than the Current Market Price on such record date, or (iii) rights, options or warrants to acquire Equity Shares or securities exchangeable for or convertible into Equity Shares at an exercise, exchange -14- or conversion price per share less than the Current Market Price on such record date; then the number of securities purchasable upon the subsequent conversion of the Debenture shall be adjusted simultaneously with the adjustment to the Conversion Price provided in Section 5.3 by multiplying the number of securities issuable upon the conversion of the Debenture immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the adjustment of the Conversion Price. 5.3. ADJUSTMENT IN CONVERSION PRICE The Conversion Price shall be subject to adjustment from time to time as follows: (a) If, at any time after the date hereof and prior to the Maturity Date, the Corporation: (i) subdivides its outstanding Common Shares into a greater number of shares, (ii) consolidates its outstanding Common Shares into a smaller number of shares, or (iii) issues Common Shares to the holders of all of its outstanding Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, (any of such events being called a "Common Share Reorganization"), the Conversion Price shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Common Share Reorganization (the "relevant record date") by multiplying the Conversion Price in effect immediately prior to the relevant record date by a fraction: (A) the numerator of which shall be the number of Common Shares outstanding on the relevant record date before giving effect to the Common Share Reorganization; and (B) the denominator of which shall be the number of Common Shares outstanding on the relevant record date after giving effect to the Common Share Reorganization. (b) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date for the issue of rights, options or warrants to the holders of all of its outstanding Common Shares (the "relevant record date") under which such holders are entitled, during a period expiring not more than 45 days after the relevant record date (the "Rights Period"), to subscribe for or purchase Common Shares at a price per share, or securities exchangeable for or convertible into Common Shares at an exchange or conversion price per share less than 95% of the Current Market Price on the relevant record date (any of such events being called a "Rights Offering"), the Conversion Price shall be adjusted effective immediately after the end of the Rights -15- Period by multiplying the Conversion Price in effect immediately prior to the end of the Rights Period by a fraction: (i) the numerator of which shall be the aggregate of: (A) the number of Common Shares outstanding on the relevant record date, and (B) the number determined by dividing (1) either (a) the product of the number of Common Shares issued or subscribed for during the Rights Period under the Rights Offering and the price at which such Common Shares were offered, or, as the case may be, (b) the product of the exchange or conversion price of the securities exchangeable for or convertible into Common Shares and the number of Common Shares for, or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period, by (2) the Current Market Price on the relevant record date; and (ii) the denominator of which shall be, in the case of Section 5.3(b)(i)(B)(1)(a), the number of Common Shares outstanding on the relevant record date plus the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering and, in the case of Section 5.3(b)(i)(B)(1)(b), the number of Common Shares outstanding on the relevant record date plus the number of Common Share for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period. If the Debenture has been converted during the period beginning immediately after the record date for a Rights Offering and ending on the last day of the Rights Period for that Rights Offering then, in addition to the securities to which the Holder is otherwise entitled upon such exercise pursuant to this Debenture, the Holder shall be entitled to that number of additional securities which, when added to the number of securities to which the Holder is entitled upon such exercise, equals the number of securities to which the Holder would have been entitled upon exercise if the Holder had converted the Debenture immediately after the end of the Rights Period and after giving effect to the adjustment of the Conversion Price provided for in this Section 5.3(b). Such additional Common Shares shall be deemed to have been issued to the Holder immediately following the end of the Rights Period. (c) If, at any time after the date hereof and prior to the Maturity Date, the Corporation fixes a record date (the "relevant record date") for the issue or distribution to the holders of all of its outstanding Common Shares of: (i) shares of any class in its capital, (ii) evidences of its Indebtedness, -16- (iii) assets or property, or (iv) rights, options or warrants to subscribe for or purchase any of the foregoing (other than rights, options or warrants to purchase Common Shares exercisable within 45 days of the date of issue of the rights, options or warrants at a price per share equal to or greater than 95% of the Current Market Price), and if such issue or distribution does not constitute a Common Share Reorganization, a Rights Offering or a Dividend Paid in the Ordinary Course (any of such events referred to in Sections 5.3(c)(i) through 5.3(c)(iv) being called a "Special Distribution"), the Conversion Price shall be adjusted immediately after the relevant record date by multiplying the Conversion Price in effect on the relevant record date by a fraction: (A) the numerator of which shall be the difference obtained when (a) the amount by which the aggregate fair market value of the shares, rights, options, warrants, evidences of Indebtedness or assets or property, as the case may be, which are distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation, is subtracted from (b) the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; and (B) the denominator of which shall be the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; provided that no such adjustment shall be made if the result of such adjustment would be to increase the Conversion Price in effect immediately before the relevant record date. Any determination of fair market value shall be made by the Board and their determination shall be conclusive. To the extent that any Special Distribution is not made, the Conversion Price shall be readjusted effective immediately to the Conversion Price that would then be in effect based upon the shares, rights, options or warrants, evidences of Indebtedness, assets or property actually distributed. 5.4. RULES FOR ADJUSTMENT IN RIGHTS AND EXERCISE PRICE For the purpose of this Article 5: (a) The adjustments provided for in this Article 5 are cumulative and shall be made successively wherever an event referred to in a particular section of this Article occurs, subject to the following provisions of this Article. (b) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price and no adjustment shall be made in the number of securities issuable on conversion of the Debenture unless it would result in a change of at least one-hundredths of a -17- Common Share; provided, however, that any adjustments which, by reason of this section, are not required to be made shall be carried forward and taken into account in a subsequent adjustment and so on. (c) Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any computation under Section 5.3. (d) No adjustment to the Conversion Price shall be made in respect of any event described in Section 5.3 (other than the events referred to in Sections 5.3(a)(i) and 5.3(a)(ii)) if the Holder is entitled to participate in such event on the same terms as though, and to the same effect as if, it had converted this Debenture in full prior to or on the effective date or record date of such event, provided that such participation is subject to all necessary regulatory approval. (e) In any case in which this Article 5 requires that an adjustment become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Holder in respect of the conversion of the Debenture after such record date and before the occurrence of such event the additional securities issuable upon such exercise by reason of the adjustment required by such event and delivering to the Holder any distributions declared with respect to such additional securities after such record date and before such event; provided, however, that the Corporation delivers to the Holder an appropriate instrument evidencing its right to receive such additional securities and such distributions upon the occurrence of the event requiring such adjustment. (f) If the Corporation fixes a record date to determine the holders of Common Shares entitled to receive any dividend or distribution or fixes a record date to take any other action and thereafter, but before the distribution to shareholders of any such dividend or distribution or the taking of such other action, the Corporation legally abandons its plan to pay such dividend or distribution or take such other action, then no adjustment pursuant to this paragraph shall be required by reason of the fixing of such record date. (g) If the Board does not fix a record date for a Common Share Reorganization, Special Distribution or Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the close of business on the day on which the Board authorizes the making of the Common Shares Reorganization, Special Distribution or Rights Offering, as the case may be. (h) If any question at any time arises with respect to the Conversion Price or the number of Common Shares issuable upon the conversion of this Debenture, such question shall be conclusively determined by the auditors from time to time of the Corporation, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the Corporation with the concurrence of the Holder, and any such determination shall be binding upon the Holder, the Corporation and all shareholders. If any such determination is made, the Corporation shall deliver a certificate to the Holder describing such determination. -18- (i) As a condition precedent to the taking of any action which would require any adjustment to the conversion Rights or Conversion Price, the Corporation must have taken all action which may be necessary in order that the Corporation shall have issued and reserved in its authorized capital and may validly and legally issue as fully-paid and non-assessable all of the Common Shares or other securities which the Holder is entitled to receive on full conversion hereof in accordance with the provisions hereof. (j) In the case the Corporation, after the date of issuance of this Debenture, takes any action affecting the Common Shares, other than an action described in Article 5, which in the opinion of the Board would materially affect the rights of the Holder, the Conversion Price will be adjusted in such manner, if any, and at such time by action by the Board but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the Board so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the Board has determined it to be equitable to make no adjustment. 5.5. NOTICE OF ADJUSTMENT IN EXERCISE PRICE AND RIGHTS (a) At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require an adjustment pursuant to this Article 5, the Corporation shall deliver to the Holder a certificate of the Corporation specifying the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. (b) In case any adjustment for which a notice in Section 5.5(a) has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to the Holder a certificate of the Corporation containing a computation of such adjustment. 5.6. CORPORATION TO RESERVE SHARES The Corporation covenants with the Holder that the Corporation will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon conversion of this Debenture as provided in this Article 5, and issue to the Holder or its nominee upon exercise of the conversion rights hereunder, such number of Common Shares as will then be issuable upon the conversion of this Debenture. 5.7. APPLICABLE SECURITIES LEGISLATION The Corporation will not, directly or indirectly, do any act or thing or, to the extent that it is able, permit any act or thing to be done, which would remove or deny any registration or prospectus exemption available under any applicable securities legislation with respect to the issuance of Common Shares upon the exercise of the conversion rights contained in this Debenture. -19- ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS 6.1. CORPORATION'S REPRESENTATIONS AND WARRANTIES The Corporation hereby represents, warrants and covenants to and with the Holder and acknowledges that the Holder is relying upon such representations, warranties and covenants (which representations, warranties and covenants shall survive the date hereof) that: (a) each of the Corporation and the Subsidiary is duly organized and validly existing under the laws of Ontario and Yukon, respectively; each is duly registered, licensed or qualified as an extra-provincial corporation in each jurisdiction where it carries on business or where the failure to be so registered, licensed or qualified will result in a Material Adverse Effect; other than the Subsidiary, a wholly-owned subsidiary of the Corporation, the Corporation has no Subsidiaries; (b) the Corporation has the corporate power, capacity and authority to enter into, and to perform its obligations under, this Debenture; this Debenture has been duly authorized, executed and delivered by the Corporation and is a valid and binding obligation of it, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; all agreements contemplated by this Debenture to which the Corporation is a party will be duly authorized, executed and delivered by the Corporation and will be valid and binding obligations of it, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors' rights and to the fact that specific performance is an equitable remedy available only in the discretion of the court; (c) each of the Corporation and the Subsidiary has the corporate power and capacity to own or lease its assets and to carry on its business as now conducted by it and as is presently intended to be conducted by it. The Corporation carries on business only at the Existing Locations and all Collateral is located at the Existing Locations; (d) the issue of this Debenture and the performance by the Corporation of its other obligations contemplated hereby does not require the approval or consent of any government authority having jurisdiction, except such as has already been obtained and will not result in a breach of, and does not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and does not and will not conflict with, (i) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the shareholders and directors of the Corporation or the Subsidiary, any Material Contract; (ii) to the knowledge of the Corporation, any statute, rule or regulation applicable to the Corporation or the Subsidiary; and (iii) to the knowledge of the Corporation, any judgment decree or order binding the Corporation, the Subsidiary or the property or assets of the Corporation or the Subsidiary; -20- (e) the authorized capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of preference shares, issuable in series, of which, as at the date hereof 29,186,465 Common Shares (and no other shares) are issued and outstanding as fully paid and non-assessable; the authorized capital of the Subsidiary consists of an unlimited number of class A shares of which, as at the date hereof, one class A share (and no other shares) is issued and outstanding as fully paid and non-assessable, and such share is owned by the Corporation; all such issued and outstanding securities have been validly issued and are outstanding as fully paid and non-assessable; there are no shareholders agreements, pooling agreements, voting trusts or other agreements or understandings with respect to the voting of any securities, or any of them, of the Corporation or of the Subsidiary; other than the convertible debentures issued on June 20, 2002 to the Holder and Other Holder which will be repaid on the date hereof, 11,447,113 share purchase warrants issued and outstanding and 1,596,992 options to purchase Common Shares, each of which entitles the holder to purchase one Common Share at varying exercise prices, there are no agreements, options, warrants, rights of conversion or other rights pursuant to which either the Corporation or the Subsidiary is, or may become, obligated to issue any shares or any securities convertible or exchangeable, directly or indirectly, into any shares of the Corporation or the Subsidiary, respectively. (f) the Common Shares to be delivered to the Holder, when delivered to the Holder, shall be fully-paid and non-assessable shares in the capital of the Corporation; (g) the Corporation will, at all times while the Common Share Purchase Warrants are outstanding, allot and maintain sufficient number of Common Shares to satisfy the exercise of Common Share Purchase Warrants comprising the Purchased Units; (h) each of the Corporation and the Subsidiary is current and up-to-date with all filings required to be made by it under the corporate laws of its jurisdiction of incorporation and the securities laws of the provinces of Canada where it is a reporting issuer or its equivalent, as applicable except where not filing would not have a Material Adverse Effect; (i) the Corporation is a reporting issuer not in default of its obligations under the securities laws of British Columbia, Alberta, Manitoba and Ontario (the "Provinces") and no material change relating to the Corporation has occurred with respect to which the requisite material change report has not been filed under the securities laws of the Provinces and no such disclosure has been made on a confidential basis; (j) none of the materials filed by or on behalf of the Corporation with the applicable securities commissions or the stock exchanges (the "Public Record") contained a misrepresentation as at the date of such filing which has not been corrected; (k) to the knowledge of the Corporation, each of the Corporation and the Subsidiary has conducted and is conducting its business in compliance with all applicable material licensing, anti-pollution and environmental protection legislation, regulations or by-laws or other similar legislation, laws, by-laws, rules and regulations of any governmental or regulatory bodies; to the knowledge of the Corporation, there is no -21- licensing, anti-pollution or environmental legislation, regulation, by-law or lawful requirement presently in force which the Corporation anticipates that it or the Subsidiary will be unable to comply with without adversely affecting its financial condition, results of operations, business or prospects in any jurisdiction in which its business is carried on; (l) to the knowledge of the Corporation, each of the Corporation and the Subsidiary holds all material licenses, certificates, registrations, permits, consents or qualifications required by the appropriate state, provincial, municipal or federal regulatory agencies or bodies necessary in order to enable its business to be carried on as now conducted and to the knowledge of the Corporation, all such licenses, certificates, registrations, permits, consents and qualifications are valid and subsisting and in good standing and do not contain any unusual burdensome provision, condition or limitation which has a Material Adverse Effect on the Corporation or the Subsidiary and, to the knowledge of the Corporation, neither the Corporation nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of any such licenses, certificates, registrations, permits, consents, or qualifications which, if the subject of an unfavorable decision, ruling or finding would materially and adversely affect the conduct of the business, operations, financial condition or income or future prospects of the Corporation or the Subsidiary; (m) to the knowledge of the Corporation, no legal or governmental proceedings have been instituted or threatened to which either the Corporation or the Subsidiary is a party or to which the property of the Corporation or the Subsidiary is subject that would result individually or in the aggregate in a Material Adverse Effect; (n) the audited consolidated annual financial statements of the Corporation as at and for the year ended December 31, 2003 contained in the Corporation's annual report for such year: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at the end of such fiscal year and the consolidated results of its operations and the changes in its financial position for the year then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, -22- and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal year other than as specified in the Public Record; (o) the unaudited consolidated interim financial statements of the Corporation as at and for the six months ended June 30, 2004: (i) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (ii) represent fully, fairly and correctly the consolidated assets, liabilities and financial condition of the Corporation and the Subsidiary as at June 30, 2004 and the consolidated results of its operations and the changes in its financial position for the period then ended; (iii) are in accordance with the books and records of the Corporation and the Subsidiary; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation and the Subsidiary on a consolidated basis for the period covered thereby, and there has not been any material adverse change in the financial position of the Corporation or the Subsidiary, or their businesses, assets, liabilities or undertaking since the end of such fiscal period other than as specified in the Public Record; (p) the auditors of the Corporation who audited the consolidated financial statements for the most recently completed fiscal year for which audited financial statements are available and who provided their audit report thereon are independent public accountants as required under applicable Canadian securities laws; (q) each of the Corporation and the Subsidiary has filed all necessary tax returns and has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and there are no tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon with respect to the Corporation or the Subsidiary which, in any of the above cases, might reasonably be expected to result in an adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Corporation or the Subsidiary, other than existing tax deficiencies not in excess of $50,000; (r) no order ceasing or suspending trading in securities of the Corporation or prohibiting the sale of securities by the Corporation has been issued and, to the knowledge of the Corporation, no proceedings for this purpose have been instituted or are pending; (s) to the knowledge of the Corporation, each of the Corporation and the Subsidiary is in compliance with all laws respecting employment and employment practices, terms -23- and conditions of employment, pay equity and wages, except where such non-compliance would not constitute an adverse material fact of the Corporation or the Subsidiary or result in an adverse material change to the Corporation or the Subsidiary, and has not and is not engaged in any unfair labour practice; (t) there is no requirement for the Corporation to make any filing with, give notice to or obtain any licence, permit, certificate, registration, authorization, consent or approval of any governmental or regulatory authority or third party as a condition to the execution, delivery and performance of this Debenture by the Corporation except for filing with the Ontario Securities Commission ("OSC") of a report on Form 45-501F1 or similar filings required on the issue of the Common Shares and Common Share Purchase Warrants issuable pursuant to this Debenture, each prepared and executed in accordance with OSC Rule 45-501 and accompanied by the prescribed fees, and complying with the requirements imposed by the TSX as a condition to the listing of the Common Shares issuable upon conversion of the Debenture and exercise of the Warrants; (u) each of the Corporation and the Subsidiary has good title to the assets which are subject to the Security Interest, free and clear of any Encumbrances other than Permitted Encumbrances, whether fixed or floating, on any such assets and no Person has any agreement or right to acquire an interest in such assets, other than as provided herein; (v) no Default or Event of Default has occurred and is continuing; (w) neither the Corporation nor the Subsidiary has any Indebtedness other than Permitted Indebtedness; and (x) Appendix 1 and Appendix 2 of Schedule C provide a complete and accurate description of all of the material Patents and Trade Marks of the Corporation, respectively, and the Corporation does not own, license or have any other interest in any other material Patents or Trademarks except as disclosed therein. 6.2. HOLDER REPRESENTATIONS AND WARRANTIES The Holder represents, warrants and certifies to the Corporation as follows and acknowledges that the Corporation is relying on such representations, warranties and certification in selling this Debenture: (a) the Holder is purchasing the Debenture as principal for the Holder's own account and not for the benefit of any other Person; (b) the Holder is a resident of the Province of Ontario; (c) this Debenture has been duly authorized, executed and delivered by, and constitutes a legal, valid, binding and enforceable obligation of, the Holder; (d) the Holder has not received any document purporting to describe the business and affairs of the Corporation that has been prepared primarily for delivery to and review -24- by prospective investors so as to assist those investors to make an investment decision in respect of the Debentures being sold; (e) the Holder has not been created or is not being used primarily for the purpose of acquiring or holding securities of the Corporation; (f) the Holder, if a company, either (i) had net assets of at least $5,000,000 as reflected in its most recently prepared financial statements; or (ii) is a wholly-owned subsidiary of an individual who beneficially owns, or who together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes, but net of any related liability (necessary liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets) exceeds $1,000,000; (g) the Holder, if an individual, beneficially owns, or together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000. 6.3. HOLDER'S ACKNOWLEDGMENTS The Holder acknowledges that: (a) the Debentures and any securities into which they are convertible will be subject to transfer and resale restrictions pursuant to the Securities Act (Ontario) and the regulation, rules, orders, instruments and published policy statements applicable thereunder, including Multilateral Instrument 45-102 Resale of Securities; (b) the Holder's purchase of the Debentures has not been made through or as a result of, and the distribution of the Debentures is not being accompanied by, an advertisement or general solicitation in printed or public media, or general or regular print circulation, radio or television or telecommunications, including electronic display of any other form of advertisement; (c) the Holder is responsible for obtaining such legal advice as the undersigned considers appropriate in connection with the execution, delivery and performance of this Debenture and any subsequent transfer or resale of Debentures or any securities into which they are convertible. 6.4. CORPORATION'S POSITIVE COVENANTS The Corporation covenants and agrees that so long as this Debenture is outstanding: (a) Punctual Payment. It will duly and punctually pay or cause to be paid all amounts payable by the Corporation to the Holder hereunder at the times and in the manner provided for herein; (b) Use of Proceeds. Principal amounts advanced under this Debenture shall only be used to finance discovery research and product development initiatives as approved by the Board; -25- (c) Conduct of Business. It will and will cause each of its Subsidiaries to do all things necessary or desirable to maintain its and their respective corporate existence in its and their respective present jurisdictions of incorporation, maintain its and their respective corporate power and capacity to own its and their respective properties and assets, and carry on its and their respective businesses in a commercially reasonable manner; (d) Maintain Property and Assets. It will maintain and cause each of its Subsidiaries to maintain all of its property and assets in good repair and working condition, consistent with the industry standards, reasonable wear and tear excepted, and continue to carry on its business as presently conducted and in compliance with all licences and permits and maintain its books and records in a manner consistent with good business practice and in a manner sufficient to permit the Holder to confirm compliance by the Corporation with the Corporation's covenants hereunder; (e) Inspection. It will at any reasonable time and from time to time upon reasonable prior notice, permit the Holder or representatives thereof to conduct inspections of the books and records of the Holder and its Subsidiaries and to make copies thereof, and to discuss the affairs, finances and accounts of the Corporation and its Subsidiaries with the auditors and officers of the Corporation; (f) Other Obligations. It will pay or cause to be paid and cause each of its Subsidiaries to pay or cause to be paid when required all amounts related to taxes, wages, workers' compensation obligations, government royalties or pension fund obligations and any other amount which may result in an Encumbrance against the assets of the Corporation or any of its Subsidiaries arising under any statute or regulation, other than a Permitted Encumbrance or to make adequate reserve for any such amount the payment of which is being contested; (g) Compliance with Applicable Law and Contracts. It will do or cause to be done or cause each of its Subsidiaries to do or cause to be done all acts necessary or desirable to comply with all applicable, federal, provincial and municipal laws, requirements, standards, the non-compliance with which could have a Material Adverse Effect upon it or any Subsidiary. It will and will cause each of its Subsidiaries to comply with the requirements of all Material Contracts to which it and they respectively are parties or by which respectively it and they or its and their properties are bound, non-compliance with which would, singly or in the aggregate, have a Material Adverse Effect upon its or any one of its Subsidiaries' respective business, property, financial condition or prospects; (h) Accounting Methods and Financial Records. It will and will cause each of its Subsidiaries to maintain a system of accounting which is established and administered in accordance with Canadian generally accepted accounting principles, keep adequate records and books of account in which accurate and complete entries shall be made in accordance with Canadian generally accepted accounting principles reflecting all transactions required to be reflected by such accounting principles and keep accurate and complete records of any property owned by it and each of them, respectively; -26- (i) Financial Statements. It will provide the Holder with its audited and unaudited financial statements for the Corporation in accordance with applicable corporate and securities laws together with such other financial information as the Holder may request from time to time; (j) Payment of Taxes and Claims. It will and will cause each of its Subsidiaries to: (i) pay and discharge all lawful claims for labour, material and supplies; (ii) pay and discharge all obligations which may result in liens on its assets; (iii) pay and discharge all taxes payable by it and each of them, respectively; and (iv) withhold and collect all taxes required to be withheld and collected by it and each of them, respectively, and remit such taxes to the appropriate governmental body at the time and in the manner required; provided that nothing in this Section 6.4(j) shall preclude the Corporation from contesting in good faith any of the matters referred to therein if it makes an adequate reserve for any such amount, the payment of which is being contested; (k) Notice of Event of Default. It will, as soon as it shall become aware of the same, give notice to the Holder of any Default, Event of Default, or the occurrence or non-occurrence of any event which constitutes, or which with the passage of time or giving of notice or both would constitute, a material default under any other agreement to which it is a party or by which it or any of its properties may be bound, giving in each case the details thereof and specifying the action proposed to be taken with respect thereto, regarding the Corporation or any Subsidiary of the Corporation; (l) Insurance. The Corporation shall maintain and cause its Subsidiaries to maintain insurance on its and their respective properties and assets and for the operation of its and their respective businesses in such amounts and against such risks as would be customarily obtained and maintained by a prudent owner of similar properties and assets operating a similar business (including without limitation appropriate liability insurance), and shall provide certified copies of such policies to the Holder upon request. Such policies of insurance shall include coverage against loss or damage of its property and assets by fire and other hazards, and business interruption insurance. All such insurance policies relating to properties and assets shall name the Holder and the Other Holder as loss payees as their interests may appear and copies thereof or certificates in respect of the coverage provided thereby shall be delivered to the Holder upon request. The Corporation shall pay all premiums in respect of such insurance when due and shall promptly furnish the Holder upon request with receipts or other satisfactory evidence of the payment thereof. Prior to any Event of Default any insurance proceeds in an amount (i) less than $25,000 shall be paid directly to the Corporation to be used to replace or repair the property in respect of which the proceeds have been paid, and (ii) equal to or greater than $25,000 shall be paid directly to the Holder and the Other Holder and may, at the option of the Holder and the Other Holder by joint written instruction to the Corporation, be applied against any Obligations hereunder and under the Other Debenture(s) or -27- released to the Corporation without prejudicing any rights or remedies of the Holder or Other Holder hereunder or under the Other Debenture(s) or affecting any Obligations; (m) Compliance with Securities Legislation and Matters. The Corporation shall comply with the requirements of all applicable securities laws and the regulations thereunder and shall take no step with a view to, or which would result in, the Corporation ceasing to be a reporting issuer in good standing under the Securities Act (Ontario) or the Regulation thereunder or under the securities laws of any other jurisdiction; (n) Maintain Listing. The Corporation shall continuously maintain the listing of its Common Shares on the TSX or upon such other stock exchange as may be acceptable to the Holder and shall use reasonable efforts to ensure that all Common Shares which are issuable upon the exercise of the conversion rights hereunder are listed on such stock exchange as and when issued; and (o) Secondary Offering. If, at any time, the Corporation undertakes a treasury offering of shares by way of prospectus, the Holder may participate by way of a secondary offering of which the Holder may sell all or any of the Common Shares beneficially owned by the Holder, unless this right would, in the opinion of the financial advisor and/or underwriter retained to complete such transaction, materially prejudice the offering. 6.5. CORPORATION'S NEGATIVE COVENANTS The Corporation hereby covenants and agrees with the Holder that it will not, so long as any amount owing hereunder shall remain unpaid, and it will not permit or cause any of its Subsidiaries to, without the prior written consent of the Holder: (a) Security Interests. Create, issue, incur, assume or permit to exist any Encumbrance on any of its property other than (i) Encumbrances in favour of the Holder; and (ii) Permitted Encumbrances, nor do or permit anything to adversely affect the ranking or validity of the Security Interest except by incurring a Permitted Encumbrance. (b) Change in Nature of Business. Make or permit or cause any Subsidiary to make any material change in the nature of its or their respective existing business. (c) Mergers. Enter into any transaction (whether by way of reconstruction, reorganization, consolidation, dissolution or otherwise) whereby all or any substantial part of its undertaking, property or assets would become the property of any other Person or, in the case of any such amalgamation, of the continuing corporation resulting therefrom. (d) Disposal of Assets. Directly or indirectly, sell, lease, assign, transfer, abandon, convey or otherwise dispose of any of its undertaking or assets (including any capital stock of any of its Subsidiaries or other corporation) except as follows: (i) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell any inventory or other assets that are customarily sold by the -28- Corporation or such Subsidiary as part of the normal operation of its respective business; and (ii) the Corporation or any of its Subsidiaries may, in the ordinary course of business, sell equipment, fixtures, materials or supplies that are no longer required in the business of the Corporation or such Subsidiary or that are worn-out or obsolete. (e) Distributions. Declare, make or pay any dividend or other distribution on any share in the capital of the Corporation or a Subsidiary other than a distribution made by a Subsidiary to the Corporation. (f) Alteration of Capital. Purchase, redeem or retire in any way any shares of its capital or otherwise reduce its issued or paid up capital in respect of such shares or otherwise permit a change in the authorized capital structure or in the terms of any of its classes of share. (g) Transactions Out of the Ordinary Course. Enter into or effect any transactions out of the ordinary course of business. (h) Financial Assistance. Provide any financial assistance to any Person except financial assistance provided to the Corporation by a Subsidiary of the Corporation or to a Subsidiary of the Corporation by the Corporation. (i) Maintenance and Ownership of Subsidiaries. In the case of the Corporation, sell or otherwise dispose of any shares of the capital of any of its Subsidiaries or permit any of such Subsidiaries to issue, sell or otherwise dispose of any shares of the capital or the capital of any other of such Subsidiaries, except to the Corporation. (j) Winding-up. Take or institute proceedings for the winding-up, reorganization or dissolution of the Corporation or any Subsidiary. (k) Changing Location etc. Change its name or the location of its chief executive office or remove or otherwise permit any Collateral (other than inventory in transit) to be located at any location other than Existing Locations, without providing the Holder with 30 days prior written notice thereof and promptly taking such other steps, if any, as the Holder may require to maintain the perfection of the Security Interest. (l) Additional Indebtedness. Incur any Indebtedness other than Permitted Indebtedness. (m) Subsidiaries. Have any Subsidiaries other than the Subsidiary without the consent of the Holder. -29- ARTICLE 7. EVENTS OF DEFAULT 7.1. EVENTS OF DEFAULT The occurrence of any one or more of the following events or conditions (each such event or condition being an "Event of Default") shall constitute a default under this Debenture: (a) except as otherwise provided in this Section, the Corporation does not observe or perform any of the Corporation's obligations under this Debenture or any other agreement or document existing at any time between the Corporation and the Holder and such default remains unremedied to the satisfaction of the Holder seven calendar days after written notice thereof is given to the Corporation by the Holder; (b) any representation, warranty or statement made by or on behalf of the Corporation to the Holder is untrue in any material respect at the time when or as of which it was made; (c) the Corporation ceases or threatens to cease to carry on in the normal course the Corporation's business or any material part thereof; (d) the holder of a charge takes possession of all or any part of the Corporation's property having a value in excess of $150,000, or a distress, execution or other similar process is levied against all or any part of such property having a value in excess of $150,000; (e) if an order ceasing or suspending or prohibiting trading in any securities of the Corporation shall be issued by any stock exchange or securities regulatory authority having jurisdiction and such situation continues in excess of two weeks; (f) default by the Corporation or any of its Subsidiaries in the performance or observance of any covenant, condition or obligation contained in any agreement between the Corporation or its Subsidiary, as the case may be, and any Person, where such default gives rise to a right to enforce security against the Corporation or its Subsidiary, as the case may be, where the default, or the cumulative defaults are in excess of $150,000; (g) the Corporation fails to pay to any Person any Indebtedness in excess of $250,000 in aggregate when due (whether at scheduled maturity or by required prepayment, acceleration, demand or otherwise) and such failure continues after any applicable grace period, except as the Holder and Other Holder have otherwise agreed; (h) an event of default occurs under the Other Debenture(s); (i) any event occurs which would have a Material Adverse Effect on the Corporation and its Subsidiaries taken as a whole; (j) if the Corporation or any of its Subsidiaries is in default under any Material Contract to which it is a party and such default is not cured before the earlier of (i) 30 days -30- after the occurrence of such default, and (ii) five Business Days prior to the expiry of the applicable cure period, if any, under such Material Contract; (k) if a final judgment or decree for the payment of money due shall have been obtained or entered against the Corporation or any of its Subsidiaries in an amount of $100,000 or more and such judgment or decree shall not have been and remain vacated, discharged or stayed pending appeal within the applicable appeal period; (l) if a decree or order of a court of competent jurisdiction is entered adjudging the Corporation or any of its Subsidiaries a bankrupt or insolvent or approving as properly filed a petition seeking the winding-up of the Corporation or any of its Subsidiaries under the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding-Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law or issuing sequestration or process of execution against any substantial part of the assets of the Corporation or any of its Subsidiaries or ordering the winding up or liquidation of its affairs and any such decree or order continues unstayed and in effect for a period of thirty (30) days; (m) if the Corporation or any of its Subsidiaries becomes insolvent, makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors, makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, seeks relief under the Companies' Creditors Arrangement Act (Canada), the Winding Up and Restructuring Act (Canada) or any other bankruptcy, insolvency or analogous law, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its assets, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors' rights or consents to, or acquiesces in, the filing of such a petition; or (n) if any Change of Control Event occurs. 7.2. RIGHTS UPON DEFAULT Upon the occurrence of an Event of Default the entire Principal amount outstanding hereunder shall at the option of the Holder forthwith become immediately due and payable, with Interest thereon, at the rate determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonour or any other notice of demand whatsoever, all of which are hereby expressly waived by the Corporation. In such event the Holder may in its discretion exercise any right or recourse and/or proceed by any action, suit, remedy or proceeding against the Corporation authorized or permitted by law for the recovery of all the Indebtedness and liabilities of the Corporation to the Holder and proceed to exercise any and all rights hereunder and under the security constituted by the Security Interest. No right will be exclusive of or dependent upon or merge in any other right, and one or more of such rights may be exercised independently or in combination from time to time. -31- 7.3. CHARGES AND EXPENSES The Corporation agrees to pay on demand all costs and expenses incurred (including among other things legal fees) and fees charged by the Holder in connection with obtaining or discharging this Debenture to and by the Holder or any Receiver in exercising any remedy under this Debenture and in carrying on the Corporation's business. All such amounts will bear interest from time to time at the rate equal to the rate payable on the Principal sum hereunder, and the Corporation will reimburse the Holder upon demand for any amount so paid. 7.4. FURTHER ASSURANCES The Corporation will from time to time as soon as practicable upon request by the Holder take such action as the Holder may consider necessary to give effect to this Debenture. 7.5. PERFORMANCE BY THE SECURED PARTY In the event that the Corporation fails to perform any obligations under this Debenture, including keeping the Collateral free and clear of all Encumbrances, other than Permitted Encumbrances, the Holder may, at its option and without being under any obligation to do so, perform such obligations and the Corporation shall pay to the Holder, immediately upon demand, all costs and expenses (including, without limitation, legal fees on a solicitor-client basis) incurred by the Holder in connection therewith and all such costs and expenses shall form part of the Obligations, bear interest at the Interest Rate, both before and after demand and judgment from the date incurred by the Holder and shall be secured by the Security Interest. The performance by the Holder of any obligation of the Corporation hereunder or the curing of any Event of Default by the Holder shall not constitute a waiver by the Holder of any of its rights, remedies or privileges hereunder or relieve the Corporation from its default or any consequences thereof. 7.6. DEALINGS BY THE HOLDER The Holder may grant renewals, extensions of time and other indulgences, take and give up securities, accept compositions, grant full, partial and conditional releases and discharges, perfect or fail to perfect any securities, release any Collateral to third parties and otherwise deal or fail to deal with the Corporation, debtors of the Corporation, guarantors, sureties and others and with the Collateral and other securities as the Holder may see fit, all without prejudice to any liability of the Corporation to the Holder or the Holder's rights and remedies under this Debenture, the Personal Property Security Act (Ontario) or otherwise at law. 7.7. NO SET-OFF The Obligations shall be paid by the Corporation without regard to any equities between the Corporation and the Holder or any right of set-off or cross-claim that the Corporation may have against the Holder. -32- ARTICLE 8. SECURITY 8.1. SECURITY As general and continuing security for the payment and performance of the Obligations, the Corporation hereby grants a security interest in favour of the Holder as set out in Schedule "C" and shall execute and deliver in favour of the Holder, all such further, security agreements, instruments and documents (collectively with this Debenture being the "SECURITY DOCUMENTS") and do all such other acts and things as the Holder may from time to time require, to create, grant and maintain a first perfected Encumbrance on the Collateral in favour of the Holder, subject only to Permitted Encumbrances. All Security Documents shall, in form and substance, be satisfactory to the Holder, acting reasonably. The Corporation acknowledges and agrees that as at the date hereof there are additional Security Documents that will have to be executed and delivered by the Corporation and additional registrations and other steps that will have to be taken by the Corporation and others in order for the Security Interest to constitute a first perfected Encumbrance on all of the Collateral, subject only to Permitted Encumbrances, and agrees that the right of the Holder to require such Security Documents and the performance of such other acts and things at any time and from time to time shall not be prejudiced by any delay on the part of the Holder in requesting same. The Corporation constitutes and appoints the Holder and any officer or agent of the Holder, with full power of substitution, as the Corporation's true and lawful attorney-in-fact with full power and authority in the place of the Corporation and in the name of the Corporation or in its own name, from time to time in the Holder's discretion after any Event of Default or any default under this section, to take any and all appropriate action and to execute any and all documents and instruments as, in the opinion of such attorney may be necessary or desirable to accomplish the purposes of this Debenture. These powers are coupled with an interest and are irrevocable until this Debenture and the Security Documents are terminated and released. Nothing in this section affects the right of the Holder as secured party or any other Person on the Holder's behalf, to sign and file or deliver (as applicable) all such financing statements, financing change statements, notices, verification agreements and other documents relating to the Collateral and this Debenture and any Security Documents as the Holder or such other Person considers appropriate ARTICLE 9. GENERAL PROVISIONS 9.1. NOTICES Any notice, communication, payment or demand required or permitted to be given under this Debenture shall be deemed to have been sufficiently given to the recipient if delivered personally, or (other than in the case of payment) if sent by facsimile or sent by ordinary first class mail within Canada, postage prepaid, addressed as follows: -33- (a) to the Corporation at: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto ON M9B 6H7 Attention: Michael Byrne, Chief Financial Officer and Corporate Secretary Facsimile: (416) 335-9306 (b) to the Holder at: 386 Cortleigh Blvd. Toronto, Ontario M5N 1R5 Attention: Andrea Dan-Hytman Facsimile: (416) 787-0311 Any such mailing shall be deemed to be received on the date of delivery if delivered personally, on the next Business Day following the transmission by facsimile confirmed by the sender thereof or on the third Business Day following the date of mailing or, in the event of any disruption, strike or interruption in the Canadian postal service after mailing and prior to receipt, on the third Business Day following full resumption of such Canadian postal service. Either party hereto may change its facsimile number or address for the purpose of this Section 9.1 by giving written notice of such change to the other. 9.2. AMENDMENTS Neither this Debenture nor any provision hereof may be amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge, or termination is sought. No delay or omission by the Holder in exercising any rights or remedies hereunder or in respect of any Obligations or the performance by the Corporation of any Obligations in default shall operate as a waiver thereof or of any other rights or remedies of the Holder. No single or partial exercise of any rights or remedies by the Holder shall preclude any other or further exercise thereof or the exercise of any other rights or remedies. A written waiver of any right or remedy shall be effective only for the specific purpose and time, if any, stipulated therein and shall not operate as a waiver of any other rights or remedies of the Holder. This Debenture may not be amended, supplemented or otherwise modified without the prior written consent of the Other Holder. 9.3. TIME OF THE ESSENCE Time is expressly declared to be of the essence of this Debenture in respect of all payments to be made hereunder, the exercise of any redemption and conversion rights hereunder, and all covenants and agreements to be performed and fulfilled. -34- 9.4. SEVERABILITY If any covenant or obligation of any party contained herein, or if any provision of this Debenture or its application to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Debenture or the application of such covenant or obligation to Persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected, and each provision and each covenant and obligation contained in this Debenture shall be separately valid and enforceable, to the fullest extent permitted by law or at equity. 9.5. COUNTERPARTS This Debenture may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 9.6. FURTHER ASSURANCES Each of the Corporation and the Holder shall promptly cure any default by it in the execution and delivery of this Debenture or of any of the other agreements provided for hereunder to which it is a party. The Corporation, at its expense, shall promptly execute and deliver or cause to be executed and delivered to the Holder, upon request by the Holder, all such other and further documents, agreements, opinions, certificates and instruments in compliance with, or accomplishment of the covenants and agreements of the Corporation hereunder or more fully to state the obligations of the Corporation set out herein or under any other loan document or to make any recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith. The Corporation hereby irrevocably constitutes and appoints any officer for the time being of the Holder and each Receiver, the true and lawful attorney of the Corporation, at any time that an Event of Default shall have occurred and be continuing, with full power of substitution to execute and deliver all such agreements, instruments and documents and to do all such further acts and things with the right to use the name of the Corporation whenever and wherever it may be deemed necessary or expedient. 9.7. ENTIRE AGREEMENT This Debenture, the Payment and Security Sharing Agreement and the confirmations delivered in respect of the Security Interest constitute the whole and entire agreement between the parties hereto and cancel and supersede any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof. 9.8. TRANSFERABILITY Except for transfers provided for in the Payment and Security Sharing Agreement, this Debenture may only be transferred by the Holder with the prior written consent of the Corporation not to be unreasonably withheld or delayed. -35- 9.9. PARTIES IN INTEREST This Debenture shall be binding on the Corporation and its successors and will be binding on and will enure to the benefit of the Holder and its successors and assigns. IN WITNESS WHEREOF the Corporation and the Holder have executed this Debenture as of the 3rd day of November, 2004. VIVENTIA BIOTECH INC. By: /s/ Michael Byrne ------------------------------------- Name: Michael Byrne Title: Chief Financial Officer By: ------------------------------------- Name: Title: ADH INVESTMENTS (1999) INC. By: /s/ Andrea Dan Hytman ------------------------------------- Name: Andrea Dan Hytman Title: SCHEDULE "A" FORM OF COMMON SHARE PURCHASE WARRANT SCHEDULE "B" CONVERSION NOTICE TO: Viventia Biotech Inc. (the "Corporation") FROM: ADH Investments (1999) Inc. (the "Holder") RE: The Convertible Secured Debenture issued by the Corporation to the Holder as of November 3, 2004 (the "Debenture") - -------------------------------------------------------------------------------- All terms used in this Conversion Notice which are defined in the Debenture have the meanings attributed thereto in the Debenture. The Holder hereby irrevocably elects to convert $_________________ of the Principal outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Conversion Price and $_____________ of the Interest outstanding as of the date hereof under this Debenture and evidenced by the Debenture into Units at the Interest Conversion Price. Please issue, register and deliver the Common Shares and Common Share Purchase Warrants comprising such Units in the name of: Name: ------------------------------------------ Address: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ DATED: , 200_. ADH INVESTMENTS (1999) INC. By: --------------------------------- Name: Title: SCHEDULE "C" SECURITY INTEREST 1. SECURITY (a) Security. Subject to Sections 1(c) and 1(d) of this Schedule "C", as continuing security for the due and timely payment and performance by the Corporation of its obligations hereunder, the Corporation hereby (i) grants a security interest in and conveys, assigns, hypothecates, mortgages and charges, as and by way of a first fixed and floating mortgage and charge to and in favour of the Holder (the "Security Interest"), all its undertaking and business and all its property and assets and rights for the time being, both present and future, of whatsoever nature and kind and wheresoever situate (the "Collateral") including, without limitation, (i) each of the Patents identified in Appendix 1, including all rights to receive royalty, licence or other payments due to the Corporation from any licensed user or other use of the Patents; (ii) each of the Trade Marks identified in Appendix 2, including all goodwill of the business of the Corporation symbolized by each of the Trade Marks and all rights of the Corporation as the registered owner of the Trade Marks, including the right to receive royalty, licence or other payments due to the Corporation from any registered user or other user of any Trade Marks; (iii) any present or future claim by, or right of action of, the Corporation against any Person with respect to the infringement of any of the Trade Marks or Patents; (b) Attachment. The parties acknowledge and agree that value has been given for the granting of the Security Interest and that they have not agreed to postpone the time for attachment, except for after-acquired property forming part of the Collateral, the attachment to which will occur forthwith upon the Corporation acquiring rights in such Collateral. (c) Exception for Last Day of Leases. The Security Interest granted hereby does not and shall not extend to, and the Collateral shall not include, the last day of the term of any lease or sub-lease, oral or written, or any agreement therefor, now held or hereafter acquired by the Corporation but, upon the sale of the leasehold interest or any part thereof, the Corporation shall stand possessed of such last day in trust to assign the same as the Holder shall direct. (d) Exception for Contractual Rights. The Security Interest hereby granted does not and shall not extend to, and the Collateral shall not include, any agreement, right, franchise, licence or permit (collectively, "Contractual Rights") to which the Corporation is a party or of which the Corporation has the benefit, to the extent that the creation of the Security Interest therein would constitute a breach of the terms of, or permit any Person to terminate, the Contractual Rights (the "Restricted Rights"), but the Corporation shall hold its interest therein in trust for the Holder -ii- and shall assign such Restricted Rights to the Holder forthwith upon obtaining the consent of the other party or parties thereto. Upon the request of the Holder, the Corporation shall use all commercially reasonable efforts to obtain any consent required to permit any Restricted Rights to be subject to the Security Interest. The Corporation shall use commercially reasonable efforts to provide that any agreement after the date hereof does not require any consent to permit the Contractual Rights created thereunder to become subject to the Security Interest and, except as disclosed to and approved by the Holder in writing, none of the existing Restricted Rights are Material Contracts. (e) Permitted Dealings with Collateral. Unless an Event of Default has occurred, the Corporation may, without the consent of the Holder: (i) deal with the Collateral as permitted by the Debenture; and (ii) subject to Section 2 of this Schedule "C", collect proceeds and accounts in the ordinary course of business. (f) Delivery of Instruments, Securities, Etc. (i) If an Event of Default has occurred the Corporation shall, upon request of the Holder, forthwith deliver to the Holder, to be held by the Holder hereunder, all instruments, securities, letters of credit, advances of credit and negotiable documents of title in its possession or control which pertain to or form part of the Collateral and shall, as required, duly endorse the same for transfer in blank or as the Holder may direct and shall use commercially reasonable efforts to deliver to the Holder any and all consents or other instruments or documents necessary to comply with any restrictions on the transfer thereof in order to transfer the same to the Holder. (ii) Subject to any other written agreements or instruments in effect from time to time between the parties, unless an Event of Default has occurred and is continuing the Corporation shall be entitled (i) to receive all distributions of any kind whatsoever at any time payable on or with respect to the Collateral and (ii) to vote the Collateral and to give consents, waivers, notices and ratifications and to take other action in respect of the Collateral; provided, however, that no vote shall be cast and no consent, waiver, notice or ratification shall be given and no action be taken which would impair the Collateral or which would be inconsistent with or violate any provision of this Debenture or any other written agreement or instrument in effect from time to time between the parties. (iii) Upon the occurrence of an Event of Default the Holder and during the continuance thereof shall be entitled to enjoy and exercise all of the rights referred to in Section (f)(ii) of this Schedule "C" in such manner as it sees fit. (g) Verification of Collateral. The Holder shall have the right at any time and from time to time to verify the existence and state of the Collateral in any manner the Holder -iii- may consider appropriate and the Corporation agrees to furnish all assistance and information and to perform al such acts as the Holder may reasonably request in connection therewith and for such purpose to grant to the Holder or its agents access to all places where Collateral may be located and to all premises occupied by the Corporation. 2. COLLECTION OF PROCEEDS AND ACCOUNTS (a) Control of Proceeds and Accounts. After the occurrence of an Event of Default the Holder, if demand has been made in accordance with Section 3(a) of this Schedule "C", may take control of any Proceeds and accounts and may notify any account debtor or any obligor under any instrument held by the Corporation or the Holder to make payment in respect of any Proceeds and accounts directly to the Holder, whether or not the Corporation has theretofore been making collections on the Collateral. (b) Proceeds and Accounts Received in Trust. After the occurrence of an Event of Default has occurred, if the Corporation shall collect or receive any accounts or shall be paid for any of the other Collateral or shall receive any Proceeds, all money so collected or received by the Corporation shall be received by the Corporation as trustee for the Holder and, if demand has been made in accordance with Section 3(a) of this Schedule "C", shall be paid to the Holder forthwith upon demand and the Holder may, in its discretion, apply the same in reduction of the Obligations or hold the same as further Collateral hereunder. 3. DEFAULT AND THE HOLDER'S REMEDIES (a) Remedies Upon Default. Upon the occurrence of an Event of Default, the Obligations shall, at the option of the Holder, forthwith become immediately due and payable by the Corporation to the Holder and the Holder may thereafter, without further notice to the Corporation except as provided at law or in this Debenture: (i) commence legal action to enforce payment or performance of the Obligations; (ii) require the Corporation, at the Corporation's expense, to assemble the Collateral at a place or places designated by notice in writing given by the Holder to the Corporation, and the Corporation agrees to so assemble the Collateral; (iii) require the Corporation, by notice in writing given by the Holder to the Corporation, to disclose to the Holder the location or locations of the Collateral, and the Corporation agrees to make such disclosure when so required by the Holder; (iv) without legal process, enter any premises where the Collateral may be situated and take possession of the Collateral by any method permitted by law; -iv- (v) repair, process, complete, modify or otherwise deal with the Collateral and prepare for the disposition of the Collateral, whether on the premises of the Corporation or otherwise and, in connection with any such action, utilize any of the Corporation's property without charge; (vi) dispose of the Collateral by private or public sale, lease or otherwise upon such terms and conditions as the Holder may determine and whether or not the Holder has taken possession of the Collateral; (vii) carry on all or any part of the business or businesses of the Corporation and, to the exclusion of all others (including the Corporation), enter upon, occupy and, subject to any requirements of law and subject to any leases or agreements then in place, use all or any of the premises, buildings, plant, undertaking and other property of, or used by, the Corporation for such time and in such manner as the Holder sees fit, free of charge, and, except to the extent required by law, the Holder shall not be liable to the Corporation for any act, omission or negligence in so doing or for any rent, charges, depreciation or damages or other amount incurred in connection therewith or resulting therefrom other than from the Holder's gross negligence or wilful misconduct; (viii) file such proofs of claim or other documents as may be necessary or desirable to have its claim lodged in any bankruptcy, winding-up, liquidation, dissolution or other proceedings (voluntary or otherwise) relating to the Corporation; (ix) borrow money for the purpose of carrying on the business of the Corporation or for the maintenance, preservation or protection of the Collateral and mortgage, charge, pledge or grant a security interest in the Collateral, whether or not in priority to this Debenture, to secure repayment of any money so borrowed; (x) where the Collateral has been disposed of by the Holder as provided in Section 3(a)(vi) of this Schedule "C", commence legal action against the Corporation for the Deficiency, if any; (xi) appoint, by an instrument in writing delivered to the Corporation, a Receiver of the Collateral and remove any Receiver so appointed and appoint another or others in its stead or institute proceedings in any court of competent jurisdiction for the appointment of a Receiver, it being understood and agreed that: (A) the Holder may appoint any Person as Receiver, including an officer or employee of the Holder, with such Person's prior written consent; (B) such appointment may be made at any time after an Event of Default, either before or after the Holder shall have taken possession of the Collateral; -v- (C) the Holder may, from time to time, fix the reasonable remuneration of the Receiver and direct the payment thereof out of the Collateral or any Proceeds; and (D) the Receiver shall be deemed to be the agent of the Corporation for all purposes, and, for greater certainty, the Holder shall not be, in any way, responsible for any actions, whether wilful, negligent or otherwise, of any Receiver, and the Corporation hereby agrees to indemnify and save harmless the Holder from and against any and all claims, demands, actions, costs, damages, expenses or payments which the Holder may hereafter suffer, incur or be required to pay as a result of, in whole or in part, any action taken by the Receiver or any failure of the Receiver to do any act or thing; (xii) pay or discharge any mortgage, charge, encumbrance, lien, adverse claim or security interest claimed by any Person in the Collateral ranking prior to or pari passu with the Security Interest and the amount so paid shall be added to the Obligations and shall bear interest calculated from the date of payment at the Interest Rate until paid; and (xiii) take any other action, suit, remedy or proceeding authorized or permitted by this Debenture or at law or equity. (b) Sale of Collateral. The parties acknowledge and agree that any sale referred to in Section 3(a)(vi) of this Schedule "C" may be either a sale of all or any portion of the Collateral and may be by way of public auction, public tender, private contract or otherwise without notice, advertisement or any other formality, except as required by law, all of which are hereby waived by the Corporation to the extent permitted by law. To the extent not prohibited by law, any such sale may be made with or without any special condition as to an upset price, reserve bid, title or evidence of title or other matter and, from time to time as the Holder in its sole discretion thinks fit, with power to vary or rescind any such sale or buy in at any public sale and resell. The Holder may sell the Collateral for a consideration payable by instalments either with or without taking security for the payment of such instalments and may make and deliver to any purchaser thereof good and sufficient deeds, assurances and conveyances of the Collateral and give receipts for the purchase money, and any such sale shall be a perpetual bar, both at law and in equity, against the Corporation and all those claiming an interest in the Collateral by, from, through or under the Corporation. (c) Reference to Secured Party Includes Receiver. For the purposes of Sections 3(a), 3(b) and 3(c)of this Schedule "C", a reference to the "Holder" shall, where the context permits, include any Receiver appointed in accordance with Section 3 of this Schedule "C". (d) Payment of Expenses. The amount of the Reasonable Expenses shall be paid by the Corporation to the Holder, as applicable, from time to time forthwith after demand therefor is given by the Holder, as applicable, to the Corporation, together with -vi- interest thereon from the date that is five Business Days from the date of such demand of such demand at the Interest Rate, and payment of such Reasonable Expenses together with such interest shall be secured by the Security Interest. (e) Payment of Deficiency. Where the Collateral has been disposed of by the Holder as provided herein, the Deficiency, if any, shall be paid by the Corporation to the Holder forthwith after demand therefor has been given by the Holder to the Corporation, together with interest thereon calculated from the date of such demand at the Interest Rate, and the payment of the Deficiency together with such interest shall be secured by the Security Interest. (f) Rights and Remedies Not Mutually Exclusive. To the fullest extent permitted by law, the Holder's rights and remedies, whether provided for in this Debenture or otherwise, are not mutually exclusive and are cumulative and not alternative and may be exercised independently or in any combination. (g) No Obligation to Enforce. The Holder shall not be under any obligation to, or liable or accountable for any failure to, enforce payment or performance of the Obligations or to seize, realize, take possession of or dispose of the Collateral and shall not be under any obligation to institute proceedings for any such purpose. (h) Exclusion of Liability of Holder and Receiver. The Holder shall not, nor shall any Receiver appointed by it, be liable for any failure to exercise its rights, powers or remedies arising hereunder or otherwise, including without limitation any failure to take possession of, collect, enforce, realize, sell, lease or otherwise dispose of, preserve or protect the Collateral, to carry on all or any part of the business of the Corporation relating to the Collateral or to take any steps or proceedings for any such purposes. Neither the Holder nor any Receiver appointed by it shall have any obligation to take any steps or proceedings to preserve rights against prior parties to or in respect of Collateral including without limitation any instrument, chattel paper or securities, whether or not in the Holder's or the Receiver's possession, and neither the Holder nor any Receiver appointed by it shall be liable for failure to do so. Subject to the foregoing, the Holder shall use reasonable care in the custody and preservation of the Collateral in its possession. 4. POSSESSION OF COLLATERAL BY THE DEBENTUREHOLDER Possession of Collateral. For so long as any Collateral is in the possession of the Holder: (a) the Holder may, at any time following the occurrence of an Event of Default, grant or otherwise create a security interest in such Collateral upon any terms, whether or not such terms impair the Corporation's right to redeem such Collateral; (b) the Holder may, at any time following the occurrence of an Event of Default use such Collateral in any manner and to such extent as it deems necessary; and (c) the Holder shall have no duty of care whatsoever with respect to such Collateral other than to use reasonable care in the custody and preservation thereof, provided that the Holder need not take any steps of any nature to defend or preserve the -vii- rights of the Corporation therein against the claims or demands of others or to preserve rights therein against prior parties. APPENDIX 1 AND APPENDIX 2 LIST OF PATENTS AND TRADE MARKS See attached list Updated September 2004 Page 1
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 95 922 373.6 A6 Human Monoclonal Antibodies Specific to June 16, 1995 Cell Cycle Independent Glioma Surface Antigen (A6) 695 22 689.4-08 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) EP 0 766 736 A6 Human Monoclonal Antibodies Specific to November 05, 2001 Cell Cycle Independent Glioma Surface Antigen (A6) 08/264.093 A6 Human Monoclonal Antibodies Specific to June 21, 1994 Cell Cycle Independent Glioma Surface Antigen (A6) 33696/97 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers PI 9710811-1 H11 Antigen Binding Fragments (H11) that November 10, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 95 922 373.6 Europe EP 0 766 736 September 12, 2001 695 22 689.4-08 Germany DE 695 22 689.4-08 April 12, 2002 EP 0 766 736 France EP(FR) 0766736 April 2002 EP 0 766 736 U.K. EP(UK) 0766736 April 2002 08/264.093 U.S. 5,639,863 June 17, 1997 33696/97 Australia AU 725238 January 25, 2001 PI 9710811-1 Brazil
Updated September 2004 Page 2
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 255,540 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers CN 97194815.1 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 97929703.3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers P9902713 H11 Antigen Binding Fragments (H11) that May 22, 1987 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 127193 H11 Antigen Binding Fragments (H11) that November 28, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 255,540 Canada CN 97194815.1 China 97929703.3 Europe P9902713 Hungary 127193 Israel
Updated September 2004 Page 3
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 9-542853 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 989695 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 332566 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 985,150 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 9805601-3 H11 Antigen Binding Fragments (H11) that May 22, 1997 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 9-542853 Japan 989695 Mexico 332566 New Zealand 332566 December 07, 2000 985,150 Norway 9805601-3 Singapore 60444 April 18, 2000
Updated September 2004 Page 4
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ------------------ ------- ----- ----- 09/194,164 H11 Antigen Binding Fragments (H11) that November 20, 1998 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 101,108 H11 Antigen Binding Fragments (H11) that May 22, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 505305 (Divisional of 332566) H11 Antigen Binding Fragments (H11) that June 21, 2000 Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 72432/00 (Divisional of AU H11 Antigen Binding Fragments (H11) that December 20, 2000 Patent 725238) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 08/862,124 (Priority over H11 Antigen Binding Fragments (H11) that May 22, 1997 08/657,449 CIP) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 09/194,164 US 101,108 Hong Kong 505305 (Divisional of 332566) N. Zealand NZ 505305 October 7, 2002 72432/00 (Divisional of AU Australia Patent 725238) 08/862,124 (Priority US 6,207,153 March 27, 2001 over 08/657,449 CIP)
Updated September 2004 Page 5
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 10/651,453 (Further H11 Antigen Binding Fragments (H11) that August 29, 2003 Continuation of US Specifically Detect Cancer Cells, App.09/782,397 Nucleotides Encoding the Fragments, and (US-2003-0021779-A1) which is Use Thereof for the Prophylaxis and a Continuation of Detection of Cancers App.08/862,124) PCT/CA00/01027 Camel A6 Enhanced Phage Display Libraries of September 07, 2000 Human VH Fragments and Methods for Producing Same 10/070,503 (National Phase Camel A6 Enhanced Phage Display Libraries of October 23, 2003 Entry in the U.S.) Human VH Fragments and Methods for Producing Same 2384388 (National Phase Entry Camel A6 Enhanced Phage Display Libraries of March 03, 2002 in Canada) Human VH Fragments and Methods for Producing Same PCT/CA01/01845 (based on U.S. Llama A6 Phage Display Libraries of Human VH December 21, 2001 Provisional 60/258,031 filed Fragments November 22, 2000) 10/451,585 (National Phase Llama A6 Phage Display Libraries of Human VH June 21, 2003 Entry in the U.S.) Fragments VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 10/651,453 (Further U.S. Continuation of US App.09/782,397 (US-2003-0021779-A1) which is a Continuation of App.08/862,124) PCT/CA00/01027 Canada WO 01/18058 A2 March 15, 2001 10/070,503 (National Phase U.S. Entry in the U.S.) 2384388 (National Phase Entry Canada in Canada) PCT/CA01/01845 (based on U.S. Canada WO 02-051870 July 04, 2002 Provisional 60/258,031 filed November 22, 2000) 10/451,585 (National Phase U.S. Entry in the U.S.)
Updated September 2004 Page 6
INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION VB (Ref) Patent/Patent App Product Title Filed - -------- ----------------- ------- ----- ----- 2,447,832 (National Phase Llama A6 Phage Display Libraries of Human VH June 20, 2003 Entry in Canada) Fragments EP 01 27 1932.4 Llama A6 Phage Display Libraries of Human VH July 22, 2003 Fragments PCT/CA2004/000637 Proxinium Methods for Treating Cancer Using an April 30, 2004 (V84-845) Immunotoxin 60/554,580 (Provisional) T-Cell Epitopes in March 19, 2004 60/578,291 (Provisional) VB1-008 Tumor Specific Antibody June 10, 2004 VB (Ref) Patent/Patent App Country Patent No Date of Issue A Brief Status - -------- ----------------- ------- --------- ------------- -------------- 2,447,832 (National Phase Canada Entry in Canada) EP 01 27 1932.4 Europe PCT/CA2004/000637 U.S. 60/554,580 (Provisional) U.S. 60/578,291 (Provisional) U.S.
Updated September 2004 Page 1 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION
- ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,070,975 VIVENTIA(TM) August 14, 2000 Canada TMA573,326 January 9, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 865627 VIVENTIA(TM) February 9, 2001 Australia 885627 January 30, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 2093110 VIVENTIA(TM) February 14, 2001 Europe 2093110 February 19, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/205555 VIVENTIA(TM) February 5, 2001 U.S. 2,745,868 August 5, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 1,117,077 HYBRIDOMICS(TM) September 28, 2001 Canada TMA601,345 February 4, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/382,011 HYBRIDOMICS(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,117,078 IMMUNO MINING(TM) September 28, 2001 Canada TMA591,709 October 7, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 2 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 76/382,289 IMMUNO MINING(TM) March 14, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,107,351 VBI Design Logo June 21, 2001 Canada TMA591,802 October 8, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 898237 VBI Design Logo December 17, 2001 Australia 898237 July 22, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 76/350,349 VBI Design Logo December 19, 2001 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 301 72 865.8/01 VBI Design Logo December 21, 2001 Germany 30172865 August 20, 2002 - ----------------------------------------------------------------------------------------------------------------------------- 1,128,376 ARMED ANTIBODIES(TM) January 16, 2002 Canada TMA607,930 April 19, 2004 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 3 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 6/424,575 ARMED ANTIBODIES(TM) June 26, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,128,377 IMMUNOMINE(TM) January 16, 2002 Canada TMA 591,451 October 3, 2003 - ----------------------------------------------------------------------------------------------------------------------------- 76/428,124 IMMUNOMINE(TM) June 27, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,140,763 UnLock(TM) May 13, 2002 Canada TMA607,270 April 7, 2004 - ----------------------------------------------------------------------------------------------------------------------------- 76/467,853 UnLock(TM) November 8, 2002 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 30254575.1/05 UnLock(TM) November 7, 2002 Germany 30254575 August 25, 2003 - -----------------------------------------------------------------------------------------------------------------------------
Updated September 2004 Page 4 INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION - ---------------------------------------------------------------------------------------------------------------------------- VBI FILE REF. TRADEMARK TRADEMARK FILED COUNTRY REGISTRATION DATE A BRIEF APPLICATION NO. REGISTERED STATUS - ---------------------------------------------------------------------------------------------------------------------------- 1,211,855 Proxinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,609 Proxinium(TM) April 1, 2004 U.S. - ----------------------------------------------------------------------------------------------------------------------------- 1,211,862 Vicinium(TM) April 1, 2004 Canada - ----------------------------------------------------------------------------------------------------------------------------- 78/394,619 Vicinium(TM) April 1, 2004 U.S. - -----------------------------------------------------------------------------------------------------------------------------
SCHEDULE "D" MATERIAL CONTRACTS See attached list. MATERIAL AGREEMENTS 1. Exclusive License Agreement between Biovation Limited and Viventia Biotech Inc., dated March 8, 2004 2. Exclusive License Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated December 19, 2003 3. Exclusive License Option Agreement between the Trustees of Columbia University in the City of New York and Viventia Biotech Inc., dated March 1, 2002 4. License Agreement between McGill University and Novopharm Limited, dated April 28, 1994 5. License Agreement between Tanox, Inc. and Viventia Biotech Inc., dated August 20, 2002 6. License Agreement between University of Zurich and Viventia Biotech Inc., dated January 9, 2003 7. Non-exclusive License Agreement between XOMA Ireland Limited and Viventia Biotech Inc., dated November 30, 2001 8. Property Lease between Almad Investments Limited and Viventia Biotech Inc., dated January 26, 2004 9. Net Office Lease between Fana Burnhamthorpe Corp. and Viventia Biotech Inc., dated November 20, 2000 EX-3.4 11 t17062exv3w4.txt EXHIBIT 3.4 THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005. SCHEDULE "A" FORM OF COMMON SHARE PURCHASE WARRANTS COMMON SHARE PURCHASE WARRANTS THE WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE _, 20_ VIVENTIA BIOTECH INC. (Continued under the laws of Ontario) This is to certify that, for value received, Leslie L. Dan is the registered holder ("HOLDER") of________________ common share purchase warrants ("WARRANTS") each entitling the Holder to subscribe for and purchase one (1) fully paid and non-assessable common share (a "COMMON SHARE") of Viventia Biotech Inc. (the "CORPORATION"), on the terms set out below. 1. EXERCISE The Warrants may be exercised on or before 5:00 p.m. (Toronto time) on [THE DATE WHICH IS FOUR YEARS FROM DATE OF ISSUANCE] (the "EXPIRY DATE") by the Holder by completing the subscription form attached hereto and made a part hereof and delivering same to the Corporate Secretary of the Corporation, at its principal office at 10 Four Seasons Place, Suite 501, Toronto ON M9B 6H7, together with this certificate and the appropriate sum being an amount equal to the Exercise Price (as defined hereafter) multiplied by the number of Warrants for which subscription is being made in the subscription form. The Corporation shall notify each Holder in writing of any change of address of its principal office. 2. EXERCISE PRICE The exercise price shall be $2.00 per Warrant (the "EXERCISE PRICE") payable in lawful money of Canada, subject to adjustment as provided herein. 3. PAYMENT The Common Shares subscribed for must be paid in full at the time of subscription by certified cheque or bank draft payable in Canadian funds to or to the order of the Corporation. (ii) 4. SHARE CERTIFICATES Upon compliance with the conditions as aforesaid, and subject to the provisions under "Dilution" below, the Corporation will cause to be issued to the person or persons in whose name or names the Common Shares so subscribed for are to be issued, the number of Common Shares subscribed for and such person or persons shall be deemed upon presentation and payment as aforesaid, to be the holder or holders of record of such Common Shares. Within five (5) business days of compliance of the conditions aforesaid, the Corporation will cause to be mailed or delivered to the holder at the address or addresses specified in the attached subscription form, a certificate or certificates evidencing the number of Common Shares subscribed for. The certificate evidencing the Common Shares subscribed for shall contain the following legend: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005." The Corporation will pay all expenses and other charges payable in connection with the preparation, issuance and delivery of the share certificates issuable upon the exercise of the Warrants. 5. EXERCISE IN WHOLE OR IN PART The Warrants may be exercised in whole or in part, and if exercised in part, the Corporation shall issue another certificate, in a form substantially evidencing the remaining rights to purchase Common Shares, provided that any such right shall terminate on the Expiry Date. This Warrant Certificate is also exchangeable from time to time, upon surrender hereof by the Holder, for new Warrant Certificates of like tenor representing, in the aggregate, the same number of Warrants and/or the Warrant Certificate so surrendered. 6. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE The Holder shall have no rights whatsoever as a shareholder pursuant to the Warrants (including any right to receive dividends or other distribution to shareholders or to vote at a general meeting of the shareholders of the Corporation), other than in respect of Common Shares in respect of which the Holder shall have exercised its right to purchase hereunder and which the Holder shall have actually taken up and paid for. 7. TRANSFERABILITY The Warrants and all rights granted hereunder may be transferred on notice to the Corporation and in accordance with applicable securities laws. The Holder may at any time prior to the Expiry Date, upon surrender hereof to the Corporation at its principal office, and upon payment of the (iii) reasonable charges of the Corporation, exchange this Warrant certificate for other Warrant certificates evidencing Warrants entitling the Holder and/or its transferee to acquire in the aggregate the same number of Common Shares as may be acquired under the Warrants. 8. FRACTIONAL COMMON SHARES To the extent that the Holder would otherwise have been entitled to receive, on the exercise or deemed exercise of Warrants, 0.5 or more of a Common Share, the Holder shall be entitled to receive one Common Share. Except as provided in the preceding sentence, no fractional Common Shares shall be issued. 9. NO OBLIGATION TO PURCHASE Nothing contained herein or done pursuant hereto shall obligate the Holder to purchase or pay for, or the Corporation to issue, any Common Shares except those Common Shares in respect of which the Holder shall have exercised its rights to purchase in the manner provided hereunder. 10. COVENANTS The Corporation covenants that so long as any Warrants evidenced hereby remain outstanding, it shall: 10.1 reserve and there shall remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the right of purchase provided for herein should the Holder determine to exercise its rights in respect of all the Common Shares available for purchase and issuance under outstanding Warrants, and all Common Shares which shall be issued upon the exercise of the right to purchase provided for herein, upon payment therefor of the amount at which such Common Shares may at the time be purchased pursuant to the provisions hereof, shall be issued as fully paid and non-assessable Common Shares; 10.2 make all requisite filings under the securities legislation applicable to it in order that the Corporation continue as a reporting issuer in the Province of Ontario; 10.3 at all times maintain its existence, subject to the express provisions hereof; 10.4 use its best efforts to arrange for the additional listing and reservation for issuance of those Common Shares issued in connection with the exercise of the Warrants, and ensure that its Common Shares remain listed and posted for trading on the facilities of the Toronto Stock Exchange or another recognized Canadian stock exchange until at least the end of the one-year period following the Expiry Date; and 10.5 use its best efforts to well and truly perform and carry out all of the acts or things to be done by it as provided in this Warrant Certificate. 11. DILUTION In this Section 11, the following terms have the following meanings: (iv) "COMMON SHARES" means the common shares in the capital of the Corporation, provided that if a change referred to in Sections 11.1 or 11.2 occurs in respect of or affecting the Common Shares, then thereafter "Common Shares" means the shares or other securities or property purchasable or receivable on the exercise of the Warrants as a result of any such change; "CURRENT MARKET PRICE" at any particular date means the weighted average trading price of the Common Shares on the Toronto Stock Exchange (or, if the Common Shares are not then listed and posted for trading on the Toronto Stock Exchange, on any other stock exchange in Canada on which the Common Shares are listed and posted for trading as may be selected for that purpose by the board of directors of the Corporation) during the twenty (20) consecutive trading days ending on a date not earlier than the fifth trading day before the particular date or, if the Common Shares are not listed and posted for trading on any stock exchange, the current market price of the Common Shares as determined by the board of directors of the Corporation, which determination shall be conclusive; and for the purposes hereof, "trading day" means a day on which the relevant stock exchange is open for business and the Common Shares may be traded on that exchange on that day; "DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the Common Shares in any financial year of the Corporation, whether in (i) cash, (ii) securities of the Corporation, including rights, options or warrants to purchase any securities or property of the Corporation or other assets of the Corporation (but excluding rights, options or warrants referred to in Section 11.2.2 and rights, options or warrants referred to in parentheses in Section 11.2.3.4), or (iii) property or other assets of the Corporation, in each case to the extent that the amount or value of such dividend together with the amount or value of all other such dividends theretofore paid in such financial year (any such securities, property or other assets so distributed to be valued at the fair market value of such securities, property or other assets, as the case may be, as determined by the board of directors of the Corporation, which determination shall be conclusive) does not exceed the greater of: (i) 150% of the greater of (A) the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year; and (B) one-third of the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of thirty-six (36) consecutive months ended immediately prior to the first day of such financial year; or (v) (ii) 100% of the consolidated net income of the Corporation before extraordinary items (but after dividends payable on all shares ranking prior to, or on a parity with the Common Shares, with respect to the payment of dividends) for the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year, such consolidated net income, extraordinary items and dividends to be as shown in the audited consolidated financial statements of the Corporation for such period of twelve (12) consecutive months or if there are no audited consolidated financial statements for such period, computed in accordance with generally accepted accounting principles, consistent with those applied in the preparation of the most recent audited consolidated financial statements of the Corporation; and "EQUITY SHARES" means the Common Shares and any shares of any other class or series of the Corporation which may from time to time be authorized for issue if by their terms such shares confer on the holders thereof the right to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation beyond a fixed sum or a fixed sum plus accrued dividends. 11.1 Adjustment in Rights 11.1.1 If, at any time after the date hereof and prior to the Expiry Date, there is a reclassification of the outstanding Common Shares or change of the Common Shares into other shares or securities or any other capital reorganization of the Corporation or a consolidation, merger or amalgamation of the Corporation with or into any other corporation (any such event being called a "CAPITAL REORGANIZATION"), each Holder shall be entitled to receive and shall accept for the same aggregate consideration, upon the exercise of the Warrants at any time after the record date on which the holders of Common Shares are determined for the purpose of the Capital Reorganization (the "relevant record date"), in lieu of the number of Common Shares to which it was theretofore entitled upon such exercise, the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization that the Holder would have been entitled to receive as a result of such Capital Reorganization if, on the relevant record date, it had been the holder of record of the number of Common Shares in respect of which the Warrants are then being exercised, and such shares or other securities shall be subject to adjustment thereafter in accordance with provisions which are the same, as nearly as may be possible, as those contained in this Section 11; provided that no such Capital Reorganization shall be implemented unless all necessary steps have been taken so that each Holder shall be entitled to receive the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization as provided above. 11.1.2 If, at any time after the date hereof and prior to the Expiry Date, any adjustment in the Exercise Price shall occur as a result of: 11.1.2.1 an event referred to in Section 11.2.1; (vi) 11.1.2.2 the fixing by the Corporation of a record date for an event referred to in Section 11.2.2; or 11.1.2.3 the fixing by the Corporation of a record date for an event referred to in Section 11.2.3 if such event constitutes the issue or distribution to the holders of all of its outstanding Common Shares of (i) Equity Shares, or (ii) securities exchangeable for or convertible into Equity Shares at an exchange or conversion price per share less than the Current Market Price on such record date, or (iii) rights, options or warrants to acquire Equity Shares or securities exchangeable for or convertible into Equity Shares at an exercise, exchange or conversion price per share less than the Current Market Price on such record date; then the number of Common Shares purchasable upon the subsequent exercise of the Warrants shall be adjusted simultaneously with the adjustment to the Exercise Price provided in Section 11.2 by multiplying the number of Common Shares issuable upon the exercise of the Warrants immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the adjustment of the Exercise Price. 11.2 Adjustment in Exercise Price The Exercise Price shall be subject to adjustment from time to time as follows: 11.2.1 If, at any time after the date hereof and prior to the Expiry Date, the Corporation: 11.2.1.1 subdivides its outstanding Common Shares into a greater number of shares, 11.2.1.2 consolidates its outstanding Common Shares into a smaller number of shares, or 11.2.1.3 issues Common Shares to the holders of all of its outstanding Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, (any of such events being called a "COMMON SHARE REORGANIZATION"), the Exercise Price shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Common Share Reorganization (the "relevant record date") by multiplying the Exercise Price in effect immediately prior to the relevant record date by a fraction: (i) the numerator of which shall be the number of Common Shares outstanding on the relevant record date before giving effect to the Common Share Reorganization; and (vii) (ii) the denominator of which shall be the number of Common Shares outstanding on the relevant record date after giving effect to the Common Share Reorganization. 11.2.2 If, at any time after the date hereof and prior to the Expiry Date, the Corporation fixes a record date for the issue of rights, options or warrants to the holders of all or substantially all of its outstanding Common Shares (the "relevant record date") under which such holders are entitled, during a period expiring not more than forty five (45) days after the relevant record date (the "RIGHTS PERIOD"), to subscribe for or purchase Common Shares at a price per share, or securities exchangeable for or convertible into Common Shares at an exchange or conversion price per share less than 95% of the Current Market Price on the relevant record date (any of such events being called a "RIGHTS OFFERING"), the Exercise Price shall be adjusted effective immediately after the end of the Rights Period by multiplying the Exercise Price in effect immediately prior to the end of the Rights Period by a fraction: (i) the numerator of which shall be the aggregate of: (A) the number of Common Shares outstanding on the relevant record date, and (B) the number determined by dividing (1) either (a) the product of the number of Common Shares issued or subscribed for during the Rights Period under the Rights Offering and the price at which such Common Shares were offered, or, as the case may be, (b) the product of the exchange or conversion price of the securities exchangeable for or convertible into Common Shares and the number of Common Shares for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period, by (2) the Current Market Price on the relevant record date; and (ii) the denominator of which shall be, in the case of Section 11.2.2(i)(B)(1)(a), the number of Common Shares outstanding on the relevant record date plus the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering and, in the case of Section 11.2.2(i)(B)(1)(b), the number of Common Shares outstanding at the relevant record date plus the number of Common Shares for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period. If a Holder has exercised the Warrants during the period beginning immediately after the record date for a Rights Offering and ending on the last day of the Rights Period for that Rights Offering then, in addition to the Common Shares to which the (viii) Holder is otherwise entitled upon such exercise pursuant to this agreement, the Holder shall be entitled to that number of additional Common Shares which, when added to the number of Common Shares to which the Holder is entitled upon such exercise, equals the number of Common Shares to which the Holder would have been entitled upon exercise if the Holder had exercised the Warrants immediately after the end of the Rights Period and after giving effect to the adjustment of the Exercise Price provided for in this Section 11.2.2. Such additional Common Shares shall be deemed to have been issued to the Holder immediately following the end of the Rights Period. 11.2.3 If, at any time after the date hereof and prior to the Expiry Date, the Corporation fixes a record date (the "relevant record date") for the issue or distribution to the holders of all of its outstanding Common Shares of: 11.2.3.1 shares of any class in its capital, 11.2.3.2 evidences of its indebtedness, 11.2.3.3 assets or property, or 11.2.3.4 rights, options or warrants to subscribe for or purchase any of the foregoing (other than rights, options or warrants to purchase Common Shares exercisable within 45 days of the date of issue of the rights, options or warrants at a price per share equal to or greater than 95% of the Current Market Price), and if such issue or distribution does not constitute a Common Share Reorganization, a Rights Offering or a Dividend Paid in the Ordinary Course (any of such events referred to in Sections 11.2.3.1 through 11.2.3.4 being called a "Special Distribution"), the Exercise Price shall be adjusted immediately after the relevant record date by multiplying the Exercise Price in effect on the relevant record date by a fraction: (i) the numerator of which shall be the difference obtained when (a) the amount by which the aggregate fair market value of the shares, rights, options, warrants, evidences of indebtedness or assets or property, as the case may be, which are distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation, is subtracted from (b) the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; and (ii) the denominator of which shall be the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; provided that no such adjustment shall be made if the result of such adjustment (ix) would be to increase the Exercise Price in effect immediately before the relevant record date. Any determination of fair market value shall be made by the board of directors of the Corporation and their determination shall be conclusive. To the extent that any Special Distribution is not made, the Exercise Price shall be readjusted effective immediately to the Exercise Price that would then be in effect based upon the shares, rights, options or warrants, evidences of indebtedness, assets or property actually distributed. 11.3 Rules for Adjustment in Rights and Exercise Price For the purpose of this Section 11: 11.3.1 The adjustments provided for in this Section are cumulative and shall be made successively wherever an event referred to in a particular paragraph of this Section occurs, subject to the following provisions of this Section. 11.3.2 No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price and no adjustment shall be made in the number of Common Shares issuable on exercise of the Warrants unless it would result in a change of at least one-hundredths of a Common Share; provided, however, that any adjustments which, by reason of this Section, are not required to be made shall be carried forward and taken into account in a subsequent adjustment and so on. 11.3.3 Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any computation under Section 11.2. 11.3.4 No adjustment to the Exercise Price shall be made in respect of any event described in Section 11.2 (other than the events referred to in Sections 11.2.1.1 and 11.2.1.2) if the Holder is entitled to participate in such event on the same terms as though, and to the same effect as if, it had exercised the Warrants in full prior to or on the effective date or record date of such event, provided that such participation is subject to all necessary regulatory approval. 11.3.5 In any case in which this Section 11 requires that an adjustment become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to each Holder in respect of the exercise of the Warrants after such record date and before the occurrence of such event the additional Common Shares issuable upon such exercise by reason of the adjustment required by such event and delivering to the Holder any distributions declared with respect to such additional Common Shares after such record date and before such event; provided, however, that the Corporation delivers to the Holder an appropriate instrument evidencing its right to receive such additional Common Shares and such distributions upon the occurrence of the event requiring such adjustment. (x) 11.3.6 If the Corporation fixes a record date to determine the holders of Common Shares entitled to receive any dividend or distribution or fixes a record date to take any other action and thereafter, but before the distribution to shareholders of any such dividend or distribution or the taking of such other action, the Corporation legally abandons its plan to pay such dividend or distribution or take such other action, then no adjustment pursuant to this Section shall be required by reason of the fixing of such record date. 11.3.7 If the board of directors of the Corporation does not fix a record date for a Common Share Reorganization, Special Distribution or Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the close of business on the day on which the board of directors authorizes the making of the Common Shares Reorganization, Special Distribution or Rights Offering, as the case may be. 11.3.8 If any question at any time arises with respect to the Exercise Price or the number of Common Shares issuable upon the exercise of the Warrants, such question shall be conclusively determined by the auditors from time to time of the Corporation, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the Corporation with the concurrence of each Holder, and any such determination shall be binding upon each Holder, the Corporation and all shareholders. If any such determination is made, the Corporation shall deliver a certificate to each Holder describing such determination. 11.3.9 As a condition precedent to the taking of any action which would require any adjustment to the Warrants represented by this Warrant Certificate, including the Exercise Price, the Corporation must have taken all action which may be necessary in order that the Corporation shall have issued and reserved in its authorized capital and may validly and legally issue as fully-paid and non-assessable all of the Common Shares or other securities which each Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof. 11.3.10 In the case the Corporation, after date of issuance of the Warrants represented by this Warrant Certificate, takes any action affecting the Common Shares, other than an action described in this Section 11, which in the opinion of the directors of the Corporation would materially affect the rights of the Holders, the Exercise Price will be adjusted in such manner, if any, and at such time by action by the directors of the Corporation but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Corporation so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the directors have determined it to be equitable to make no adjustment. 11.4 Notice of Adjustment in Exercise Price and Rights 11.4.1 At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require an adjustment pursuant to this Section 11, the Corporation shall deliver to each Holder a certificate of the (xi) Corporation specifying the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. 11.4.2 In case any adjustment for which a notice in Section 11.4.1 has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to each Holder a certificate of the Corporation containing a computation of such adjustment. 12. CONSOLIDATION AND MERGER 12.1 The Corporation shall not enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other company, corporation or other entity (herein called a "successor entity") whether by way of reorganization, reconstruction, consolidation, merger, transfer, sale, disposition or otherwise, unless prior to or contemporaneously with the consummation of such transaction the Corporation and the successor entity shall have executed such instruments and done such things as, in the opinion of counsel to the Corporation, are necessary or advisable to establish that upon the consummation of such transaction,: 12.1.1 the successor entity will have assumed all the covenants and obligations of the Corporation under this Warrant Certificate, and 12.1.2 this Warrant will be a valid and binding obligation of the successor entity entitling each Holder, as against the successor entity, to all the rights of the Holder under this Warrant Certificate. 12.2 Whenever the conditions of Section 12.1 shall have been duly observed and performed, the successor entity shall possess and from time to time may exercise each and every right and power of the Corporation under this Warrant Certificate in the name of the Corporation or otherwise and any act or proceeding by any provision hereof required to be done or performed by any employee or officer of the Corporation may be done and performed with like force and effect by the like employees or officers of the successor entity. 13. REPRESENTATION AND WARRANTY The Corporation hereby represents and warrants to each Holder that the Corporation is duly authorized and has the lawful power and authority to create and issue the Warrants represented by this Warrant Certificate and the Common Shares issuable upon the exercise of the Warrants represented by this Warrant Certificate and perform its obligations hereunder and that this Warrant represents a valid, legal and binding obligation of the Corporation enforceable in accordance with its terms. 14. TRANSFER RESTRICTION ON COMMON SHARES If at the time of the exercise of the Warrants, there exist trading restrictions on the Common Shares acquired due to applicable securities legislation, the Corporation may, on the advice of counsel, endorse the Common Shares to such effect. (xii) 15. MISCELLANEOUS If the certificate representing the Warrants is lost, mutilated, destroyed or stolen, the Corporation may, on such reasonable terms as to cost and indemnity or otherwise as it may impose, issue a replacement certificate similar as to denomination, tenor and date as the certificate representing the Warrant so lost, mutilated, destroyed or stolen. Anything in this Warrant certificate to the contrary notwithstanding, the Warrants may be exercised, and are exercisable, only to the extent permitted by applicable law. 16. NOTICE Any notice, communication, payment or demand required or permitted to be given under this Warrant shall be deemed to have been sufficiently given to the recipient if delivered personally, or (other than in the case of payment) if sent by facsimile or sent by ordinary first class mail within Canada, postage prepaid, addressed as follows: (a) to the Corporation at: Four Seasons Place Suite 501 Toronto ON M9B 6H7 Attention: Michael Byrne, Chief Financial Officer and Corporate Secretary Facsimile: (416) 335-9306 (b) to the Holder: 78 The Bridle Path Toronto, Ontario M3B 2B1 Attention: Leslie Dan Facsimile: (416) 291-2162 Any such mailing shall be deemed to be received on the date of delivery if delivered personally, on the next business day following the transmission by facsimile confirmed by the sender thereof or on the third business day following the date of mailing or, in the event of any disruption, strike or interruption in the Canadian postal service after mailing and prior to receipt, on the third business day following full resumption of such Canadian postal service. Either party hereto may change its facsimile number or address for the purpose of this Section by giving written notice of such change to the other. 17. GOVERNING LAW The Warrants shall be governed by the laws of the Province of Ontario. Time shall be of the essence. (xiii) IN WITNESS WHEREOF the Corporation has authorized this certificate to be signed by the signature of its duly authorized officer this day of , 200_. VIVENTIA BIOTECH INC. By: _____________________________________ Name: Michael Byrne Title: Chief Financial Officer and Corporate Secretary SUBSCRIPTION TO: VIVENTIA BIOTECH INC. 10 FOUR SEASONS PLACE SUITE 501 TORONTO ON M9B 6H7 CANADA The undersigned holder of the within Warrant hereby subscribes for _____ Common Shares of Viventia Biotech Inc. (or such number of Common Shares or other securities to which such subscription entitles it in lieu thereof or in addition thereto under the provisions of the Warrants) at the subscription price of $2.00 for each one (1) Warrant evidenced by and on the terms specified in the Warrants and encloses herewith a certified cheque or bank draft payable to the order of Viventia Biotech Inc. in payment of the subscription price. The undersigned hereby directs that the said Common Shares be registered as follows:
NAME ADDRESS NUMBER OF COMMON SHARES ________________________ _______________________ _________________________ _______________________ SIN #___________________ _______________________
(Please print full name in which share certificates are to be issued.) DATED this ___________________ day of _____________________, 200__. _________________________________ By:___________________________ LESLIE L. DAN EX-3.5 12 t17062exv3w5.txt EXHIBIT 3.5 THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005. SCHEDULE "A" FORM OF COMMON SHARE PURCHASE WARRANTS COMMON SHARE PURCHASE WARRANTS THE WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE _, 20_ VIVENTIA BIOTECH INC. (Continued under the laws of Ontario) This is to certify that, for value received, ADH Investments (1999) Inc. is the registered holder ("HOLDER") of _____________________ common share purchase warrants ("WARRANTS") each entitling the Holder to subscribe for and purchase one (1) fully paid and non-assessable common share (a "COMMON SHARE") of Viventia Biotech Inc. (the "CORPORATION"), on the terms set out below. 1. EXERCISE The Warrants may be exercised on or before 5:00 p.m. (Toronto time) on [THE DATE WHICH IS FOUR YEARS FROM DATE OF ISSUANCE] (the "EXPIRY DATE") by the Holder by completing the subscription form attached hereto and made a part hereof and delivering same to the Corporate Secretary of the Corporation, at its principal office at 10 Four Seasons Place, Suite 501, Toronto ON M9B 6H7, together with this certificate and the appropriate sum being an amount equal to the Exercise Price (as defined hereafter) multiplied by the number of Warrants for which subscription is being made in the subscription form. The Corporation shall notify each Holder in writing of any change of address of its principal office. 2. EXERCISE PRICE The exercise price shall be $2.00 per Warrant (the "EXERCISE PRICE") payable in lawful money of Canada, subject to adjustment as provided herein. 3. PAYMENT The Common Shares subscribed for must be paid in full at the time of subscription by certified cheque or bank draft payable in Canadian funds to or to the order of the Corporation. (ii) 4. SHARE CERTIFICATES Upon compliance with the conditions as aforesaid, and subject to the provisions under "Dilution" below, the Corporation will cause to be issued to the person or persons in whose name or names the Common Shares so subscribed for are to be issued, the number of Common Shares subscribed for and such person or persons shall be deemed upon presentation and payment as aforesaid, to be the holder or holders of record of such Common Shares. Within five (5) business days of compliance of the conditions aforesaid, the Corporation will cause to be mailed or delivered to the holder at the address or addresses specified in the attached subscription form, a certificate or certificates evidencing the number of Common Shares subscribed for. The certificate evidencing the Common Shares subscribed for shall contain the following legend: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT PURSUANT TO THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY BEFORE MARCH 4, 2005." The Corporation will pay all expenses and other charges payable in connection with the preparation, issuance and delivery of the share certificates issuable upon the exercise of the Warrants. 5. EXERCISE IN WHOLE OR IN PART The Warrants may be exercised in whole or in part, and if exercised in part, the Corporation shall issue another certificate, in a form substantially evidencing the remaining rights to purchase Common Shares, provided that any such right shall terminate on the Expiry Date. This Warrant Certificate is also exchangeable from time to time, upon surrender hereof by the Holder, for new Warrant Certificates of like tenor representing, in the aggregate, the same number of Warrants and/or the Warrant Certificate so surrendered. 6. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE The Holder shall have no rights whatsoever as a shareholder pursuant to the Warrants (including any right to receive dividends or other distribution to shareholders or to vote at a general meeting of the shareholders of the Corporation), other than in respect of Common Shares in respect of which the Holder shall have exercised its right to purchase hereunder and which the Holder shall have actually taken up and paid for. 7. TRANSFERABILITY The Warrants and all rights granted hereunder may be transferred on notice to the Corporation and in accordance with applicable securities laws. The Holder may at any time prior to the Expiry Date, upon surrender hereof to the Corporation at its principal office, and upon payment of the (iii) reasonable charges of the Corporation, exchange this Warrant certificate for other Warrant certificates evidencing Warrants entitling the Holder and/or its transferee to acquire in the aggregate the same number of Common Shares as may be acquired under the Warrants. 8. FRACTIONAL COMMON SHARES To the extent that the Holder would otherwise have been entitled to receive, on the exercise or deemed exercise of Warrants, 0.5 or more of a Common Share, the Holder shall be entitled to receive one Common Share. Except as provided in the preceding sentence, no fractional Common Shares shall be issued. 9. NO OBLIGATION TO PURCHASE Nothing contained herein or done pursuant hereto shall obligate the Holder to purchase or pay for, or the Corporation to issue, any Common Shares except those Common Shares in respect of which the Holder shall have exercised its rights to purchase in the manner provided hereunder. 10. COVENANTS The Corporation covenants that so long as any Warrants evidenced hereby remain outstanding, it shall: 10.1 reserve and there shall remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the right of purchase provided for herein should the Holder determine to exercise its rights in respect of all the Common Shares available for purchase and issuance under outstanding Warrants, and all Common Shares which shall be issued upon the exercise of the right to purchase provided for herein, upon payment therefor of the amount at which such Common Shares may at the time be purchased pursuant to the provisions hereof, shall be issued as fully paid and non-assessable Common Shares; 10.2 make all requisite filings under the securities legislation applicable to it in order that the Corporation continue as a reporting issuer in the Province of Ontario; 10.3 at all times maintain its existence, subject to the express provisions hereof; 10.4 use its best efforts to arrange for the additional listing and reservation for issuance of those Common Shares issued in connection with the exercise of the Warrants, and ensure that its Common Shares remain listed and posted for trading on the facilities of the Toronto Stock Exchange or another recognized Canadian stock exchange until at least the end of the one-year period following the Expiry Date; and 10.5 use its best efforts to well and truly perform and carry out all of the acts or things to be done by it as provided in this Warrant Certificate. 11. DILUTION In this Section 11, the following terms have the following meanings: (iv) "COMMON SHARES" means the common shares in the capital of the Corporation, provided that if a change referred to in Sections 11.1 or 11.2 occurs in respect of or affecting the Common Shares, then thereafter "Common Shares" means the shares or other securities or property purchasable or receivable on the exercise of the Warrants as a result of any such change; "CURRENT MARKET PRICE" at any particular date means the weighted average trading price of the Common Shares on the Toronto Stock Exchange (or, if the Common Shares are not then listed and posted for trading on the Toronto Stock Exchange, on any other stock exchange in Canada on which the Common Shares are listed and posted for trading as may be selected for that purpose by the board of directors of the Corporation) during the twenty (20) consecutive trading days ending on a date not earlier than the fifth trading day before the particular date or, if the Common Shares are not listed and posted for trading on any stock exchange, the current market price of the Common Shares as determined by the board of directors of the Corporation, which determination shall be conclusive; and for the purposes hereof, "trading day" means a day on which the relevant stock exchange is open for business and the Common Shares may be traded on that exchange on that day; "DIVIDEND PAID IN THE ORDINARY COURSE" means a dividend paid on the Common Shares in any financial year of the Corporation, whether in (i) cash, (ii) securities of the Corporation, including rights, options or warrants to purchase any securities or property of the Corporation or other assets of the Corporation (but excluding rights, options or warrants referred to in Section 11.2.2 and rights, options or warrants referred to in parentheses in Section 11.2.3.4), or (iii) property or other assets of the Corporation, in each case to the extent that the amount or value of such dividend together with the amount or value of all other such dividends theretofore paid in such financial year (any such securities, property or other assets so distributed to be valued at the fair market value of such securities, property or other assets, as the case may be, as determined by the board of directors of the Corporation, which determination shall be conclusive) does not exceed the greater of: (i) 150% of the greater of (A) the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year; and (B) one-third of the aggregate amount of dividends paid by the Corporation on the Common Shares in the period of thirty-six (36) consecutive months ended immediately prior to the first day of such financial year; or (v) (ii) 100% of the consolidated net income of the Corporation before extraordinary items (but after dividends payable on all shares ranking prior to, or on a parity with the Common Shares, with respect to the payment of dividends) for the period of twelve (12) consecutive months ended immediately prior to the first day of such financial year, such consolidated net income, extraordinary items and dividends to be as shown in the audited consolidated financial statements of the Corporation for such period of twelve (12) consecutive months or if there are no audited consolidated financial statements for such period, computed in accordance with generally accepted accounting principles, consistent with those applied in the preparation of the most recent audited consolidated financial statements of the Corporation; and "EQUITY SHARES" means the Common Shares and any shares of any other class or series of the Corporation which may from time to time be authorized for issue if by their terms such shares confer on the holders thereof the right to participate in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation beyond a fixed sum or a fixed sum plus accrued dividends. 11.1 Adjustment in Rights 11.1.1 If, at any time after the date hereof and prior to the Expiry Date, there is a reclassification of the outstanding Common Shares or change of the Common Shares into other shares or securities or any other capital reorganization of the Corporation or a consolidation, merger or amalgamation of the Corporation with or into any other corporation (any such event being called a "CAPITAL REORGANIZATION"), each Holder shall be entitled to receive and shall accept for the same aggregate consideration, upon the exercise of the Warrants at any time after the record date on which the holders of Common Shares are determined for the purpose of the Capital Reorganization (the "relevant record date"), in lieu of the number of Common Shares to which it was theretofore entitled upon such exercise, the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization that the Holder would have been entitled to receive as a result of such Capital Reorganization if, on the relevant record date, it had been the holder of record of the number of Common Shares in respect of which the Warrants are then being exercised, and such shares or other securities shall be subject to adjustment thereafter in accordance with provisions which are the same, as nearly as may be possible, as those contained in this Section 11; provided that no such Capital Reorganization shall be implemented unless all necessary steps have been taken so that each Holder shall be entitled to receive the kind and amount of shares or other securities of the Corporation or of the corporation resulting from the Capital Reorganization as provided above. 11.1.2 If, at any time after the date hereof and prior to the Expiry Date, any adjustment in the Exercise Price shall occur as a result of: 11.1.2.1 an event referred to in Section 11.2.1; (vi) 11.1.2.2 the fixing by the Corporation of a record date for an event referred to in Section 11.2.2; or 11.1.2.3 the fixing by the Corporation of a record date for an event referred to in Section 11.2.3 if such event constitutes the issue or distribution to the holders of all of its outstanding Common Shares of (i) Equity Shares, or (ii) securities exchangeable for or convertible into Equity Shares at an exchange or conversion price per share less than the Current Market Price on such record date, or (iii) rights, options or warrants to acquire Equity Shares or securities exchangeable for or convertible into Equity Shares at an exercise, exchange or conversion price per share less than the Current Market Price on such record date; then the number of Common Shares purchasable upon the subsequent exercise of the Warrants shall be adjusted simultaneously with the adjustment to the Exercise Price provided in Section 11.2 by multiplying the number of Common Shares issuable upon the exercise of the Warrants immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the adjustment of the Exercise Price. 11.2 Adjustment in Exercise Price The Exercise Price shall be subject to adjustment from time to time as follows: 11.2.1 If, at any time after the date hereof and prior to the Expiry Date, the Corporation: 11.2.1.1 subdivides its outstanding Common Shares into a greater number of shares, 11.2.1.2 consolidates its outstanding Common Shares into a smaller number of shares, or 11.2.1.3 issues Common Shares to the holders of all of its outstanding Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, (any of such events being called a "COMMON SHARE REORGANIZATION"), the Exercise Price shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Common Share Reorganization (the "relevant record date") by multiplying the Exercise Price in effect immediately prior to the relevant record date by a fraction: (i) the numerator of which shall be the number of Common Shares outstanding on the relevant record date before giving effect to the Common Share Reorganization; and (vii) (ii) the denominator of which shall be the number of Common Shares outstanding on the relevant record date after giving effect to the Common Share Reorganization. 11.2.2 If, at any time after the date hereof and prior to the Expiry Date, the Corporation fixes a record date for the issue of rights, options or warrants to the holders of all or substantially all of its outstanding Common Shares (the "relevant record date") under which such holders are entitled, during a period expiring not more than forty five (45) days after the relevant record date (the "RIGHTS PERIOD"), to subscribe for or purchase Common Shares at a price per share, or securities exchangeable for or convertible into Common Shares at an exchange or conversion price per share less than 95% of the Current Market Price on the relevant record date (any of such events being called a "RIGHTS OFFERING"), the Exercise Price shall be adjusted effective immediately after the end of the Rights Period by multiplying the Exercise Price in effect immediately prior to the end of the Rights Period by a fraction: (i) the numerator of which shall be the aggregate of: (A) the number of Common Shares outstanding on the relevant record date, and (B) the number determined by dividing (1) either (a) the product of the number of Common Shares issued or subscribed for during the Rights Period under the Rights Offering and the price at which such Common Shares were offered, or, as the case may be, (b) the product of the exchange or conversion price of the securities exchangeable for or convertible into Common Shares and the number of Common Shares for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period, by (2) the Current Market Price on the relevant record date; and (ii) the denominator of which shall be, in the case of Section 11.2.2(i)(B)(1)(a), the number of Common Shares outstanding on the relevant record date plus the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering and, in the case of Section 11.2.2(i)(B)(1)(b), the number of Common Shares outstanding at the relevant record date plus the number of Common Shares for or into which the securities so offered pursuant to the Rights Offering could have been exchanged or converted during the Rights Period. If a Holder has exercised the Warrants during the period beginning immediately after the record date for a Rights Offering and ending on the last day of the Rights Period for that Rights Offering then, in addition to the Common Shares to which the (viii) Holder is otherwise entitled upon such exercise pursuant to this agreement, the Holder shall be entitled to that number of additional Common Shares which, when added to the number of Common Shares to which the Holder is entitled upon such exercise, equals the number of Common Shares to which the Holder would have been entitled upon exercise if the Holder had exercised the Warrants immediately after the end of the Rights Period and after giving effect to the adjustment of the Exercise Price provided for in this Section 11.2.2. Such additional Common Shares shall be deemed to have been issued to the Holder immediately following the end of the Rights Period. 11.2.3 If, at any time after the date hereof and prior to the Expiry Date, the Corporation fixes a record date (the "relevant record date") for the issue or distribution to the holders of all of its outstanding Common Shares of: 11.2.3.1 shares of any class in its capital, 11.2.3.2 evidences of its indebtedness, 11.2.3.3 assets or property, or 11.2.3.4 rights, options or warrants to subscribe for or purchase any of the foregoing (other than rights, options or warrants to purchase Common Shares exercisable within 45 days of the date of issue of the rights, options or warrants at a price per share equal to or greater than 95% of the Current Market Price), and if such issue or distribution does not constitute a Common Share Reorganization, a Rights Offering or a Dividend Paid in the Ordinary Course (any of such events referred to in Sections 11.2.3.1 through 11.2.3.4 being called a "Special Distribution"), the Exercise Price shall be adjusted immediately after the relevant record date by multiplying the Exercise Price in effect on the relevant record date by a fraction: (i) the numerator of which shall be the difference obtained when (a) the amount by which the aggregate fair market value of the shares, rights, options, warrants, evidences of indebtedness or assets or property, as the case may be, which are distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation, is subtracted from (b) the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; and (ii) the denominator of which shall be the product obtained when the number of Common Shares outstanding on the relevant record date is multiplied by the Current Market Price on the relevant record date; (ix) provided that no such adjustment shall be made if the result of such adjustment would be to increase the Exercise Price in effect immediately before the relevant record date. Any determination of fair market value shall be made by the board of directors of the Corporation and their determination shall be conclusive. To the extent that any Special Distribution is not made, the Exercise Price shall be readjusted effective immediately to the Exercise Price that would then be in effect based upon the shares, rights, options or warrants, evidences of indebtedness, assets or property actually distributed. 11.3 Rules for Adjustment in Rights and Exercise Price For the purpose of this Section 11: 11.3.1 The adjustments provided for in this Section are cumulative and shall be made successively wherever an event referred to in a particular paragraph of this Section occurs, subject to the following provisions of this Section. 11.3.2 No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price and no adjustment shall be made in the number of Common Shares issuable on exercise of the Warrants unless it would result in a change of at least one-hundredths of a Common Share; provided, however, that any adjustments which, by reason of this Section, are not required to be made shall be carried forward and taken into account in a subsequent adjustment and so on. 11.3.3 Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any computation under Section 11.2. 11.3.4 No adjustment to the Exercise Price shall be made in respect of any event described in Section 11.2 (other than the events referred to in Sections 11.2.1.1 and 11.2.1.2) if the Holder is entitled to participate in such event on the same terms as though, and to the same effect as if, it had exercised the Warrants in full prior to or on the effective date or record date of such event, provided that such participation is subject to all necessary regulatory approval. 11.3.5 In any case in which this Section 11 requires that an adjustment become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to each Holder in respect of the exercise of the Warrants after such record date and before the occurrence of such event the additional Common Shares issuable upon such exercise by reason of the adjustment required by such event and delivering to the Holder any distributions declared with respect to such additional Common Shares after such record date and before such event; provided, however, that the Corporation delivers to the Holder an appropriate instrument evidencing its right to receive such additional Common Shares and such distributions upon the occurrence of the event requiring such adjustment. (x) 11.3.6 If the Corporation fixes a record date to determine the holders of Common Shares entitled to receive any dividend or distribution or fixes a record date to take any other action and thereafter, but before the distribution to shareholders of any such dividend or distribution or the taking of such other action, the Corporation legally abandons its plan to pay such dividend or distribution or take such other action, then no adjustment pursuant to this Section shall be required by reason of the fixing of such record date. 11.3.7 If the board of directors of the Corporation does not fix a record date for a Common Share Reorganization, Special Distribution or Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the close of business on the day on which the board of directors authorizes the making of the Common Shares Reorganization, Special Distribution or Rights Offering, as the case may be. 11.3.8 If any question at any time arises with respect to the Exercise Price or the number of Common Shares issuable upon the exercise of the Warrants, such question shall be conclusively determined by the auditors from time to time of the Corporation, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the Corporation with the concurrence of each Holder, and any such determination shall be binding upon each Holder, the Corporation and all shareholders. If any such determination is made, the Corporation shall deliver a certificate to each Holder describing such determination. 11.3.9 As a condition precedent to the taking of any action which would require any adjustment to the Warrants represented by this Warrant Certificate, including the Exercise Price, the Corporation must have taken all action which may be necessary in order that the Corporation shall have issued and reserved in its authorized capital and may validly and legally issue as fully-paid and non-assessable all of the Common Shares or other securities which each Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof. 11.3.10 In the case the Corporation, after date of issuance of the Warrants represented by this Warrant Certificate, takes any action affecting the Common Shares, other than an action described in this Section 11, which in the opinion of the directors of the Corporation would materially affect the rights of the Holders, the Exercise Price will be adjusted in such manner, if any, and at such time by action by the directors of the Corporation but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Corporation so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the directors have determined it to be equitable to make no adjustment. 11.4 Notice of Adjustment in Exercise Price and Rights 11.4.1 At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require an adjustment pursuant to this Section 11, the Corporation shall deliver to each Holder a certificate of the (xi) Corporation specifying the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. 11.4.2 In case any adjustment for which a notice in Section 11.4.1 has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to each Holder a certificate of the Corporation containing a computation of such adjustment. 12. CONSOLIDATION AND MERGER 12.1 The Corporation shall not enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other company, corporation or other entity (herein called a "successor entity") whether by way of reorganization, reconstruction, consolidation, merger, transfer, sale, disposition or otherwise, unless prior to or contemporaneously with the consummation of such transaction the Corporation and the successor entity shall have executed such instruments and done such things as, in the opinion of counsel to the Corporation, are necessary or advisable to establish that upon the consummation of such transaction,: 12.1.1 the successor entity will have assumed all the covenants and obligations of the Corporation under this Warrant Certificate, and 12.1.2 this Warrant will be a valid and binding obligation of the successor entity entitling each Holder, as against the successor entity, to all the rights of the Holder under this Warrant Certificate. 12.2 Whenever the conditions of Section 12.1 shall have been duly observed and performed, the successor entity shall possess and from time to time may exercise each and every right and power of the Corporation under this Warrant Certificate in the name of the Corporation or otherwise and any act or proceeding by any provision hereof required to be done or performed by any employee or officer of the Corporation may be done and performed with like force and effect by the like employees or officers of the successor entity. 13. REPRESENTATION AND WARRANTY The Corporation hereby represents and warrants to each Holder that the Corporation is duly authorized and has the lawful power and authority to create and issue the Warrants represented by this Warrant Certificate and the Common Shares issuable upon the exercise of the Warrants represented by this Warrant Certificate and perform its obligations hereunder and that this Warrant represents a valid, legal and binding obligation of the Corporation enforceable in accordance with its terms. 14. TRANSFER RESTRICTION ON COMMON SHARES If at the time of the exercise of the Warrants, there exist trading restrictions on the Common Shares acquired due to applicable securities legislation, the Corporation may, on the advice of counsel, endorse the Common Shares to such effect. (xii) 15. MISCELLANEOUS If the certificate representing the Warrants is lost, mutilated, destroyed or stolen, the Corporation may, on such reasonable terms as to cost and indemnity or otherwise as it may impose, issue a replacement certificate similar as to denomination, tenor and date as the certificate representing the Warrant so lost, mutilated, destroyed or stolen. Anything in this Warrant certificate to the contrary notwithstanding, the Warrants may be exercised, and are exercisable, only to the extent permitted by applicable law. 16. NOTICE Any notice, communication, payment or demand required or permitted to be given under this Warrant shall be deemed to have been sufficiently given to the recipient if delivered personally, or (other than in the case of payment) if sent by facsimile or sent by ordinary first class mail within Canada, postage prepaid, addressed as follows: (a) to the Corporation at: Four Seasons Place Suite 501 Toronto ON M9B 6H7 Attention: Michael Byrne, Chief Financial Officer and Corporate Secretary Facsimile: (416) 335-9306 (b) to the Holder: 386 Cortleigh Blvd Toronto, Ontario, M5N 1R5 Attention: Andrea Dan-Hytman Facsimile: (416) 787-0311 Any such mailing shall be deemed to be received on the date of delivery if delivered personally, on the next business day following the transmission by facsimile confirmed by the sender thereof or on the third business day following the date of mailing or, in the event of any disruption, strike or interruption in the Canadian postal service after mailing and prior to receipt, on the third business day following full resumption of such Canadian postal service. Either party hereto may change its facsimile number or address for the purpose of this Section by giving written notice of such change to the other. 17. GOVERNING LAW The Warrants shall be governed by the laws of the Province of Ontario. Time shall be of the essence. (xiii) IN WITNESS WHEREOF the Corporation has authorized this certificate to be signed by the signature of its duly authorized officer this day of , 200_. VIVENTIA BIOTECH INC. By: _______________________________________ Name: Michael Byrne Title: Chief Financial Officer and Corporate Secretary SUBSCRIPTION TO: VIVENTIA BIOTECH INC. 10 FOUR SEASONS PLACE SUITE 501 TORONTO ON M9B 6H7 CANADA The undersigned holder of the within Warrant hereby subscribes for ______ Common Shares of Viventia Biotech Inc. (or such number of Common Shares or other securities to which such subscription entitles it in lieu thereof or in addition thereto under the provisions of the Warrants) at the subscription price of $2.00 for each one (1) Warrant evidenced by and on the terms specified in the Warrants and encloses herewith a certified cheque or bank draft payable to the order of Viventia Biotech Inc. in payment of the subscription price. The undersigned hereby directs that the said Common Shares be registered as follows:
NAME ADDRESS NUMBER OF COMMON SHARES ________________________ _______________________ _________________________ _______________________ SIN #___________________ _______________________
(Please print full name in which share certificates are to be issued.) DATED this _______________ day of __________________, 200__. _______________________________________ ADH INVESTMENTS (1999) INC. By:______________________________ Authorized Signing Officer EX-3.6 13 t17062exv3w6.txt EXHIBIT 3.6 PAYMENT AND SECURITY SHARING AGREEMENT Agreement made as of November 3, 2004 between Leslie Dan ("LD"), ADH Investments (1999) Inc. ("ADHCO") and Viventia Biotech Inc. (the "DEBTOR"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS In this agreement all terms with capitalized initial letters used but not expressly defined herein have the meanings given to them under the Debentures and "DEBENTURE OBLIGATIONS" means all debts, liabilities and obligations of the Debtor under or in connection with any Debenture; "DEBENTURES" means the convertible secured debenture issued by the Debtor to LD in the principal amount of $12,584,142.47 and the two convertible secured debentures issued by the Debtor to ADHCo one in the principal amount of $5,000,000, and the other in the principal amount of $5,562,568.49 in each case, dated the date hereof, and as such debentures may from time to time be amended, supplemented, restated or otherwise modified; "INSOLVENCY EVENT" means and shall occur if any of the Events of Default under Sections 7.1(l) or (m) of the Debentures shall occur and be continuing; "PERSON" means an individual, body corporate, partnership or other juridical entity; "PRO RATA SHARE" at any time means, in relation to a Secured Party, the ratio determined at the particular time of the amount of the Debenture Obligations in favour of such Secured Party to the total amount of the Debenture Obligations; "RIGHTS AND REMEDIES" of a Secured Party means all rights, remedies and privileges of a Secured Party upon or during the continuance of any Event of Default; "SECURED PARTIES" means LD and ADHCo, and their respective successors and permitted assigns; "SECURITY" of a Secured Party means all Security Interests now or hereafter held by the Secured Party as security for the payment or performance of any Debenture Obligations; and "SECURITY INTERESTS" means all mortgages, charges, hypothecs, pledges, trusts, liens, security interests and other encumbrances and adverse claims of every nature and kind and all other arrangements creating any tights in respect of any property. -2- 2. PRO RATA PAYMENTS All payments received by the Secured Parties in respect of the Debenture Obligations shall be shared between the Secured Parties in accordance with their Pro Rata Shares immediately prior to the payment. Each Secured Party agrees that if it should receive any amount (whether by voluntary payment, realization of security, the exercise of any right of setoff, counterclaim, the enforcement of any contractual right or otherwise) in respect of any Debenture Obligations which is greater than its Pro Rata Share it shall purchase free and clear of all Encumbrances, other than the Encumbrances created by this agreement, such amount of the Debenture Obligations of the other Secured Parties as shall result in the Secured Parties each having received their Pro Rata Share of the payment. 3. SECURITY PARI PASSU All Security of the Secured Parties shall rank pari passu and equally notwithstanding (i) the priorities otherwise afforded to the Security under applicable laws; (ii) the time of execution, delivery, attachment, registration, perfection or enforcement of any Security; (iii) the time of any loan or advance or other extension of credit made by a Secured Party to the Debtor; (iv) the time of any default or the time of crystallization of any floating charge under any Security; (v) any provisions of any Security; (vi) the giving or failure to give notice of any of the foregoing to the Debtor or other Person; (vii) the order of any court having jurisdiction as to the entitlement of a Secured Party to any collateral or to any proceeds derived there from; or (viii) any other matter whatsoever. 4. ENFORCEMENT Unless an Insolvency Event has occurred and is continuing, no Secured Party shall enforce or take any actions to enforce any of its Rights and Remedies unless it has first given the other Secured Party at least 7 calendar days' prior written notice (a "NOTICE OF ENFORCEMENT") of one or more of the Events of Default entitling it to enforce its Rights and Remedies and its intention to enforce such Rights and Remedies and the Debenture Obligations owing to it and its Security has not been purchased by the other Secured Party pursuant to Section 5 of this agreement. Upon the occurrence of any Insolvency Event, or if no Purchase Notice (as hereinafter defined) is given to an Enforcing Secured Party (as hereinafter defined) in accordance with Section 5, all of the Debenture Obligations shall become and be immediately due and payable by the Debtor to each of the Secured Parties, and the Rights and Remedies of each of the Secured Parties shall become and be immediately enforceable, automatically and without demand, presentment, protest or further notice of any kind, all of which are hereby expressly waived by the Debtor. 5. CALL RIGHTS If a Secured Party who has not provided a Notice of Enforcement (a "NON-ENFORCING SECURED PARTY") receives a Notice of Enforcement from the other Secured Party pursuant to Section 4 of this agreement (an "ENFORCING SECURED PARTY") the Non-Enforcing Secured Party receiving the Notice of Enforcement shall be entitled to purchase the Debenture Obligations -3- owing to the Enforcing Secured Party and its Security upon providing written notice to the Enforcing Secured Party (a "PURCHASE NOTICE") at any time prior to the expiration of the 7 calendar day period referred to in Section 4, whereupon a binding agreement of purchase and sale between the Non-Enforcing Secured Party and the Enforcing Secured Party shall be deemed to have been created, which agreement shall be completed not later than 7 calendar days following the date of the Purchase Notice. On the closing date the Non-Enforcing Secured Party shall deliver a certified cheque or bank draft to the Enforcing Secured Party for an amount equal to the Debenture Obligations owing to the Enforcing Secured Party and the Enforcing Secured Party shall deliver to the Non-Enforcing Secured Party a Debenture in like amount, free and clear of any Encumbrances, other than the Encumbrances created by this agreement. 6. FURTHER ASSURANCES Each party shall execute and deliver all such further agreements, instruments and documents and do all such further acts and things as any other party hereto may reasonably require from time to time to give effect to the matters contemplated hereby. 7. SUCCESSORS, ASSIGNS AND GOVERNING LAW This agreement shall enure to the benefit of and shall be binding upon the respective successors and permitted assigns of each party hereto and shall be governed by and construed in accordance with the laws of Ontario. No Secured Party shall assign or grant any Security Interests in respect of any Debenture Obligations or any of its Security without first obtaining and delivering a written agreement from the proposed assignee or secured party, as the case may be, in favour of the other parties hereto that binds such Person to the terms of this agreement. /s/ /s/ Leslie Dan - ----------------------------- ------------------------------ Witness Leslie Dan ADH INVESTMENTS (1999) INC. VIVENTIA BIOTECH INC. By /s/ c/s By /s/ c/s -------------------------- -------------------------- Authorized Signing Officer Authorized Signing Officer EX-3.7 14 t17062exv3w7.txt EXHIBIT 3.7 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of this 7th day of January 2004, BETWEEN: VIVENTIA BIOTECH INC., a corporation continued under the laws of Ontario (the "CORPORATION") - and - NICK GLOVER, of the City of Oakville, in the Province of Ontario (the "EXECUTIVE") RECITALS: A. The Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Executive's employment with the Corporation. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Executive agree as follows: 1. DEFINITIONS 1.1. In this Agreement, 1.1.1. "AFFILIATE" has the meaning attributed to such term in the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.2. "AGREEMENT" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this agreement and unless otherwise indicated, references to sections are to sections in this agreement; 1.1.3. "BASIC SALARY" has the meaning attributed to such term in section 5.1; -2- 1.1.4. "BENEFITS" has the meaning attributed to such term in section 5.3; 1.1.5. "BIO-PHARMACEUTICAL BUSINESS" has the meaning attributed to that term in section 2; 1.1.6. "BONUS" has the meaning attributed to such term in section 5.2; 1.1.7. "BOARD" means the board of directors of the Corporation; 1.1.8. "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario; 1.1.9. "CHAIRMAN" means the chairman of the Board; 1.1.10. "CONFIDENTIAL INFORMATION" means all confidential or proprietary information, intellectual property and confidential facts relating to and used or proposed to be used in the business of the Corporation and its Affiliates and includes all information which is confidential based upon its nature or the circumstances surrounding its disclosure, including such information acquired by the Executive during any period in which the Executive was affiliated with the Corporation in any capacity, including as an employee, director or shareholder, and includes, without limiting the generality of the foregoing, information: (a) relating to the Corporation's or an Affiliate's biotechnology or bio- pharmaceutical products and services, products and services related to bio-technology or the Bio-Pharmaceutical Business, or to the Corporation's or an Affiliate's research and development projects or plans; (b) relating to the Corporation's or an Affiliate's trade secrets, technology, patentable and unpatentable inventions, discoveries, texts, cell lines, nucleic acid, protein and peptide sequences, synthetic procedures, processes, test procedures and results, records, specifications, data, formulations, know-how, samples, specimens, manufacturing processes, toxicology, regulatory and clinical information; (c) relating to the Corporation's or an Affiliates business policies, strategies, operations, finances, plans or opportunities including the identity of, or particulars about, the Corporation's clients or suppliers or other Person with whom the Corporation has a business relationship; and (d) marked or otherwise identified as confidential, restricted, secret or proprietary including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure; provided that Confidential Information does not extend to the skill, expertise, know-how and experience of the Executive gained in the performance of his employment. -3- 1.1.11. "DISABILITY" means the mental or physical state of the Executive such that the Executive has been unable as a result of illness, disease, mental or physical disability or similar cause to fulfil his obligations under this Agreement either for any consecutive six month period or for any period of aggregating twelve (12) months (whether or not consecutive) in any consecutive twenty-four (24) month period; 1.1.12. "EFFECTIVE DATE" means January 7, 2004 or such earlier date as may be agreed upon by the Corporation and the Executive; 1.1.13. "EMPLOYMENT PERIOD" has the meaning attributed to such term in section 4; 1.1.14. "ESA" means the Employment Standards Act, 2000 (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.15. "JUST CAUSE" includes the willful failure of the Executive to properly carry out his duties after notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such notice, or theft, fraud, dishonesty or misconduct by the Executive involving the property, business or affairs of the Corporation or the carrying out of the Executive's duties or any other conduct or omission which is to be treated as just cause by the courts of Ontario from time to time; 1.1.16. "PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.17. "RETIREMENT" means resignation of the Executive on or after the Executive attains the age of sixty-five (65); 1.1.18. "SEVERANCE AMOUNT" has the meaning attributed to such term in section 9; 1.1.19. "SUBSIDIARIES" has the meaning attributed to such term by the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.20. "TERMINATION WITHOUT CAUSE" means termination for any reason other than for Just Cause or for Disability or by reason of resignation or Retirement by the Executive; 1.1.21. "YEAR OF EMPLOYMENT" means any twelve (12) month period commencing on January 1, 2005 or on any anniversary of such date, provided that for the purposes of this Agreement, the "FIRST YEAR OF EMPLOYMENT" shall be deemed to commence on the date hereof and to end on December 31, 2004. -4- 2. EMPLOYMENT OF THE EXECUTIVE Provided that the Board has approved the terms and conditions of employment set out in this Agreement, the Corporation shall employ the Executive and the Executive shall serve the Corporation in the position of President & Chief Executive Officer. The Executive shall report to the Board. In the capacity as President & Chief Executive Officer the Executive will play an important strategic role in the conduct of the business and will be privy to, and acquire detailed knowledge of, Confidential Information and other business sensitive information about the Corporation and its Affiliates and will assist in the business of 2.1.1. research, development, clinical trials, regulatory compliance, marketing, sales, manufacturing, distribution, licensing or other exploitation of: 2.1.1.1. monoclonal antibody products, including without limitation human monoclonal antibodies; 2.1.1.2. the use of the human immune system to identify therapeutically or diagnostically relevant antibodies and their cognate antigens for cancer; 2.1.1.3. and any exploitation thereof, related research, products and services to any of the above and products derived from any of the above (the "BIO-PHARMACEUTICAL BUSINESS"). Without limiting the generality of the foregoing, the Executive's duties shall include: 2.2. management of activities that relate to the Bio-Pharmaceutical Business, including production, production development, quality control, quality assurance, project management and marketing activities; 2.3. in conjunction with other members of the Corporation's senior management team, preparation of the Corporation's annual budget and business plan for approval by the Board; 2.4. directing and supervising the Corporation's human resource policies and procedures, including the recruitment and training of the Corporation's personnel; and 2.5. supervising and directing the Corporation's scientific, clinical and regulatory affairs. 3. PERFORMANCE OF DUTIES The Executive represents and warrants that neither his execution of the Employment Agreement nor his performance of the duties and obligations set out in the Employment Agreement does or will violate or breach any obligation he may have to any third party or imposed by statute, contract or order of any judicial or quasi-judicial authority. During the Employment Period, the Executive shall faithfully, honestly and diligently serve the -5- Corporation. The Executive shall (except in the case of illness or accident) devote all of his working time and attention to his employment and shall use his best efforts to promote the interests of the Corporation. 4. EMPLOYMENT PERIOD The term of employment of the Executive under this Agreement will commence January 7, 2004 and will continue until terminated in accordance with section 8 of this Agreement (the "EMPLOYMENT PERIOD"). 5. REMUNERATION 5.1. Basic Remuneration. The Corporation shall pay the Executive a gross annual salary of $275,000 (the "BASIC SALARY") payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. 5.2. Bonus Remuneration. The Board may award the Executive, an annual bonus of cash, stock options, other share based compensation or any combination thereof. Such bonus shall be awarded in the sole discretion of the Board (the "BONUS"). Each year, at the time that the Board approves the Corporation's annual business plan and annual budget, the Executive and the Board (or a committee thereof) shall mutually agree on the objectives upon which any Bonus shall be based. Such objectives may include subjective and objective criteria. 5.3. Signing Bonus. The Executive will receive a signing bonus of S20,000. 5.4. Benefits. The Corporation shall provide to the Executive, in addition to Basic Salary and Bonus, if any, the benefits (the "BENEFITS") generally available to the executives of the Corporation, such benefits to be provided in accordance with, to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto in effect from time to time. The Corporation acknowledges that the Executive shall be subject to the provisions of the Corporation's liability insurance for directors and officers as same may be in effect from time to time. 5.5. Initial Grant of Stock Options. Subject to the approval of the Board, the Corporation will grant the Executive an option to purchase 3,000,000 common shares of the Corporation. The terms of the stock option including, without limitation, provisions respecting exercise price, vesting and expiry, shall be governed by the terms of the Viventia Biotech Inc. Share Option Plan. 5.6. Pro-Rata Entitlement in First Year of Employment. Notwithstanding sections 5.1 and 5.2 hereof (i) the Basic Salary shall be prorated in respect of the First Year of Employment such that the Executive shall be entitled to receive and the Corporation shall be required to pay in respect of such year only that proportion of the Basic Salary that the number of days in the First Year of Employment is to 365; and (ii) any bonus payable in respect of the First Year of Employment shall be awarded in the sole discretion of the Board. -6- 5.7. Pro-Rata Entitlement in the Event of Termination. If the Executive's employment is terminated pursuant to section 8.1.1, 8.1.2, or 8.1.3, bonus, if any, will be payable at the board's discretion. If the Executive dies or retires during the Employment Period, the Executive shall be entitled to receive in respect of his entitlement to bonus remuneration and the Corporation shall be required to pay in respect thereof, only that proportion of the bonus remuneration in respect of the year of employment at which the effective date of the termination of employment or the date of death occurs that the number of days elapsed from the commencement of such year of employment to the effective date of termination or the date of death is to 365, provided that said bonus shall be equal to or greater than 66% of the bonus remuneration the Executive earned in the year proceeding termination. 6. EXPENSES & CAR ALLOWANCE The Corporation shall pay or reimburse the Executive for all travel and out-of-pocket expenses reasonably incurred or paid by the Executive in the performance of his duties and responsibilities upon presentation of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require. All travel and other expenses incurred by the Executive shall be in accordance with the Corporation's travel and expense policies. In accordance with the Corporation's current policy governing the provision of automobiles to executive personnel, the Corporation shall provide the Executive with a monthly car allowance payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. 7. VACATION The Executive shall be entitled while employed by the Corporation to four (4) weeks vacation with pay per year. Vacation shall be taken by the Executive at such time as may be acceptable to the Corporation having regard to its operations and no more than two (2) weeks of vacation shall be taken consecutively. If the Executive has not taken the full vacation to which the Executive is entitled in any calendar year, the Executive will be paid at the end of such calendar year Basic Salary in respect of the accrued unused vacation. Except as required under the ESA, the Executive shall not be entitled to carry over any unused portion of vacation to the following calendar year and will lose the entitlement to such unused portion. Notwithstanding the foregoing, in the event that the Executive's employment is terminated pursuant to section 8, the Executive shall not be entitled to receive any payment in lieu of any accrued unused vacation except to the extent, if any, required by the ESA. -7- 8. TERMINATION 8.1. Notice. The Executive's employment shall terminate or be terminable: 8.1.1. by the Executive on three (3) months prior written notice to the Corporation; 8.1.2. by the Corporation at any time without prior notice and, subject to the provisions of the ESA and the Human Rights Code (Ontario), without further obligation to the Executive for reasons of Just Cause or because of the occurrence of Disability; 8.1.3. by the Corporation, for any reason other than for Just Cause or Disability, at any time without prior notice and without further obligation to the Executive other than those obligations of the Corporation set out in section 9 of this Agreement; 8.1.4. upon the death of the Executive; and 8.1.5. upon the Retirement of the Executive. 8.2. Effective Date. The effective date on which the Executive's employment shall be terminated shall be: 8.2.1. in the case of termination pursuant to section 8.1.1, the last day of the three (3) month period set out in the notice; 8.2.2. in the case of termination pursuant to sections 8.1.2 and 8.1.3, the day the Executive is deemed, under section 12 to have received notice from the Corporation of such termination; 8.2.3. in the event of the death of the Executive, on the date of his death; and 8.2.4. in the event of the Retirement of the Executive, on the date of his Retirement. 9. PAYMENTS ON TERMINATION OF EMPLOYMENT (a) If the Executive's employment is terminated as a result of Termination Without Cause, the Corporation shall (subject to the Executive's obligations contained herein): (i) for a period of eighteen (18) months from the effective date of Termination Without Cause make the following payments (collectively referred to herein as the "SEVERANCE AMOUNT") to the Executive: (I) payments to the Executive in the same amount and on the same basis as the Basic Salary and Bonus Remuneration being paid to the Executive immediately prior to the effective date of termination; and -8- (II) continue to provide the Executive with Benefits, in accordance with, and to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto; (III) car allowance in accordance with Article 6; (IV) payment to the Executive up to a maximum of $10,000.00 to cover all costs associated with career relocation and outplacement services obtained by the Executive, upon presentation of receipts. (ii) all payments made to the Executive shall be subject to applicable deductions and withholdings and shall be in full satisfaction of any and all entitlement that the Executive may have to notice of termination or payment in lieu thereof, severance pay and any other payments to which the Executive may otherwise be entitled to pursuant to ESA and any other applicable law. The Corporation shall cooperate with the Executive with respect to the payment of all payments due on termination such that the Executive shall be entitled to obtain the benefit of any tax shelters or strategies that may be available or may become available; (iii) notwithstanding the foregoing and subject to the ESA: (I) the Severance Amount payable by the Corporation to the Executive during the initial twelve (12) month period from the effective date of Termination Without Cause may not be reduced for any reason. (II) any Severance Amount and car allowance payable by the Corporation in the six (6) month period commencing one year from the effective date of Termination Without Cause may be reduced by the Corporation by an amount equal to the base salary and bonus or other income or benefits earned by the Executive in connection with any employment by another employer or employers or any business activity undertaken by the Executive. The Executive agrees to promptly provide the Corporation with any evidence of amounts received in connection with any such other employment or business activity which the Corporation shall reasonably request; (iv) notwithstanding any other provisions in this Agreement, the exercise of the Executive's options will be in accordance with the terms of the Viventia Biotech Inc. Share Option Plan; (v) if, following Termination Without Cause, the Executive breaches any of the provisions of the Confidential Information, Intellectual Property, Non- -9- Competition and Non-Solicitation Agreement (attached as Appendix A), the Executive shall not be eligible, as of the date of such breaches for any Severance Amount and all obligations of the Corporation to pay the Executive the Severance Amount shall (subject to applicable minimum amounts payable pursuant to the ESA) cease. 10. REMEDIES The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled. 11. CO-OPERATION BY EXECUTIVE The Executive shall co-operate in all respects with the Corporation if the question arises as to whether a Disability has occurred. Without limiting the generality of the foregoing, the Executive shall authorize the Executive's medical doctor or other health care specialist to discuss the condition of the Executive with the Corporation and shall submit to examination by a medical doctor or other health care specialist selected by the Corporation. 12. NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows: if to the Executive: -10- Dr. Nick Glover 2389 Deer Run Avenue Oakville, Ontario L6S 6K7 if to the Corporation: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto, Ontario M9B 6H7
Attention: Chairman Telecopier number: (416) 335-9306
13. HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 14. INVALIDITY OF PROVISIONS Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 15. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior agreements, if any, written or oral, with respect to the Executive's employment by the Corporation and any rights which the Executive may have by reason of any such prior agreement or by reason of the Executive's prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Executive, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid. -11- 16. WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 17. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 18. COUNTERPARTS This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. -12- 19. ACKNOWLEDGEMENT The Executive acknowledges that: 19.1. the Executive has had sufficient time to review and consider this Agreement thoroughly; 19.2. the Executive has read and understands the terms of this Agreement and the Executive's obligations hereunder; 19.3. the Executive has been given an opportunity to obtain independent legal advice, or such other advice as the Executive may desire, concerning the interpretation and effect of this Agreement; and 19.4. this Agreement is entered into voluntarily and without any pressure. IN WITNESS WHEREOF the parties have executed this Agreement. ) VIVENTIA BIOTECH INC. ) ) ) ) ) ) By: /s/ Leslie Dan --------------------------------------------- Name: Leslie Dan Title: Chairman of the Board of Directors I/We have the authority to bind the corporation SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Nick Glover - ---------------------------------- -------------------------------------- Witness Nick Glover VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT In consideration of my employment with Viventia Biotech Inc. ("VIVENTIA"), I acknowledge, understand and agree with Viventia as follows: 1. PROTECTION OF CONFIDENTIAL INFORMATION. All Confidential Information (as defined in paragraph 2 below) whether it is developed by me or by others employed or engaged by or associated with Viventia, is the exclusive and confidential property of Viventia and will at all times be regarded, treated and protected as such, as provided in this Agreement. Failure to mark any written material as confidential will not affect the confidential nature of such written material or the information contained therein. 2. DEFINITION OF CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means all information, intellectual property (including trade secrets) and facts, relating to and used or proposed to be used in the business of Viventia and its affiliates, acquired by the Executive during any period in which the Executive was affiliated with Viventia in the capacity of an Executive, director or shareholder which is confidential based upon its nature or the circumstances surrounding its disclosure, and includes, without limiting the generality of the foregoing information: (i) relating to Viventia's or an affiliate's products and services or to Viventia's or an affiliate's research and development projects or plans; (ii) relating to Viventia's or an affiliate's trade secret, technology, patentable and unpatentable inventions, discoveries, processes, test procedures and results, records, specifications, data formulations, formulas, know-how, samples, specimens, manufacturing processes and regulatory information; or (iii) relating to Viventia's or an affiliate's business policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, Viventia's or an affiliate's clients or suppliers. 3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" will not include information publicly known that is generally used by persons in my current position with Viventia, and the general skills and experience gained during my employment with or engagement by Viventia which I could reasonably have been expected to acquire in similar employment with or engagement by other companies. The phrase "PUBLICLY KNOWN" shall mean readily accessible to the public in written publications without breach of this or similar agreements. The burden of proving that information or skills and experience are Confidential Information shall be on the party asserting such exclusion. "CONFIDENTIAL INFORMATION" shall also not include information the disclosure of which is Appendix A - Page 2 required to be made by any law, regulation, governmental authority or court, provided that before disclosure is made, notice of the requirement is provided to Viventia, and (to the extent possible in the circumstances) Viventia is afforded an opportunity to dispute the requirement. 4. COVENANTS RESPECTING CONFIDENTIAL INFORMATION. As a consequence of my acquisition of Confidential Information, I will occupy a position of trust and confidence with respect to Viventia's affairs and business. In view of the foregoing and of the consideration to be provided to me by Viventia, I agree that it is reasonable and necessary for me to make the following covenants regarding my conduct during and subsequent to my employment with or engagement by Viventia. I hereby agree as follows: (i) Non-Disclosure. During and after my employment with or engagement by Viventia, I will not disclose Confidential Information to any person or entity other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent disclosure of such Confidential Information. This prohibition against disclosure of Confidential Information includes, but is not limited to, disclosing the fact that any similarity exists between the Confidential Information and information independently developed by another person or entity, and I understand that such similarity does not excuse me from abiding by my covenants and other obligations under this Agreement. (ii) Using, Copying, etc. During and after my employment with or engagement by Viventia, I will not use, copy, transfer or destroy any Confidential Information other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Confidential Information. The prohibition against my use, copying, transfer or destruction of Confidential Information includes, but is not limited to, licensing or otherwise exploiting, directly or indirectly, any products or services (including software in any form) which embody or are derived from Confidential Information, or exercising judgment or performing analysis based upon knowledge of Confidential Information. 5. INTELLECTUAL PROPERTY RIGHTS. I agree to disclose to Viventia all information relating to Intellectual Property (as defined below) prior to any public disclosure thereof, including but not limited to the nature of the Intellectual Property, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights developed by me during my employment with Viventia, either individually or in collaboration with others, which relates directly or indirectly to the business of Viventia. I acknowledge and agree that all right, title and interest whatsoever in and to the Intellectual Property, including the foregoing and any copyright, is and will be the exclusive property of Viventia and it will have absolute discretion to determine how such Intellectual Property is used. All work done while I am employed by Viventia is a Appendix A - Page 3 work for hire under which Viventia is the first owner for copyright purposes and any and all copyright will vest in Viventia. I hereby waive all moral rights that I may have in the Intellectual Property and agree that this waiver may be invoked by Viventia, and by any of its authorized agents or assignees, to use any of the Intellectual Property. I agree that, in performing my duties as an Executive of Viventia, I will not use or disclose any information that is confidential to any third party or that is subject to the copyright, patent, trade secret, or topography, rights of any third party. I agree to execute all such instruments and do all such things as may be reasonably necessary or desirable to give full effect to the foregoing and will cooperate and assist Viventia in enforcing its rights under this paragraph. "INTELLECTUAL PROPERTY" means all legally recognized rights, including patents, copyrights, trade marks, topographies, and trade secrets which result or derive from my services provided to Viventia or with the knowledge or use of Confidential Information, and includes, but is not limited to developments, inventions, designs, works of authorship, improvements and ideas, whether or not patentable or copyrightable, conceived or made by me (individually or in collaboration with others) during my employment with Viventia or which result from or derive from Viventia's resources or which are reasonably related to the business of Viventia. 6. NON-SOLICITATION. (a) No Solicitation of Customers, Clients and Suppliers. I acknowledge the importance to the business carried on by Viventia of the customer, client and supplier relationships developed by it and the unique opportunity that my employment and my access to the Confidential Information offers to interfere with these relationships. Accordingly, I will not while employed or engaged by Viventia and for 24 months thereafter, directly or indirectly, contact or solicit any person who I know to be a prospective, current or former customer, client or supplier of Viventia for the purpose of selling to the customer or client or buying from the supplier any products or services that are the same as or substantially similar to, or in any way competitive with, the products or services sold or purchased by Viventia during my employment or at the end thereof, as the case may be. Appendix A - Page 4 (b) No Solicitation of Executives. I acknowledge the importance to the business carried on by Viventia of the human resources engaged and developed by it and the unique access my employment offers to interfere with these resources. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, hire, engage or retain or induce or solicit, attempt to induce or solicit or assist any third party in hiring, engaging or retaining or inducing or soliciting any executive or consultant of the Company, to leave the Company or to accept employment or engagement elsewhere. 7. NON-COMPETITION. I will not, while employed or engaged by Viventia and for 12 months thereafter, directly or indirectly, in any manner whatsoever including either individually, or in partnership, jointly or in conjunction with any other person, or as principal, agent, owner, consultant, contractor, Executive, officer, director, advisor or shareholder: (i) be engaged in any undertaking; (ii) have any financial or other interest (including an interest by way of royalty or compensation arrangements) in or in respect of the business of any person which carries on a business; or (iii) advise, render or provide services to, lend money to or guarantee the debts or obligations of any person that carries on a business; in any province of Canada or any state of the United States, if, at the relevant time, Viventia is carrying on business in such province or state, which is a Competitive Business (as defined below). "COMPETITIVE BUSINESS" means any Bio-Pharmaceutical Business in Canada and the United States. 8. CERTAIN WARRANTIES, COVENANTS AND REMEDIES. (a) I agree that my obligations as set forth in this Agreement will commence as of the date on which I was first employed by Viventia. (b) I acknowledge that a breach by me of this Agreement will result in Viventia, its affiliates and shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, I agree that Viventia will be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which Viventia may become entitled if I breach or threaten to breach this Agreement. (c) My obligations under this Agreement are to remain in effect in accordance with each of their terms and will exist and continue in full force and effect notwithstanding any breach Appendix A - Page 5 or repudiation, or alleged breach or repudiation, of this Agreement or my employment agreement by Viventia. 9. BINDING EFFECT. This Agreement shall be binding on me and my heirs, executors and legal representatives. 10. GOVERNING LAWS. This Agreement shall be governed by the laws in force in the Province of Ontario. 11. OTHER AGREEMENTS. This Agreement is supplemental to and separate from the agreement under which I am employed or engaged by Viventia. However, if there is any conflict or inconsistency between the provisions of such other agreement and this Agreement, the provisions of this Agreement will govern and prevail. IN WITNESS WHEREOF, I have signed and sealed this Agreement as of the date set forth below. SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Nick Glover - ---------------------------------- -------------------------------------- Witness Nick Glover EX-3.8 15 t17062exv3w8.txt EXHIBIT 3.8 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of this 14th day of October 2004, BETWEEN: VIVENTIA BIOTECH INC., a corporation continued under the laws of Ontario (the "CORPORATION") - and - Michael Byrne of the City of Mississauga, in the Province of Ontario (the "EXECUTIVE") RECITALS: A. The Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Executive's employment with the Corporation. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Executive agree as follows: 1. DEFINITIONS 1.1. In this Agreement, 1.1.1. "AFFILIATE" has the meaning attributed to such term in the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.2. "AGREEMENT" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this agreement and unless otherwise indicated, references to sections are to sections in this agreement; 1.1.3. "BASIC SALARY" has the meaning attributed to such term in section 5.1; -2- 1.1.4. "BENEFITS" has the meaning attributed to such term in section 5.3; 1.1.5. "BIO-PHARMACEUTICAL BUSINESS" has the meaning attributed to that term in section 2; 1.1.6. "BONUS" has the meaning attributed to such term in section 5.2; 1.1.7. "BOARD" means the board of directors of the Corporation; 1.1.8. "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario; 1.1.9. "CONFIDENTIAL INFORMATION" means all confidential or proprietary information, intellectual property and confidential facts relating to and used or proposed to be used in the business of the Corporation and its Affiliates and includes all information which is confidential based upon its nature or the circumstances surrounding its disclosure, including such information acquired by the Executive during any period in which the Executive was affiliated with the Corporation in any capacity, including as an employee, director or shareholder, and includes, without limiting the generality of the foregoing, information: (a) relating to the Corporation's or an Affiliate's biotechnology or bio- pharmaceutical products and services, products and services related to biotechnology or the Bio-Pharmaceutical Business, or to the Corporation's or an Affiliate's research and development projects or plans; (b) relating to the Corporation's or an Affiliate's trade secrets, technology, patentable and unpatentable inventions, discoveries, texts, cell lines, nucleic acid, protein and peptide sequences, synthetic procedures, processes, test procedures and results, records, specifications, data, formulations, know-how, samples, specimens, manufacturing processes, toxicology, regulatory and clinical information; (c) relating to the Corporation's or an Affiliates business policies, strategies, operations, finances, plans or opportunities including the identity of, or particulars about, the Corporation's clients or suppliers or other Person with whom the Corporation has a business relationship; and (d) marked or otherwise identified as confidential, restricted, secret or proprietary including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure; provided that Confidential Information does not extend to the skill, expertise, know-how and experience of the Executive gained in the performance of his employment. 1.1.10. "DISABILITY" means the mental or physical state of the Executive such that the Executive has been unable as a result of illness, disease, mental or physical disability or similar cause to fulfil his obligations under this Agreement either for any consecutive six -3- month period or for any period of aggregating twelve (12) months (whether or not consecutive) in any consecutive twenty-four (24) month period; 1.1.11. "EMPLOYMENT PERIOD" has the meaning attributed to such term in section 4; 1.1.12. "ESA" means the Employment Standards Act, 2000 (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.13. "JUST CAUSE" includes the willful failure of the Executive to properly carry out his duties after notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such notice, or theft, fraud, dishonesty or misconduct by the Executive involving the property, business or affairs of the Corporation or the carrying out of the Executive's duties or any other conduct or omission which is to be treated as just cause by the courts of Ontario from time to time; 1.1.14."PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.15. "RETIREMENT" means resignation of the Executive on or after the Executive attains the age of sixty-five (65); 1.1.16. "SEVERANCE AMOUNT" has the meaning attributed to such term in section 9; 1.1.17. "SUBSIDIARIES" has the meaning attributed to such term by the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.18. "TERMINATION WITHOUT CAUSE" means termination for any reason other than for Just Cause or for Disability or by reason of resignation or Retirement by the Executive; 1.1.19."YEAR OF EMPLOYMENT" means any twelve (12) month period commencing on January 1, 2004 or on any anniversary of such date. 2. EMPLOYMENT OF THE EXECUTIVE The Corporation shall employ the Executive and the Executive shall serve the Corporation in the position of Chief Financial Officer. The Executive shall report to the President and CEO. In the capacity as Chief Executive Officer, the Executive will play an important strategic role in the conduct of the business and will be privy to, and acquire detailed knowledge of, Confidential Information and other business sensitive information about the Corporation and its Affiliates and will assist in the business of: -4- 2.1.1.1. research, development, clinical trials, regulatory compliance, marketing, sales, manufacturing, distribution, licensing or other exploitation of: 2.1.1.2. monoclonal antibody products, including without limitation human monoclonal antibodies; 2.1.1.3. the use of the human immune system to identify therapeutically or diagnostically relevant antibodies and their cognate antigens for cancer; 2.1.1.4. and any exploitation thereof, related research, products and services to any of the above and products derived from any of the above (the "BIO-PHARMACEUTICAL BUSINESS"). Without limiting the generality of the foregoing, the Executive's duties shall include: 2.2. management of activities that relate to the Bio-Pharmaceutical Business, including finance, payroll, human resources, investor relations, financial reporting, corporate communications and Corporate Secretary. 3. PERFORMANCE OF DUTIES The Executive represents and warrants that neither his execution of the Employment Agreement nor his performance of the duties and obligations set out in the Employment Agreement does or will violate or breach any obligation he may have to any third party or imposed by statute, contract or order of any judicial or quasi-judicial authority. During the Employment Period, the Executive shall faithfully, honestly and diligently serve the Corporation. The Executive shall (except in the case of illness or accident) devote all of his working time and attention to his employment and shall use his best efforts to promote the interests of the Corporation. 4. EMPLOYMENT PERIOD The term of employment of the Executive under this Agreement will commence on January 1, 2004 and will continue until terminated in accordance with section 8 of this Agreement (the "EMPLOYMENT PERIOD"). 5. REMUNERATION 5.1. Basic Remuneration. The Corporation shall pay the Executive a gross annual salary of $175,000 (the "BASIC SALARY") payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. 5.2. Bonus Remuneration. The Board may award the Executive, an annual bonus of cash, stock options, other share based compensation or any combination thereof. Such bonus shall be awarded in the sole discretion of the Board (the "BONUS") at the recommendation -5- of the Chief Executive Officer. Each year, at the time that the Board approves the Corporation's annual business plan and annual budget, the Executive and the Board (or a committee thereof) shall mutually agree on the objectives upon which any Bonus shall be based. Such objectives may include subjective and objective criteria. 5.3. Benefits. The Corporation shall provide to the Executive, in addition to Basic Salary and Bonus, if any, the benefits (the "BENEFITS") generally available to the executives of the Corporation, such benefits to be provided in accordance with, to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto in effect from time to time. The Corporation acknowledges that the Executive shall be subject to the provisions of the Corporation's liability insurance for directors and officers as same may be in effect from time to time. 5.4. Pro-Rata Entitlement in First Year of Employment, Notwithstanding sections 5.1 and 5.2 hereof (i) the Basic Salary shall be prorated in respect of the First Year of Employment such that the Executive shall be entitled to receive and the Corporation shall be required to pay in respect of such year only that proportion of the Basic Salary that the number of days in the First Year of Employment is to 365; and (ii) any bonus payable in respect of the First Year of Employment shall be awarded in the sole discretion of the Board. 5.5. Pro-Rata Entitlement in the Event of Termination. If the Executive's employment is terminated pursuant to section 8.1.1, 8.1.2, or 8.1.3, bonus, if any, will be payable at the board's discretion. If the Executive dies or retires during the Employment Period, the Executive shall be entitled to receive in respect of his entitlement to bonus remuneration and the Corporation shall be required to pay in respect thereof, only that proportion of the bonus remuneration in respect of the year of employment at which the effective date of the termination of employment or the date of death occurs that the number of days elapsed from the commencement of such year of employment to the effective date of termination or the date of death is to 365, provided that said bonus shall be equal to or greater than 66% of the bonus remuneration the Executive earned in the year proceeding termination. 6. EXPENSES & CAR ALLOWANCE The Corporation shall pay or reimburse the Executive for all travel and out-of-pocket expenses reasonably incurred or paid by the Executive in the performance of his duties and responsibilities upon presentation of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require. All travel and other expenses incurred by the Executive shall be in accordance with the Corporation's travel and expense policies. In accordance with the Corporation's current policy governing the provision of automobiles to executive personnel, the Corporation shall provide the Executive with a monthly car allowance payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. -6- 7. VACATION The Executive shall be entitled while employed by the Corporation to four weeks vacation with pay per year. Vacation shall be taken by the Executive at such time as may be acceptable to the Corporation having regard to its operations and no more than two (2) weeks of vacation shall be taken consecutively. If the Executive has not taken the full vacation to which the Executive is entitled in any calendar year, the Executive will be paid at the end of such calendar year Basic Salary in respect of the accrued unused vacation. Except as required under the ESA, the Executive shall not be entitled to carry over any unused portion of vacation to the following calendar year and will lose the entitlement to such unused portion. Notwithstanding the foregoing, in the event that the Executive's employment is terminated pursuant to section 8, the Executive shall not be entitled to receive any payment in lieu of any accrued unused vacation except to the extent, if any, required by the ESA. 8. TERMINATION 8.1. Notice. The Executive's employment shall terminate or be terminable: 8.1.1. by the Executive on one (1) months prior written notice to the Corporation; 8.1.2. by the Corporation at any time without prior notice and, subject to the provisions of the ESA and the Human Rights Code (Ontario), without further obligation to the Executive for reasons of Just Cause or because of the occurrence of Disability; 8.1.3. by the Corporation, for any reason other than for Just Cause or Disability, at any time without prior notice and without further obligation to the Executive other than those obligations of the Corporation set out in section 9 of this Agreement; 8.1.4. upon the death of the Executive; and 8.1.5. upon the Retirement of the Executive. 8.2. Effective Date. The effective date on which the Executive's employment shall be terminated shall be: 8.2.1. in the case of termination pursuant to section 8.1.1, the last day of the one (1) month period set out in the notice; 8.2.2. in the case of termination pursuant to sections 8.1.2 and 8.1.3, the day the Executive is deemed, under section 12 to have received notice from the Corporation of such termination; 8.2.3. in the event of the death of the Executive, on the date of his death; and 8.2.4. in the event of the Retirement of the Executive, on the date of his Retirement. -7- 9. PAYMENTS ON TERMINATION OF EMPLOYMENT (a) If the Executive's employment is terminated as a result of Termination Without Cause, the Corporation shall (subject to the Executive's obligations contained herein): (i) for a period of 12 months from the effective date of Termination Without Cause make the following payments (collectively referred to herein as the "SEVERANCE AMOUNT") to the Executive. In addition, the period of termination payments and benefits shall be extended by one month for each additional year of employment completed by the Executive commencing January 1,2004: (I) payments to the Executive in the same amount and on the same basis as the Basic Salary being paid to the Executive immediately prior to the effective date of termination; and (II) continue to provide the Executive with Benefits, in accordance with, and to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto; (III) car allowance in accordance with Article 6; (IV) payment to the Executive up to a maximum of $10,000.00 to cover all costs associated with career relocation and outplacement services obtained by the Executive, upon presentation of receipts. (ii) all payments made to the Executive shall be subject to applicable deductions and withholdings and shall be in full satisfaction of any and all entitlement that the Executive may have to notice of termination or payment in lieu thereof, severance pay and any other payments to which the Executive may otherwise be entitled to pursuant to ESA and any other applicable law. The Corporation shall cooperate with the Executive with respect to the payment of all payments due on termination such that the Executive shall be entitled to obtain the benefit of any tax shelters or strategies that may be available or may become available; (iii) notwithstanding any other provisions in this Agreement, the exercise of the Executive's options will be in accordance with the terms of the Viventia Biotech Inc. Share Option Plan; (iv) if, following Termination Without Cause, the Executive breaches any of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement (attached as Appendix A), the Executive shall not be eligible, as of the date of such breaches for any Severance Amount and all obligations of the Corporation to pay the -8- Executive the Severance Amount shall (subject to applicable minimum amounts payable pursuant to the ESA) cease. 10. REMEDIES The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled. 11. CO-OPERATION BY EXECUTIVE The Executive shall co-operate in all respects with the Corporation if the question arises as to whether a Disability has occurred. Without limiting the generality of the foregoing, the Executive shall authorize the Executive's medical doctor or other health care specialist to discuss the condition of the Executive with the Corporation and shall submit to examination by a medical doctor or other health care specialist selected by the Corporation. 12. NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows: if to the Executive: Mr. Michael A. Byrne 2049 Burbank Drive -9- Mississauga, Ontario L5L 2T6 if to the Corporation: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto, Ontario M9B 6H7
Attention: President and Chief Executive Officer Telecopier number: (416) 335-9306
13. HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 14. INVALIDITY OF PROVISIONS Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 15. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior agreements, if any, written or oral, with respect to the Executive's employment by the Corporation and any rights which the Executive may have by reason of any such prior agreement or by reason of the Executive's prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Executive, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid. -10- 16. WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 17. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 18. COUNTERPARTS This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. -11- 19. ACKNOWLEDGEMENT The Executive acknowledges that: 19.1. the Executive has had sufficient time to review and consider this Agreement thoroughly; 19.2. the Executive has read and understands the terms of this Agreement and the Executive's obligations hereunder; 19.3. the Executive has been given an opportunity to obtain independent legal advice, or such other advice as the Executive may desire, concerning the interpretation and effect of this Agreement; and 19.4. this Agreement is entered into voluntarily and without any pressure. IN WITNESS WHEREOF the parties have executed this Agreement. ) VIVENTIA BIOTECH INC. ) ) ) ) ) ) By: /s/ Nick Glover --------------------------------------------- Name: Nick Glover Title: President and Chief Executive Officer I/We have the authority to bind the corporation SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Michael A. Byrne - ------------------------------------- ------------------------------------ Witness Michael A. Byrne VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT In consideration of my employment with Viventia Biotech Inc. ("VIVENTIA"), I acknowledge, understand and agree with Viventia as follows: 1. PROTECTION OF CONFIDENTIAL INFORMATION. All Confidential Information (as defined in paragraph 2 below) whether it is developed by me or by others employed or engaged by or associated with Viventia, is the exclusive and confidential property of Viventia and will at all times be regarded, treated and protected as such, as provided in this Agreement. Failure to mark any written material as confidential will not affect the confidential nature of such written material or the information contained therein. 2. DEFINITION OF CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means all information, intellectual property (including trade secrets) and facts, relating to and used or proposed to be used in the business of Viventia and its affiliates, acquired by the Executive during any period in which the Executive was affiliated with Viventia in the capacity of an Executive, director or shareholder which is confidential based upon its nature or the circumstances surrounding its disclosure, and includes, without limiting the generality of the foregoing information: (i) relating to Viventia's or an affiliate's products and services or to Viventia's or an affiliate's research and development projects or plans; (ii) relating to Viventia's or an affiliate's trade secret, technology, patentable and unpatentable inventions, discoveries, processes, test procedures and results, records, specifications, data formulations, formulas, know-how, samples, specimens, manufacturing processes and regulatory information; or (iii) relating to Viventia's or an affiliate's business policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, Viventia's or an affiliate's clients or suppliers. 3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" will not include information publicly known that is generally used by persons in my current position with Viventia, and the general skills and experience gained during my employment with or engagement by Viventia which I could reasonably have been expected to acquire in similar employment with or engagement by other companies. The phrase "PUBLICLY KNOWN" shall mean readily accessible to the public in written publications without breach of this or similar agreements. The burden of proving that information or skills and experience are Confidential Information shall be on the party asserting such exclusion. "CONFIDENTIAL INFORMATION" shall also not include information the disclosure of which is Appendix A - Page 2 required to be made by any law, regulation, governmental authority or court, provided that before disclosure is made, notice of the requirement is provided to Viventia, and (to the extent possible in the circumstances) Viventia is afforded an opportunity to dispute the requirement. 4. COVENANTS RESPECTING CONFIDENTIAL INFORMATION. As a consequence of my acquisition of Confidential Information, I will occupy a position of trust and confidence with respect to Viventia's affairs and business. In view of the foregoing and of the consideration to be provided to me by Viventia, I agree that it is reasonable and necessary for me to make the following covenants regarding my conduct during and subsequent to my employment with or engagement by Viventia. I hereby agree as follows: (i) Non-Disclosure. During and after my employment with or engagement by Viventia, I will not disclose Confidential Information to any person or entity other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent disclosure of such Confidential Information. This prohibition against disclosure of Confidential Information includes, but is not limited to, disclosing the fact that any similarity exists between the Confidential Information and information independently developed by another person or entity, and I understand that such similarity does not excuse me from abiding by my covenants and other obligations under this Agreement. (ii) Using. Copying, etc. During and after my employment with or engagement by Viventia, I will not use, copy, transfer or destroy any Confidential Information other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Confidential Information. The prohibition against my use, copying, transfer or destruction of Confidential Information includes, but is not limited to, licensing or otherwise exploiting, directly or indirectly, any products or services (including software in any form) which embody or are derived from Confidential Information, or exercising judgment or performing analysis based upon knowledge of Confidential Information. 5. INTELLECTUAL PROPERTY RIGHTS. I agree to disclose to Viventia all information relating to Intellectual Property (as defined below) prior to any public disclosure thereof, including but not limited to the nature of the Intellectual Property, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights developed by me during my employment with Viventia, either individually or in collaboration with others, which relates directly or indirectly to the business of Viventia. I acknowledge and agree that all right, title and interest whatsoever in and to the Intellectual Property, including the foregoing and any copyright, is and will be the exclusive property of Viventia and it will have absolute discretion to determine how such Intellectual Property is used. All work done while I am employed by Viventia is a Appendix A - Page 3 work for hire under which Viventia is the first owner for copyright purposes and any and all copyright will vest in Viventia. I hereby waive all moral rights that I may have in the Intellectual Property and agree that this waiver may be invoked by Viventia, and by any of its authorized agents or assignees, to use any of the Intellectual Property. I agree that, in performing my duties as an Executive of Viventia, I will not use or disclose any information that is confidential to any third party or that is subject to the copyright, patent, trade secret, or topography, rights of any third party. I agree to execute all such instruments and do all such things as may be reasonably necessary or desirable to give full effect to the foregoing and will cooperate and assist Viventia in enforcing its rights under this paragraph. "INTELLECTUAL PROPERTY" means all legally recognized rights, including patents, copyrights, trade marks, topographies, and trade secrets which result or derive from my services provided to Viventia or with the knowledge or use of Confidential Information, and includes, but is not limited to developments, inventions, designs, works of authorship, improvements and ideas, whether or not patentable or copyrightable, conceived or made by me (individually or in collaboration with others) during my employment with Viventia or which result from or derive from Viventia's resources or which are reasonably related to the business of Viventia. 6. NON-SOLICITATION. (a) No Solicitation of Customers, Clients and Suppliers. I acknowledge the importance to the business carried on by Viventia of the customer, client and supplier relationships developed by it and the unique opportunity that my employment and my access to the Confidential Information offers to interfere with these relationships. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, directly or indirectly, contact or solicit any person who I know to be a prospective, current or former customer, client or supplier of Viventia for the purpose of selling to the customer or client or buying from the supplier any products or services that are the same as or substantially similar to, or in any way competitive with, the products or services sold or purchased by Viventia during my employment or at the end thereof, as the case may be. (b) No Solicitation. I acknowledge the importance to the business carried on by Viventia of the human resources engaged and developed by it and the unique access my employment offers to interfere with these resources. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, hire, engage or retain or induce or solicit, attempt to induce or solicit or assist any third party in hiring, engaging or retaining or inducing or soliciting any employee or consultant of the Company, to leave the Company or to accept employment or engagement elsewhere. Appendix A - Page 4 7. NON-COMPETITION. I will not, while employed or engaged by Viventia directly or indirectly, in any manner whatsoever including either individually, or in partnership, jointly or in conjunction with any other person, or as principal, agent, owner, consultant, contractor, Executive, officer, director, advisor or shareholder: (i) be engaged in any undertaking; (ii) have any financial or other interest (including an interest by way of royalty or compensation arrangements) in or in respect of the business of any person which carries on a business; or (iii) advise, render or provide services to, lend money to or guarantee the debts or obligations of any person that carries on a business; in any province of Canada or any state of the United States, if, at the relevant time, Viventia is carrying on business in such province or state, which is a Competitive Business (as defined below). "COMPETITIVE BUSINESS" means any Bio-Pharmaceutical Business in Canada and the United States. 8. CERTAIN WARRANTIES, COVENANTS AND REMEDIES. (a) I agree that my obligations as set forth in this Agreement will commence as of the date on which I was first employed by Viventia. (b) I acknowledge that a breach by me of this Agreement will result in Viventia, its affiliates and shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, I agree that Viventia will be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which Viventia may become entitled if I breach or threaten to breach this Agreement. (c) My obligations under this Agreement are to remain in effect in accordance with each of their terms and will exist and continue in full force and effect notwithstanding any breach or repudiation, or alleged breach or repudiation, of this Agreement or my employment agreement by Viventia. 9. BINDING EFFECT. This Agreement shall be binding on me and my heirs, executors and legal representatives. 10. GOVERNING LAWS. This Agreement shall be governed by the laws in force in the Province of Ontario. Appendix A - Page 5 11. OTHER AGREEMENTS. This Agreement is supplemental to and separate from the agreement under which I am employed or engaged by Viventia. However, if there is any conflict or inconsistency between the provisions of such other agreement and this Agreement, the provisions of this Agreement will govern and prevail. IN WITNESS WHEREOF, I have signed and sealed this Agreement as of the date set forth below. SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Michael A. Byrne - ------------------------------------- ------------------------------------ Witness Michael A. Byrne EX-3.9 16 t17062exv3w9.txt EXHIBIT 3.9 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of this 13th day of December 2004, B E T W E E N: VIVENTIA BIOTECH INC., a corporation continued under the laws of Ontario (the "CORPORATION") - and - Michael Cross of the Town of Morrison, in the Province of Ontario (the "EXECUTIVE") RECITALS: A. The Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Executive's employment with the Corporation. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Executive agree as follows: 1. DEFINITIONS 1.1. In this Agreement, 1.1.1. "AFFILIATE" has the meaning attributed to such term in the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.2. "AGREEMENT" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this agreement and unless otherwise indicated, references to sections are to sections in this agreement; 1.1.3. "BASIC SALARY" has the meaning attributed to such term in section 5.1; 1.1.4. "BENEFITS" has the meaning attributed to such term in section 5.3; - 2 - 1.1.5. "BIO-PHARMACEUTICAL BUSINESS" has the meaning attributed to that term in section 2; 1.1.6. "BONUS" has the meaning attributed to such term in section 5.2; 1.1.7. "BOARD" means the board of directors of the Corporation; 1.1.8. "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario; 1.1.9. "CONFIDENTIAL INFORMATION" means all confidential or proprietary information, intellectual property and confidential facts relating to and used or proposed to be used in the business of the Corporation and its Affiliates and includes all information which is confidential based upon its nature or the circumstances surrounding its disclosure, including such information acquired by the Executive during any period in which the Executive was affiliated with the Corporation in any capacity, including as an employee, director or shareholder, and includes, without limiting the generality of the foregoing, information: (a) relating to the Corporation's or an Affiliate's biotechnology or bio-pharmaceutical products and services, products and services related to bio-technology or the Bio-Pharmaceutical Business, or to the Corporation's or an Affiliate's research and development projects or plans; (b) relating to the Corporation's or an Affiliate's trade secrets, technology, patentable and unpatentable inventions, discoveries, texts, cell lines, nucleic acid, protein and peptide sequences, synthetic procedures, processes, test procedures and results, records, specifications, data, formulations, know-how, samples, specimens, manufacturing processes, toxicology, regulatory and clinical information; (c) relating to the Corporation's or an Affiliates business policies, strategies, operations, finances, plans or opportunities including the identity of, or particulars about, the Corporation's clients or suppliers or other Person with whom the Corporation has a business relationship; and (d) marked or otherwise identified as confidential, restricted, secret or proprietary including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure; provided that Confidential Information does not extend to the skill, expertise, know-how and experience of the Executive gained in the performance of his employment. The Confidentiality Agreement is attached as Schedule A. 1.1.10. "DISABILITY" means the mental or physical state of the Executive such that the Executive has been unable as a result of illness, disease, mental or physical disability or similar cause to fulfil his obligations under this Agreement either for any consecutive four - 3 - month period or for any period of aggregating twelve (12) months (whether or not consecutive) in any consecutive twenty-four (24) month period; 1.1.11. "EMPLOYMENT PERIOD" has the meaning attributed to such term in section 4; 1.1.12. "ESA" means the Employment Standards Act, 2000 (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.13. "JUST CAUSE" includes the willful failure of the Executive to properly carry out his duties after notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such notice, or theft, fraud, or dishonesty by the Executive involving the property, business or affairs of the Corporation or the carrying out of the Executive's duties or any other conduct or omission which is to be treated as just cause by the courts of Ontario from time to time; 1.1.14. "PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.15. "RETIREMENT" means resignation of the Executive on or after the Executive attains the age of sixty-five (65); 1.1.16. "SEVERANCE AMOUNT" has the meaning attributed to such term in section 9; 1.1.17. "SUBSIDIARIES" has the meaning attributed to such term by the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.18. "TERMINATION WITHOUT CAUSE" means termination for any reason other than for Just Cause or for Disability or by reason of resignation or Retirement by the Executive; 1.1.19. "YEAR OF EMPLOYMENT" means any twelve (12) month period commencing on January 1, 2005 or on any anniversary of such date, provided that for the purposes of this Agreement, the "FIRST YEAR OF EMPLOYMENT" shall be deemed to commence on February 9, 2004 and to end on December 31, 2004. 2. EMPLOYMENT OF THE EXECUTIVE The Corporation shall employ the Executive and the Executive shall serve the Corporation in the position of Chief Operating Officer. The Executive shall report to the President and CEO. In the capacity as Chief Operating Officer, the Executive will play an important strategic role in the conduct of the business and will be privy to, and acquire detailed - 4 - knowledge of, Confidential Information and other business sensitive information about the Corporation and its Affiliates and will assist in the business of: 2.1.1.1. research, development, clinical trials, regulatory compliance, marketing, sales, manufacturing, distribution, licensing or other exploitation of: 2.1.1.2. monoclonal antibody products, including without limitation human monoclonal antibodies; 2.1.1.3. the use of the human immune system to identify therapeutically or diagnostically relevant antibodies and their cognate antigens for cancer; 2.1.1.4. and any exploitation thereof, related research, products and services to any of the above and products derived from any of the above (the "BIO-PHARMACEUTICAL BUSINESS"). Without limiting the generality of the foregoing, the Executive's duties shall include: 2.2. management of activities that relate to the Bio-Pharmaceutical Business, including operational development (process development, manufacturing, quality control, quality assurance, metrology, IT and engineering) and production and other activities as directed by the President or Board of Directors 3. PERFORMANCE OF DUTIES The Executive represents and warrants that neither his execution of the Employment Agreement nor his performance of the duties and obligations set out in the Employment Agreement does or will violate or breach any obligation he may have to any third party or imposed by statute, contract or order of any judicial or quasi-judicial authority. During the Employment Period, the Executive shall faithfully, honestly and diligently serve the Corporation. The Executive shall (except in the case of illness or accident) devote all of his working time and attention to his employment and shall use his best efforts to promote the interests of the Corporation. Duties and responsibilities of the Executive are outlined in Appendix B. 4. EMPLOYMENT PERIOD The term of employment of the Executive under this Agreement will commence on February 9, 2004 and will continue until terminated in accordance with section 8 of this Agreement (the "EMPLOYMENT PERIOD"). 5. REMUNERATION 5.1. Basic Remuneration. The Corporation shall pay the Executive a gross annual salary of $180,000 (the "BASIC SALARY") payable in periodic equal instalments in accordance with - 5 - the practices of the Corporation applicable to its other senior executives. The corporation shall review the compensation of the Executive on an annual basis (minimally) and make recommendations to the Board (or Compensation Committee) regarding any changes to the basic remuneration of the Executive. 5.2. Bonus Remuneration. The Board may award the Executive, an annual bonus of cash, stock options, other share based compensation or any combination thereof. Such bonus shall be awarded in the sole discretion of the Board (the "BONUS") at the recommendation of the Chief Executive Officer. Each year, at the time that the Board approves the Corporation's annual business plan and annual budget, the Executive and the Board (or a committee thereof) shall mutually agree on the objectives upon which any Bonus shall be based. Such objectives may include subjective and objective criteria. 5.3. Benefits. The Corporation shall provide to the Executive, in addition to Basic Salary and Bonus, if any, the benefits (the "BENEFITS") generally available to the executives of the Corporation, such benefits to be provided in accordance with, to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto in effect from time to time. The Corporation acknowledges that the Executive shall be subject to the provisions of the Corporation's liability insurance for directors and officers. The Corporation shall maintain a life insurance policy for the Executive in the amount of $1,000,000 during the term of the Executives relationship with the Corporation. Such policy will be for the benefit of the Executive's family at the death of the Executive. 5.4. Pro-Rata Entitlement in First Year of Employment. Notwithstanding sections 5.1 and 5.2 hereof (i) the Basic Salary shall be prorated in respect of the First Year of Employment such that the Executive shall be entitled to receive and the Corporation shall be required to pay in respect of such year only that proportion of the Basic Salary that the number of days in the First Year of Employment is to 365; and (ii) any bonus payable in respect of the First Year of Employment shall be awarded in the sole discretion of the Board. 5.5. Pro-Rata Entitlement in the Event of Termination. If the Executive's employment is terminated pursuant to section 8.1.1, 8.1.2, or 8.1.3, bonus, if any, will be payable at the board's discretion. If the Executive dies or retires during the Employment Period, the Executive shall be entitled to receive in respect of his entitlement to bonus remuneration and the Corporation shall be required to pay in respect thereof, only that proportion of the bonus remuneration in respect of the year of employment at which the effective date of the termination of employment or the date of death occurs that the number of days elapsed from the commencement of such year of employment to the effective date of termination or the date of death is to 365, provided that said bonus shall be equal to or greater than 66% of the bonus remuneration the Executive earned in the year proceeding termination. - 6 - 6. EXPENSES & CAR ALLOWANCE The Corporation shall pay or reimburse the Executive for all travel and out-of-pocket expenses reasonably incurred or paid by the Executive in the performance of his duties and responsibilities upon presentation of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require. All travel and other expenses incurred by the Executive shall be in accordance with the Corporation's travel and expense policies. In accordance with the Corporation's current policy governing the provision of automobiles to executive personnel, the Corporation shall provide the Executive with a monthly car allowance of $900.00 per month payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. At the time of the Annual Budget review, the Corporation shall review the provision of automobiles to the Executive. 7. VACATION The Executive shall be entitled while employed by the Corporation to four weeks vacation with pay per year. Vacation shall be taken by the Executive at such time as may be acceptable to the Corporation having regard to its operations and no more than two (2) weeks of vacation shall be taken consecutively. If the Executive has not taken the full vacation to which the Executive is entitled in any calendar year, the Executive will be paid at the end of such calendar year Basic Salary in respect of the accrued unused vacation. Except as required under the ESA, the Executive shall not be entitled to carry over any unused portion of vacation to the following calendar year and will lose the entitlement to such unused portion. Notwithstanding the foregoing, in the event that the Executive's employment is terminated pursuant to section 8, the Executive shall not be entitled to receive any payment in lieu of any accrued unused vacation except to the extent, if any, required by the ESA. 8. TERMINATION 8.1. Notice. The Executive's employment shall terminate or be terminable: 8.1.1. by the Executive on three (3) months prior written notice to the Corporation; 8.1.2. by the Corporation at any time without prior notice and, subject to the provisions of the ESA and the Human Rights Code (Ontario), without further obligation to the Executive for reasons of Just Cause or because of the occurrence of Disability; 8.1.3. by the Corporation, for any reason other than for Just Cause or Disability, at any time without prior notice and without further obligation to the Executive other than those obligations of the Corporation set out in section 9 of this Agreement; 8.1.4. upon the death of the Executive; and 8.1.5. upon the Retirement of the Executive. - 7 - 8.2. Effective Date. The effective date on which the Executive's employment shall be terminated shall be: 8.2.1. in the case of termination pursuant to section 8.1.1, the last day of the three (3) month period set out in the notice; 8.2.2. in the case of termination pursuant to sections 8.1.2 and 8.1.3, the day the Executive is deemed, under section 12 to have received notice from the Corporation of such termination; 8.2.3. in the event of the death of the Executive, on the date of his death; and 8.2.4. in the event of the Retirement of the Executive, on the date of his Retirement. 9. PAYMENTS ON TERMINATION OF EMPLOYMENT (a) If the Executive's employment is terminated as a result of Termination Without Cause, the Corporation shall (subject to the Executive's obligations contained herein): (i) for a period of 12 months from the effective date of Termination Without Cause make the following payments (collectively referred to herein as the "SEVERANCE AMOUNT") to the Executive. In addition, the period of termination payments and benefits shall be extended by one month for each additional year of employment completed by the Executive commencing February 9, 2004: (I) payments to the Executive in the same amount and on the same basis as the Basic Salary being paid to the Executive immediately prior to the effective date of termination; and (II) continue to provide the Executive with Benefits, in accordance with, and to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto; (III) payment to the Executive up to a maximum of $10,000.00 to cover all costs associated with career relocation and outplacement services obtained by the Executive, upon presentation of receipts. (ii) all payments made to the Executive shall be subject to applicable deductions and withholdings and shall be in full satisfaction of any and all entitlement that the Executive may have to notice of termination or payment in lieu thereof, severance pay and any other payments to which the Executive may otherwise be entitled to pursuant to ESA and any other applicable law. The Corporation shall cooperate with the Executive with - 8 - respect to the payment of all payments due on termination such that the Executive shall be entitled to obtain the benefit of any tax shelters or strategies that may be available or may become available; (iii) notwithstanding any other provisions in this Agreement, the exercise of the Executive's options will be in accordance with the terms of the Viventia Biotech Inc. Share Option Plan, attached as Schedule C.; (iv) if, following Termination Without Cause, the Executive breaches any of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement (attached as Appendix A), the Executive shall not be eligible, as of the date of such breaches for any Severance Amount and all obligations of the Corporation to pay the Executive the Severance Amount shall (subject to applicable minimum amounts payable pursuant to the ESA) cease. 10. REMEDIES The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled. 11. CO-OPERATION BY EXECUTIVE The Executive shall co-operate in all respects with the Corporation if the question arises as to whether a Disability has occurred. Without limiting the generality of the foregoing, the Executive, or his representatives, shall authorize the Executive's medical doctor or other health care specialist to discuss the condition of the Executive with the Corporation and shall submit to examination by a medical doctor or other health care specialist mutually selected by both the Corporation and the Executive's Power of Attorney or personal representative. 12. NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office, - 9 - or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows: if to the Executive: Dr. Michael Cross 28 Telfer Glen Road Morriston, Ontario N0B 2C0 if to the Corporation: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto, Ontario M9B 6H7 Attention: President and Chief Executive Officer Telecopier number: (416) 335-9306 13. HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 14. INVALIDITY OF PROVISIONS Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 15. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior - 10 - agreements, if any, written or oral, with respect to the Executive's employment by the Corporation and any rights which the Executive may have by reason of any such prior agreement or by reason of the Executive's prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Executive, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid. 16. WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 17. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 18. COUNTERPARTS This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. - 11 - 19. ACKNOWLEDGEMENT The Executive acknowledges that: 19.1. the Executive has had sufficient time to review and consider this Agreement thoroughly; 19.2. the Executive has read and understands the terms of this Agreement and the Executive's obligations hereunder; 19.3. the Executive has been given an opportunity to obtain independent legal advice, or such other advice as the Executive may desire, concerning the interpretation and effect of this Agreement; and 19.4. this Agreement is entered into voluntarily and without any pressure. IN WITNESS WHEREOF the parties have executed this Agreement. VIVENTIA BIOTECH INC. } By: __________________________________ Name: Nick Glover Title: President and Chief Executive Officer I/We have the authority to bind the corporation SIGNED, SEALED AND DELIVERED in the presence of ___________________________________ ______________________________________ Witness Michael Cross 1 Appendix A VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT In consideration of my employment with Viventia Biotech Inc. ("VIVENTIA"), I acknowledge, understand and agree with Viventia as follows: 1. PROTECTION OF CONFIDENTIAL INFORMATION. All Confidential Information (as defined in paragraph 2 below) whether it is developed by me or by others employed or engaged by or associated with Viventia, is the exclusive and confidential property of Viventia and will at all times be regarded, treated and protected as such, as provided in this Agreement. Failure to mark any written material as confidential will not affect the confidential nature of such written material or the information contained therein. 2. DEFINITION OF CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means all information, intellectual property (including trade secrets) and facts, relating to and used or proposed to be used in the business of Viventia and its affiliates, acquired by the Executive during any period in which the Executive was affiliated with Viventia in the capacity of an Executive, director or shareholder which is confidential based upon its nature or the circumstances surrounding its disclosure, and includes, without limiting the generality of the foregoing information: (i) relating to Viventia's or an affiliate's products and services or to Viventia's or an affiliate's research and development projects or plans; (ii) relating to Viventia's or an affiliate's trade secret, technology, patentable and unpatentable inventions, discoveries, processes, test procedures and results, records, specifications, data formulations, formulas, know-how, samples, specimens, manufacturing processes and regulatory information; or (iii) relating to Viventia's or an affiliate's business policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, Viventia's or an affiliate's clients or suppliers. 3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" will not include information publicly known that is generally used by persons in my current position with Viventia, and the general skills and experience gained during my employment with or engagement by Viventia which I could reasonably have been expected to acquire in similar employment with or engagement by other companies. The phrase "PUBLICLY KNOWN" shall mean readily accessible to the public in written publications without breach of this or similar agreements. The burden of proving that information or skills and experience are Confidential Information shall be on the party asserting such exclusion. "CONFIDENTIAL INFORMATION" shall also not include information the disclosure of which is 2 Appendix A required to be made by any law, regulation, governmental authority or court, provided that before disclosure is made, notice of the requirement is provided to Viventia, and (to the extent possible in the circumstances) Viventia is afforded an opportunity to dispute the requirement. 4. COVENANTS RESPECTING CONFIDENTIAL INFORMATION. As a consequence of my acquisition of Confidential Information, I will occupy a position of trust and confidence with respect to Viventia's affairs and business. In view of the foregoing and of the consideration to be provided to me by Viventia, I agree that it is reasonable and necessary for me to make the following covenants regarding my conduct during and subsequent to my employment with or engagement by Viventia. I hereby agree as follows: (i) Non-Disclosure. During and after my employment with or engagement by Viventia, I will not disclose Confidential Information to any person or entity other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent disclosure of such Confidential Information. This prohibition against disclosure of Confidential Information includes, but is not limited to, disclosing the fact that any similarity exists between the Confidential Information and information independently developed by another person or entity, and I understand that such similarity does not excuse me from abiding by my covenants and other obligations under this Agreement. (ii) Using, Copying, etc. During and after my employment with or engagement by Viventia, I will not use, copy, transfer or destroy any Confidential Information other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia 's consent, and I will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Confidential Information. The prohibition against my use, copying, transfer or destruction of Confidential Information includes, but is not limited to, licensing or otherwise exploiting, directly or indirectly, any products or services (including software in any form) which embody or are derived from Confidential Information, or exercising judgment or performing analysis based upon knowledge of Confidential Information. 5. INTELLECTUAL PROPERTY RIGHTS. I agree to disclose to Viventia all information relating to Intellectual Property (as defined below) prior to any public disclosure thereof, including but not limited to the nature of the Intellectual Property, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights developed by me during my employment with Viventia, either individually or in collaboration with others, which relates directly or indirectly to the business of Viventia. I acknowledge and agree that all right, title and interest whatsoever in and to the Intellectual Property, including the foregoing and any copyright, is and will be the exclusive property of Viventia and it will have absolute discretion to determine how such Intellectual Property is used. All work done while I am employed by Viventia is a 3 Appendix A work for hire under which Viventia is the first owner for copyright purposes and any and all copyright will vest in Viventia. I hereby waive all moral rights that I may have in the Intellectual Property and agree that this waiver may be invoked by Viventia, and by any of its authorized agents or assignees, to use any of the Intellectual Property. I agree that, in performing my duties as an Executive of Viventia, I will not use or disclose any information that is confidential to any third party or that is subject to the copyright, patent, trade secret, or topography, rights of any third party. I agree to execute all such instruments and do all such things as may be reasonably necessary or desirable to give full effect to the foregoing and will cooperate and assist Viventia in enforcing its rights under this paragraph. "INTELLECTUAL PROPERTY" means all legally recognized rights, including patents, copyrights, trade marks, topographies, and trade secrets which result or derive from my services provided to Viventia or with the knowledge or use of Confidential Information, and includes, but is not limited to developments, inventions, designs, works of authorship, improvements and ideas, whether or not patentable or copyrightable, conceived or made by me (individually or in collaboration with others) during my employment with Viventia or which result from or derive from Viventia's resources or which are reasonably related to the business of Viventia. 6. NON-SOLICITATION. (a) No Solicitation. I acknowledge the importance to the business carried on by Viventia of the human resources engaged and developed by it and the unique access my employment offers to interfere with these resources. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, hire, engage or retain or induce or solicit, attempt to induce or solicit or assist any third party in hiring, engaging or retaining or inducing or soliciting any employee or consultant of the Company, to leave the Company or to accept employment or engagement elsewhere. 7. NON-COMPETITION. I will not, while employed or engaged by Viventia and for 12 months thereafter, directly or indirectly, in any manner whatsoever including either individually, or in partnership, jointly or in conjunction with any other person, or as principal, agent, owner, consultant, contractor, Executive, officer, director, advisor or shareholder: (i) be engaged in any undertaking; (ii) have any financial or other interest (including an interest by way of royalty or compensation arrangements) in or in respect of the business of any person which carries on a business; or (iii) advise, render or provide services to, lend money to or guarantee the debts or obligations of any person that carries on a business; 4 Appendix A in any province of Canada or any state of the United States, if, at the relevant time, Viventia is carrying on business in such province or state, which is a Competitive Business (as defined below). "COMPETITIVE BUSINESS" means any Bio-Pharmaceutical Business in Canada and the United States that involves the use of anti-cancer antibody-cytotoxin conjugates. 8. CERTAIN WARRANTIES, COVENANTS AND REMEDIES. (a) I agree that my obligations as set forth in this Agreement will commence as of the date on which I was first employed by Viventia. (b) I acknowledge that a breach by me of this Agreement will result in Viventia, its affiliates and shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, I agree that Viventia will be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which Viventia may become entitled if I breach or threaten to breach this Agreement. (c) My obligations under this Agreement are to remain in effect in accordance with each of their terms and will exist and continue in full force and effect notwithstanding any breach or repudiation, or alleged breach or repudiation, of this Agreement or my employment agreement by Viventia. 9. BINDING EFFECT. This Agreement shall be binding on me and my heirs, executors and legal representatives. 10. GOVERNING LAWS. This Agreement shall be governed by the laws in force in the Province of Ontario. 11. OTHER AGREEMENTS. This Agreement is supplemental to and separate from the agreement under which I am employed or engaged by Viventia. However, if there is any conflict or inconsistency between the provisions of such other agreement and this Agreement, the provisions of this Agreement will govern and prevail. 5 Appendix A IN WITNESS WHEREOF, I have signed and sealed this Agreement as of the date set forth below. SIGNED, SEALED AND DELIVERED in the presence of ___________________________________ _____________________________________ Witness Michael Cross 1 Appendix B Viventia Biotech Inc. Job Profile for: Chief Operating Officer (COO) Duties and Responsibilities: - The COO reports directly to the CEO, and is the second most senior member of the Company's executive management team. - Directs, manages and co-ordinates the operational activities of the Company according to the policies and objectives established by the President and CEO & by the Board of Directors. - Assists the President & CEO in establishing policies and objectives concerning the operations, financial performance, and strategic growth of the Company. - The COO directs management in matters concerning the operational development, production, and implementation of the Company's products and services. - The COO has responsibility for a variety of operational Departments: Process Development, Production, Manufacturing, CMC, Quality Control, Quality Assurance, Engineering, IT and Metrology. Other direct reports may evolve or be added according to strategic and/or operational growth of the Company, or as requested by the President & CEO. - Formulates, recommends and directs budgetary and operational objectives as well as the development of short and long-term strategic plans for assigned departments and oversees their implementation. - The COO directs, co-ordinates, evaluates and controls the operating performance of the assigned departments and optimizes the use of human, material and financial resources. - The COO will be responsible for overseeing the conception and implementation of activities relating to the flow of the Company's products through production following process transfer, including the transfer process, scale-up, GMP production, downstream processing, quality control and assurance, regulatory compliance, etc. - The COO formulates, recommends and oversees the implementation of manufacturing, quality and facility short and long-term strategic plans, including GMP compliance according to development stage, facility improvements, commercial scale plant and infrastructure enhancements, etc. - The COO will be expected to provide strategic and practical assistance to the development and implementation of the Company's financing and corporate communications plans. - The COO will provide strategic and practical support for the Company's financial department. - The COO will assist in various business development related activities, as requested by the President & CEO. - The COO will perform other duties as assigned by the President & CEO. EX-3.10 17 t17062exv3w10.txt EXHIBIT 3.10 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of this Tuesday, 12 October 2004, BETWEEN: VIVENTIA BIOTECH INC., a corporation continued under the laws of Ontario (the "CORPORATION") -and- Glen MacDonald of the City of Winnipeg, in the Province of Manitoba (the "EXECUTIVE") RECITALS: A. The Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Executive's employment with the Corporation. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Executive agree as follows: 1. DEFINITIONS 1.1. In this Agreement, 1.1.1. "AFFILIATE" has the meaning attributed to such term in the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.2. "Agreement" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this agreement and unless otherwise indicated, references to sections are to sections in this agreement; 1.1.3. "BASIC SALARY" has the meaning attributed to such term in section 5.1; -2- 1.1.4. "BENEFITS" has the meaning attributed to such term in section 5.3: 1.1.5. "BIO-PHARMACEUTICAL BUSINESS" has the meaning attributed to that term in section 2; 1.1.6. "BONUS" has the meaning attributed to such term in section 5.2; 1.1.7. "BOARD" means the board of directors of the Corporation; 1.1.8. "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario; 1.1.9. "CONFIDENTIAL INFORMATION" means all confidential or proprietary information, intellectual property and confidential facts relating to and used or proposed to be used in the business of the Corporation and its Affiliates and includes all information which is confidential based upon its nature or the circumstances surrounding its disclosure, including such information acquired by the Executive during any period in which the Executive was affiliated with the Corporation in any capacity, including as an employee, director or shareholder, and includes, without limiting the generality of the foregoing, information: (a) relating to the Corporation's or an Affiliate's biotechnology or bio- pharmaceutical products and services, products and services related to biotechnology or the Bio-Pharmaceutical Business, or to the Corporation's or an Affiliate's research and development projects or plans; (b) relating to the Corporation's or an Affiliate's trade secrets, technology, patentable and unpatentable inventions, discoveries, texts, cell lines, nucleic acid, protein and peptide sequences, synthetic procedures, processes, test procedures and results, records, specifications, data, formulations, know-how, samples, specimens, manufacturing processes, toxicology, regulatory and clinical information; (c) relating to the Corporation's or an Affiliates business policies, strategies, operations, finances, plans or opportunities including the identity of, or particulars about, the Corporation's clients or suppliers or other Person with whom the Corporation has a business relationship; and (d) marked or otherwise identified as confidential, restricted, secret or proprietary including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure; provided that Confidential Information does not extend to the skill, expertise, know-how and experience of the Executive gained in the performance of his employment. 1.1.10. "DISABILITY" means the mental or physical state of the Executive such that the Executive has been unable as a result of illness, disease, mental or physical disability or similar cause to fulfil his obligations under this Agreement either for any consecutive six -3- month period or for any period of aggregating twelve (12) months (whether or not consecutive) in any consecutive twenty-four (24) month period; 1.1.11. "EMPLOYMENT PERIOD" has the meaning attributed to such term in section 4; 1.1.12. "ESA" means the Employment Standards Act, 2000 (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.13. "JUST CAUSE" includes the willful failure of the Executive to properly carry out his duties after notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such notice, or theft, fraud, dishonesty or misconduct by the Executive involving the property, business or affairs of the Corporation or the carrying out of the Executive's duties or any other conduct or omission which is to be treated as just cause by the courts of Ontario from time to time; 1.1.14."PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.15. "RETIREMENT" means resignation of the Executive on or after the Executive attains the age of sixty-five (65); 1.1.16. "SEVERANCE AMOUNT" has the meaning attributed to such term in section 9; 1.1.17. "SUBSIDIARIES" has the meaning attributed to such term by the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.18. "TERMINATION WITHOUT CAUSE" means termination for any reason other than for Just Cause or for Disability or by reason of resignation or Retirement by the Executive; 1.1.19."YEAR OF EMPLOYMENT" means any twelve (12) month period commencing on January 1, 2004 or on any anniversary of such date. 2. EMPLOYMENT OF THE EXECUTIVE The Corporation shall employ the Executive and the Executive shall serve the Corporation in the position of Vice President, Research. The Executive shall report to the President and CEO. In the capacity as Vice President, Research, the Executive will play an important strategic role in the conduct of the business and will be privy to, and acquire detailed knowledge of, Confidential Information and other business sensitive information about the Corporation and its Affiliates and will assist in the business of -4- 2.1.1.1. research, development, clinical trials, regulatory compliance, marketing, sales, manufacturing, distribution, licensing or other exploitation of: 2.1.1.2. monoclonal antibody products, including without limitation human monoclonal antibodies; 2.1.1.3. the use of the human immune system to identify therapeutically or diagnostically relevant antibodies and their cognate antigens for cancer; 2.1.1.4. and any exploitation thereof, related research, products and services to any of the above and products derived from any of the above (the "BIO-PHARMACEUTICAL BUSINESS"). Without limiting the generality of the foregoing, the Executive's duties shall include: 2.2. management of activities that relate to the Bio-Pharmaceutical Business, including supervision, co-ordination and planning of research strategies programs and platform technologies; 3. PERFORMANCE OF DUTIES The Executive represents and warrants that neither his execution of the Employment Agreement nor his performance of the duties and obligations set out in the Employment Agreement does or will violate or breach any obligation he may have to any third party or imposed by statute, contract or order of any judicial or quasi-judicial authority. During the Employment Period, the Executive shall faithfully, honestly and diligently serve the Corporation. The Executive shall (except in the case of illness or accident) devote all of his working time and attention to his employment and shall use his best efforts to promote the interests of the Corporation. 4. EMPLOYMENT PERIOD The term of employment of the Executive under this Agreement will commence January 1, 2004 and will continue until terminated in accordance with section 8 of this Agreement (the "EMPLOYMENT PERIOD"). 5. REMUNERATION 5.1. Basic Remuneration. The Corporation shall pay the Executive a gross annual salary of $130,000 (the "BASIC SALARY") payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. 5.2. Bonus Remuneration. The Board may award the Executive, an annual bonus of cash, stock options, other share based compensation or any combination thereof. Such bonus -5- shall be awarded in the sole discretion of the Board (the "BONUS") at the recommendation of the Chief Executive Officer. Each year, at the time that the Board approves the Corporation's annual business plan and annual budget, the Executive and the Board (or a committee thereof) shall mutually agree on the objectives upon which any Bonus shall be based. Such objectives may include subjective and objective criteria. 5.3. Benefits. The Corporation shall provide to the Executive, in addition to Basic Salary and Bonus, if any, the benefits (the "BENEFITS") generally available to the executives of the Corporation, such benefits to be provided in accordance with, to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto in effect from time to time. The Corporation acknowledges that the Executive shall be subject to the provisions of the Corporation's liability insurance for directors and officers as same may be in effect from time to time. 5.4. Pro-Rata Entitlement in First Year of Employment. Notwithstanding sections 5.1 and 5.2 hereof (i) the Basic Salary shall be prorated in respect of the First Year of Employment such that the Executive shall be entitled to receive and the Corporation shall be required to pay in respect of such year only that proportion of the Basic Salary that the number of days in the First Year of Employment is to 365; and (ii) any bonus payable in respect of the First Year of Employment shall be awarded in the sole discretion of the Board. 5.5. Pro-Rata Entitlement in the Event of Termination. If the Executive's employment is terminated pursuant to section 8.1.1, 8.1.2, or 8.1.3, bonus, if any, will be payable at the board's discretion. If the Executive dies or retires during the Employment Period, the Executive shall be entitled to receive in respect of his entitlement to bonus remuneration and the Corporation shall be required to pay in respect thereof, only that proportion of the bonus remuneration in respect of the year of employment at which the effective date of the termination of employment or the date of death occurs that the number of days elapsed from the commencement of such year of employment to the effective date of termination or the date of death is to 365, provided that said bonus shall be equal to or greater than 66% of the bonus remuneration the Executive earned in the year proceeding termination. 6. EXPENSES & CAR ALLOWANCE The Corporation shall pay or reimburse the Executive for all travel and out-of-pocket expenses reasonably incurred or paid by the Executive in the performance of his duties and responsibilities upon presentation of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require. All travel and other expenses incurred by the Executive shall be in accordance with the Corporation's travel and expense policies. In accordance with the Corporation's current policy governing the provision of automobiles to executive personnel, the Corporation shall provide the Executive with a monthly car allowance payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. -6- 7. VACATION The Executive shall be entitled while employed by the Corporation to four weeks vacation with pay per year. Vacation shall be taken by the Executive at such time as may be acceptable to the Corporation having regard to its operations and no more than two (2) weeks of vacation shall be taken consecutively. If the Executive has not taken the full vacation to which the Executive is entitled in any calendar year, the Executive will be paid at the end of such calendar year Basic Salary in respect of the accrued unused vacation. Except as required under the ESA, the Executive shall not be entitled to carry over any unused portion of vacation to the following calendar year and will lose the entitlement to such unused portion. Notwithstanding the foregoing, in the event that the Executive's employment is terminated pursuant to section 8, the Executive shall not be entitled to receive any payment in lieu of any accrued unused vacation except to the extent, if any, required by the ESA. 8. TERMINATION 8.1. Notice. The Executive's employment shall terminate or be terminable: 8.1.1. by the Executive on three (3) months prior written notice to the Corporation; 8.1.2. by the Corporation at any time without prior notice and, subject to the provisions of the ESA and the Human Rights Code (Ontario), without further obligation to the Executive for reasons of Just Cause or because of the occurrence of Disability; 8.1.3. by the Corporation, for any reason other than for Just Cause or Disability, at any time without prior notice and without further obligation to the Executive other than those obligations of the Corporation set out in section 9 of this Agreement; 8.1.4. upon the death of the Executive; and 8.1.5. upon the Retirement of the Executive. 8.2. Effective Date. The effective date on which the Executive's employment shall be terminated shall be: 8.2.1. in the case of termination pursuant to section 8.1.1, the last day of the three (3) month period set out in the notice; 8.2.2. in the case of termination pursuant to sections 8.1.2 and 8.1.3, the day the Executive is deemed, under section 12 to have received notice from the Corporation of such termination; 8.2.3. in the event of the death of the Executive, on the date of his death; and 8.2.4. in the event of the Retirement of the Executive, on the date of his Retirement. -7- 9. PAYMENTS ON TERMINATION OF EMPLOYMENT (a) If the Executive's employment is terminated as a result of Termination Without Cause, the Corporation shall (subject to the Executive's obligations contained herein): (i) for a period of 12 months from the effective date of Termination Without Cause make the following payments (collectively referred to herein as the "SEVERANCE AMOUNT") to the Executive. In addition, the period of termination payments and benefits shall be extended by one month for each additional year of employment completed by the Executive commencing January 1, 2004: (I) payments to the Executive in the same amount and on the same basis as the Basic Salary being paid to the Executive immediately prior to the effective date of termination; and (II) continue to provide the Executive with Benefits, in accordance with, and to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto; (III) payment to the Executive up to a maximum of $10,000.00 to cover all costs associated with career relocation and outplacement services obtained by the Executive, upon presentation of receipts. (ii) all payments made to the Executive shall be subject to applicable deductions and withholdings and shall be in full satisfaction of any and all entitlement that the Executive may have to notice of termination or payment in lieu thereof, severance pay and any other payments to which the Executive may otherwise be entitled to pursuant to ESA and any other applicable law. The Corporation shall cooperate with the Executive with respect to the payment of all payments due on termination such that the Executive shall be entitled to obtain the benefit of any tax shelters or strategies that may be available or may become available; (iii) notwithstanding any other provisions in this Agreement, the exercise of the Executive's options will be in accordance with the terms of the Viventia Biotech Inc. Share Option Plan; (iv) if, following Termination Without Cause, the Executive breaches any of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement (attached as Appendix A), the Executive shall not be eligible, as of the date of such breaches for any Severance Amount and all obligations of the Corporation to pay the Executive the Severance Amount shall (subject to applicable minimum amounts payable pursuant to the ESA) cease. -8- 10. REMEDIES The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled. 11. CO-OPERATION BY EXECUTIVE The Executive shall co-operate in all respects with the Corporation if the question arises as to whether a Disability has occurred. Without limiting the generality of the foregoing, the Executive shall authorize the Executive's medical doctor or other health care specialist to discuss the condition of the Executive with the Corporation and shall submit to examination by a medical doctor or other health care specialist selected by the Corporation. 12. NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows: if to the Executive: Dr. Glen MacDonald 475 Raglan Road Winnipeg, Manitoba R3G 3E4 -9- if to the Corporation: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto, Ontario M9B 6H7
Attention: President and Chief Executive Officer Telecopier number: (416)335-9306
13. HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 14. INVALIDITY OF PROVISIONS Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 15. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior agreements, if any, written or oral, with respect to the Executive's employment by the Corporation and any rights which the Executive may have by reason of any such prior agreement or by reason of the Executive's prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Executive, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid. 16. WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor -10- shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 17. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 18. COUNTERPARTS This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. 19. ACKNOWLEDGEMENT The Executive acknowledges that: 19.1. the Executive has had sufficient time to review and consider this Agreement thoroughly; 19.2. the Executive has read and understands the terms of this Agreement and the Executive's obligations hereunder; 19.3. the Executive has been given an opportunity to obtain independent legal advice, or such other advice as the Executive may desire, concerning the interpretation and effect of this Agreement; and 19.4. this Agreement is entered into voluntarily and without any pressure. IN WITNESS WHEREOF the parties have executed this Agreement. ) VIVENTIA BIOTECH INC. ) ) ) ) ) ) By: /s/ Nick Glover --------------------------------------------- Name: Nick Glover Title: President and Chief Executive Officer I/We have the authority to bind the corporation -11- SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Glen MacDonald - ----------------------------------- ------------------------------------- Witness Glen MacDonald VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT In consideration of my employment with Viventia Biotech Inc. ("VIVENTIA"), I acknowledge, understand and agree with Viventia as follows: 1. PROTECTION OF CONFIDENTIAL INFORMATION. All Confidential Information (as defined in paragraph 2 below) whether it is developed by me or by others employed or engaged by or associated with Viventia, is the exclusive and confidential property of Viventia and will at all times be regarded, treated and protected as such, as provided in this Agreement. Failure to mark any written material as confidential will not affect the confidential nature of such written material or the information contained therein. 2. DEFINITION OF CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means all information, intellectual property (including trade secrets) and facts, relating to and used or proposed to be used in the business of Viventia and its affiliates, acquired by the Executive during any period in which the Executive was affiliated with Viventia in the capacity of an Executive, director or shareholder which is confidential based upon its nature or the circumstances surrounding its disclosure, and includes, without limiting the generality of the foregoing information: (i) relating to Viventia's or an affiliate's products and services or to Viventia's or an affiliate's research and development projects or plans; (ii) relating to Viventia's or an affiliate's trade secret, technology, patentable and unpatentable inventions, discoveries, processes, test procedures and results, records, specifications, data formulations, formulas, know-how, samples, specimens, manufacturing processes and regulatory information; or (iii) relating to Viventia's or an affiliate's business policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, Viventia's or an affiliate's clients or suppliers. 3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" will not include information publicly known that is generally used by persons in my current position with Viventia, and the general skills and experience gained during my employment with or engagement by Viventia which I could reasonably have been expected to acquire in similar employment with or engagement by other companies. The phrase "PUBLICLY KNOWN" shall mean readily accessible to the public in written publications without breach of this or similar agreements. The burden of proving that information or skills and experience are Confidential Information shall be on the party asserting such exclusion. "CONFIDENTIAL INFORMATION" shall also not include information the disclosure of which is Appendix A - Page 2 required to be made by any law, regulation, governmental authority or court, provided that before disclosure is made, notice of the requirement is provided to Viventia, and (to the extent possible in the circumstances) Viventia is afforded an opportunity to dispute the requirement. 4. COVENANTS RESPECTING CONFIDENTIAL INFORMATION. As a consequence of my acquisition of Confidential Information, I wilt occupy a position of trust and confidence with respect to Viventia's affairs and business. In view of the foregoing and of the consideration to be provided to me by Viventia, I agree that it is reasonable and necessary for me to make the following covenants regarding my conduct during and subsequent to my employment with or engagement by Viventia. I hereby agree as follows: (i) Non-Disclosure. During and after my employment with or engagement by Viventia, I will not disclose Confidential Information to any person or entity other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia's consent, and I will take all reasonable precautions to prevent inadvertent disclosure of such Confidential Information. This prohibition against disclosure of Confidential Information includes, but is not limited to, disclosing the fact that any similarity exists between the Confidential Information and information independently developed by another person or entity, and I understand that such similarity does not excuse me from abiding by my covenants and other obligations under this Agreement. (ii) Using, Copying, etc. During and after my employment with or engagement by Viventia, I will not use, copy, transfer or destroy any Confidential Information other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia's consent, and I will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Confidential Information. The prohibition against my use, copying, transfer or destruction of Confidential Information includes, but is not limited to, licensing or otherwise exploiting, directly or indirectly, any products or services (including software in any form) which embody or are derived from Confidential Information, or exercising judgment or performing analysis based upon knowledge of Confidential Information. 5. INTELLECTUAL PROPERTY RIGHTS. I agree to disclose to Viventia all information relating to Intellectual Property (as defined below) prior to any public disclosure thereof, including but not limited to the nature of the Intellectual Property, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights developed by me during my employment with Viventia, either individually or in collaboration with others, which relates directly or indirectly to the business of Viventia. I acknowledge and agree that all right, title and interest whatsoever in and to the Intellectual Property, including the foregoing and any copyright, is and will be the exclusive property of Viventia and it will have absolute discretion to determine how such Intellectual Property is used. All work done while I am employed by Viventia is a Appendix A - Page 3 work for hire under which Viventia is the first owner for copyright purposes and any and all copyright will vest in Viventia. I hereby waive all moral rights that I may have in the Intellectual Property and agree that this waiver may be invoked by Viventia, and by any of its authorized agents or assignees, to use any of the Intellectual Property. I agree that, in performing my duties as an Executive of Viventia, I will not use or disclose any information that is confidential to any third party or that is subject to the copyright, patent, trade secret, or topography, rights of any third party. I agree to execute all such instruments and do all such things as may be reasonably necessary or desirable to give full effect to the foregoing and will cooperate and assist Viventia in enforcing its rights under this paragraph. "INTELLECTUAL PROPERTY" means all legally recognized rights, including patents, copyrights, trade marks, topographies, and trade secrets which result or derive from my services provided to Viventia or with the knowledge or use of Confidential Information, and includes, but is not limited to developments, inventions, designs, works of authorship, improvements and ideas, whether or not patentable or copyrightable, conceived or made by me (individually or in collaboration with others) during my employment with Viventia or which result from or derive from Viventia's resources or which are reasonably related to the business of Viventia. 6. NON-SOLICITATION. (a) No Solicitation of Customers, Clients and Suppliers. I acknowledge the importance to the business carried on by Viventia of the customer, client and supplier relationships developed by it and the unique opportunity that my employment and my access to the Confidential Information offers to interfere with these relationships. Accordingly, I will not while employed or engaged by Viventia and for 24 months thereafter, directly or indirectly, contact or solicit any person who I know to be a prospective, current or former customer, client or supplier of Viventia for the purpose of selling to the customer or client or buying from the supplier any products or services that are the same as or substantially similar to, or in any way competitive with, the products or services sold or purchased by Viventia during my employment or at the end thereof, as the case may be. Appendix A - Page 4 (b) No Solicitation, I acknowledge the importance to the business carried on by Viventia of the human resources engaged and developed by it and the unique access my employment offers to interfere with these resources. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, hire, engage or retain or induce or solicit, attempt to induce or solicit or assist any third party in hiring, engaging or retaining or inducing or soliciting any employee or consultant of the Company, to leave the Company or to accept employment or engagement elsewhere. 7. NON-COMPETITION. I will not, while employed or engaged by Viventia and for 12 months thereafter, directly or indirectly, in any manner whatsoever including either individually, or in partnership, jointly or in conjunction with any other person, or as principal, agent, owner, consultant, contractor, Executive, officer, director, advisor or shareholder: (i) be engaged in any undertaking; (ii) have any financial or other interest (including an interest by way of royalty or compensation arrangements) in or in respect of the business of any person which carries on a business; or (iii) advise, render or provide services to, lend money to or guarantee the debts or obligations of any person that carries on a business; in any province of Canada or any state of the United States, if, at the relevant time, Viventia is carrying on business in such province or state, which is a Competitive Business (as defined below). "COMPETITIVE BUSINESS" means any Bio-Pharmaceutical Business in Canada and the United States. 8. CERTAIN WARRANTIES, COVENANTS AND REMEDIES. (a) I agree that my obligations as set forth in this Agreement will commence as of the date on which I was first employed by Viventia. (b) I acknowledge that a breach by me of this Agreement will result in Viventia, its affiliates and shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, I agree that Viventia will be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which Viventia may become entitled if I breach or threaten to breach this Agreement. (c) My obligations under this Agreement are to remain in effect in accordance with each of their terms and will exist and continue in full force and effect notwithstanding any breach Appendix A - Page 5 or repudiation, or alleged breach or repudiation, of this Agreement or my employment agreement by Viventia. 9. BINDING EFFECT. This Agreement shall be binding on me and my heirs, executors and legal representatives. 10. GOVERNING LAWS. This Agreement shall be governed by the laws in force in the Province of Ontario. 11. OTHER AGREEMENTS. This Agreement is supplemental to and separate from the agreement under which I am employed or engaged by Viventia. However, if there is any conflict or inconsistency between the provisions of such other agreement and this Agreement, the provisions of this Agreement will govern and prevail. IN WITNESS WHEREOF, I have signed and sealed this Agreement as of the date set forth below. SIGNED, SEALED AND DELIVERED in the presence of /s/ /s/ Glen MacDonald - ----------------------------------- ------------------------------------- Witness Glen MacDonald EX-3.11 18 t17062exv3w11.txt EXHIBIT 3.11 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of this 17th day of November, 2004, BETWEEN: VIVENTIA BIOTECH INC., a corporation continued under the laws of Ontario (the "CORPORATION") -and- Dimitri Fitsialos of the City of Toronto, in the Province of Ontario (the "EXECUTIVE") RECITALS: A. The Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Executive's employment with the Corporation. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Executive agree as follows: 1. DEFINITIONS 1.1. In this Agreement, 1.1.1. "AFFILIATE" has the meaning attributed to such term in the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.2. "AGREEMENT" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this agreement and unless otherwise indicated, references to sections are to sections in this agreement; 1.1.3. "BASIC SALARY" has the meaning attributed to such term in section 5.1; 1.1.4. "BENEFITS" has the meaning attributed to such term in section 5.3; -2- 1.1.5. "BIO-PHARMACEUTICAL BUSINESS" has the meaning attributed to that term in section 2; 1.1.6. "BONUS" has the meaning attributed to such term in section 5.2; 1.1.7. "BOARD" means the board of directors of the Corporation; 1.1.8. "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario; 1.1.9. "CONFIDENTIAL INFORMATION" means all confidential or proprietary information, intellectual property and confidential facts relating to and used or proposed to be used in the business of the Corporation and its Affiliates and includes all information which is confidential based upon its nature or the circumstances surrounding its disclosure, including such information acquired by the Executive during any period in which the Executive was affiliated with the Corporation in any capacity, including as an employee, director or shareholder, and includes, without limiting the generality of the foregoing, information: (a) relating to the Corporation's or an Affiliate's biotechnology or bio- pharmaceutical products and services, products and services related to bio-technology or the Bio-Pharmaceutical Business, or to the Corporation's or an Affiliate's research and development projects or plans; (b) relating to the Corporation's or an Affiliate's trade secrets, technology, patentable and unpatentable inventions, discoveries, texts, cell lines, nucleic acid, protein and peptide sequences, synthetic procedures, processes, test procedures and results, records, specifications, data, formulations, know-how, samples, specimens, manufacturing processes, toxicology, regulatory and clinical information; (c) relating to the Corporation's or an Affiliates business policies, strategies, operations, finances, plans or opportunities including the identity of, or particulars about, the Corporation's clients or suppliers or other Person with whom the Corporation has a business relationship; and (d) marked or otherwise identified as confidential, restricted, secret or proprietary including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure; provided that Confidential Information does not extend to the skill, expertise, know-how and experience of the Executive gained in the performance of his employment. 1.1.10. "DISABILITY" means the mental or physical state of the Executive such that the Executive has been unable as a result of illness, disease, mental or physical disability or similar cause to fulfil his obligations under this Agreement either for any consecutive six month period or for any period of aggregating twelve (12) months (whether or not consecutive) in any consecutive twenty-four (24) month period; -3- 1.1.11. "EMPLOYMENT PERIOD" has the meaning attributed to such term in section 4; 1.1.12. "ESA" means the Employment Standards Act, 2000 (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.13. "JUST CAUSE" includes the willful failure of the Executive to properly carry out his duties after notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such notice, or theft, fraud, dishonesty or misconduct by the Executive involving the property, business or affairs of the Corporation or the carrying out of the Executive's duties or any other conduct or omission which is to be treated as just cause by the courts of Ontario from time to time; 1.1.14. "PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.15. "RETIREMENT" means resignation of the Executive on or after the Executive attains the age of sixty-five (65); 1.1.16. "SEVERANCE AMOUNT" has the meaning attributed to such term in section 9; 1.1.17. "SUBSIDIARIES" has the meaning attributed to such term by the Business Corporations Act (Ontario) as the same may be amended from time to time and any successor legislation thereto; 1.1.18. "TERMINATION WITHOUT CAUSE" means termination for any reason other than for Just Cause or for Disability or by reason of resignation or Retirement by the Executive; 1.1.19. "YEAR OF EMPLOYMENT" means any twelve (12) month period commencing on January 1, 2004 or on any anniversary of such date. 2. EMPLOYMENT OF THE EXECUTIVE The Corporation shall employ the Executive and the Executive shall serve the Corporation in the position of Executive Director, Clinical Development. The Executive shall report to the President and CEO. In the capacity as Director, Clinical Development, the Executive will play an important strategic role in the conduct of the business and will be privy to, and acquire detailed knowledge of, Confidential Information and other business sensitive information about the Corporation and its Affiliates and will assist in the business of: 2.1.1.1. research, development, clinical trials, regulatory compliance, marketing, sales, manufacturing, distribution, licensing or other exploitation of: -4- 2.1.1.2. monoclonal antibody products, including without limitation human monoclonal antibodies; 2.1.1.3. the use of the human immune system to identify therapeutically or diagnostically relevant antibodies and their cognate antigens for cancer; 2.1.1.4. and any exploitation thereof, related research, products and services to any of the above and products derived from any of the above (the "BIO-PHARMACEUTICAL BUSINESS"). Without limiting the generality of the foregoing, the Executive's duties shall include: 2.2. management of activities that relate to the Bio-Pharmaceutical Business, including clinical projects, operations, personnel, clinical study protocols, clinical reports, case report forms; safety reviews, reporting submissions, data, and clinical trial agreements; 3. PERFORMANCE OF DUTIES The Executive represents and warrants that neither his execution of the Employment Agreement nor his performance of the duties and obligations set out in the Employment Agreement does or will violate or breach any obligation he may have to any third party or imposed by statute, contract or order of any judicial or quasi-judicial authority. During the Employment Period, the Executive shall faithfully, honestly and diligently serve the Corporation. The Executive shall (except in the case of illness or accident) devote all of his working time and attention to his employment and shall use his best efforts to promote the interests of the Corporation. 4. EMPLOYMENT PERIOD The term of employment of the Executive under this Agreement will commence JANUARY 1, 2004 and will continue until terminated in accordance with section 8 of this Agreement (the "EMPLOYMENT PERIOD"). 5. REMUNERATION 5.1. Basic Remuneration. The Corporation shall pay the Executive a gross annual salary of $125,000 (the "BASIC SALARY") payable in periodic equal instalments in accordance with the practices of the Corporation applicable to its other senior executives. 5.2. Bonus Remuneration. The Board may award the Executive, an annual bonus of cash, stock options, other share based compensation or any combination thereof. Such bonus shall be awarded in the sole discretion of the Board (the "BONUS") at the recommendation of the Chief Executive Officer. Each year, at the time that the Board approves the -5- Corporation's annual business plan and annual budget, the Executive and the Board (or a committee thereof) shall mutually agree on the objectives upon which any Bonus shall be based. Such objectives may include subjective and objective criteria. 5.3. Benefits. The Corporation shall provide to the Executive, in addition to Basic Salary and Bonus, if any, the benefits (the "BENEFITS") generally available to the executives of the Corporation, such benefits to be provided in accordance with, to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto in effect from time to time. The Corporation acknowledges that the Executive shall be subject to the provisions of the Corporation's liability insurance for directors and officers as same may be in effect from time to time. 5.4. Pro-Rata Entitlement in the Event of Termination. If the Executive's employment is terminated pursuant to section 8.1.1, 8,1.2, or 8.1.3, bonus, if any, will be payable at the board's discretion. If the Executive dies or retires during the Employment Period, the Executive shall be entitled to receive in respect of his entitlement to bonus remuneration and the Corporation shall be required to pay in respect thereof, only that proportion of the bonus remuneration in respect of the year of employment at which the effective date of the termination of employment or the date of death occurs that the number of days elapsed from the commencement of such year of employment to the effective date of termination or the date of death is to 365, provided that said bonus shall be equal to or greater than 66% of the bonus remuneration the Executive earned in the year proceeding termination. 6. EXPENSES The Corporation shall pay or reimburse the Executive for all travel and out-of-pocket expenses reasonably incurred or paid by the Executive in the performance of his duties and responsibilities upon presentation of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require. All travel and other expenses incurred by the Executive shall be in accordance with the Corporation's travel and expense policies. 7. VACATION The Executive shall be entitled while employed by the Corporation to three weeks vacation with pay per year. Vacation shall be taken by the Executive at such time as may be acceptable to the Corporation having regard to its operations and no more than two (2) weeks of vacation shall be taken consecutively. If the Executive has not taken the full vacation to which the Executive is entitled in any calendar year, the Executive will be paid at the end of such calendar year Basic Salary in respect of the accrued unused vacation, Except as required under the ESA, the Executive shall not be entitled to carry over any unused portion of vacation to the following calendar year and will lose the entitlement to such unused portion. Notwithstanding the foregoing, in the event that the Executive's employment is terminated pursuant to section 8, the -6- Executive shall not be entitled to receive any payment in lieu of any accrued unused vacation except to the extent, if any, required by the ESA. 8. TERMINATION 8.1. Notice. The Executive's employment shall terminate or be terminable: 8.1.1. by the Executive on three (3) months prior written notice to the Corporation; 8.1.2. by the Corporation at any time without prior notice and, subject to the provisions of the ESA and the Human Rights Code (Ontario), without further obligation to the Executive for reasons of Just Cause or because of the occurrence of Disability; 8.1.3. by the Corporation, for any reason other than for Just Cause or Disability, at any time without prior notice and without further obligation to the Executive other than those obligations of the Corporation set out in section 9 of this Agreement; 8.1.4. upon the death of the Executive; and 8.1.5. upon the Retirement of the Executive. 8.2. Effective Date. The effective date on which the Executive's employment shall be terminated shall be: 8.2.1. in the case of termination pursuant to section 8.1.1, the last day of the three (3) month period set out in the notice; 8.2.2. in the case of termination pursuant to sections 8.1.2 and 8.1.3, the day the Executive is deemed, under section 12 to have received notice from the Corporation of such termination; 8.2.3. in the event of the death of the Executive, on the date of his death; and 8.2.4. in the event of the Retirement of the Executive, on the date of his Retirement. 9. PAYMENTS ON TERMINATION OF EMPLOYMENT (a) IF the Executive's employment is terminated as a result of Termination Without Cause, the Corporation shall (subject to the Executive's obligations contained herein): (i) for a period of 6 months from the effective date of Termination Without Cause make the following payments (collectively referred to herein as the "SEVERANCE AMOUNT") to the Executive. In addition, the period of termination payments and benefits shall be extended by one month for each additional year of employment completed by the Executive commencing January 1,2004: -7- (I) payments to the Executive in the same amount and on the same basis as the Basic Salary being paid to the Executive immediately prior to the effective date of termination; and (II) continue to provide the Executive with Benefits, in accordance with, and to the extent permitted by and subject to the terms and conditions of the applicable fund, plan or arrangement relating thereto; (III) payment to the Executive up to a maximum of $10,000.00 to cover all costs associated with career relocation and outplacement services obtained by the Executive, upon presentation of receipts. (ii) any Severance Amount payable by the Corporation in the period commencing six months from the effective date of Termination Without Cause may be reduced by the Corporation by an amount equal to the base salary and bonus or other income or benefits earned by the Executive in connection with any employment by another employer or employers or any business activity undertaken by the Executive. The Executive agrees to promptly provide the Corporation with any evidence of amounts received in connection with any such other employment or business activity which the Corporation shall reasonably request; (iii) all payments made to the Executive shall be subject to applicable deductions and withholdings and shall be in full satisfaction of any and all entitlement that the Executive may have to notice of termination or payment in lieu thereof, severance pay and any other payments to which the Executive may otherwise be entitled to pursuant to ESA and any other applicable law. The Corporation shall cooperate with the Executive with respect to the payment of all payments due on termination such that the Executive shall be entitled to obtain the benefit of any tax shelters or strategies that may be available or may become available; (iv) notwithstanding any other provisions in this Agreement, the exercise of the Executive's options will be in accordance with the terms of the Viventia Biotech Inc. Share Option Plan; (v) if, following Termination Without Cause, the Executive breaches any of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement (attached as Appendix A), the Executive shall not be eligible, as of the date of such breaches for any Severance Amount and all obligations of the Corporation to pay the Executive the Severance Amount shall (subject to applicable minimum amounts payable pursuant to the ESA) cease. -8- 10. REMEDIES The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of the Confidential Information, Intellectual Property, Non-Competition and Non-Solicitation Agreement will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled. 11. CO-OPERATION BY EXECUTIVE The Executive shall co-operate in all respects with the Corporation if the question arises as to whether a Disability has occurred. Without limiting the generality of the foregoing, the Executive shall authorize the Executive's medical doctor or other health care specialist to discuss the condition of the Executive with the Corporation and shall submit to examination by a medical doctor or other health care specialist selected by the Corporation. 12. NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof, or if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows: if to the Executive: Mr. Dimitri Fitsialos 323 Keewatin Avenue Toronto, Ontario M4P 2A4 -9- if to the Corporation: Viventia Biotech Inc. 10 Four Seasons Place Suite 501 Toronto, Ontario M9B 6H7
Attention: President and Chief Executive Officer Telecopier number: (416)335-9306
13. HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 14. INVALIDITY OF PROVISIONS Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 15. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior agreements, if any, written or oral, with respect to the Executive's employment by the Corporation and any rights which the Executive may have by reason of any such prior agreement or by reason of the Executive's prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Executive, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid. 16. WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor -10- shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 17. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 18. COUNTERPARTS This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. 19. ACKNOWLEDGEMENT The Executive acknowledges that: 19.1. the Executive has had sufficient time to review and consider this Agreement thoroughly; 19.2. the Executive has read and understands the terms of this Agreement and the Executive's obligations hereunder; 19.3. the Executive has been given an opportunity to obtain independent legal advice, or such other advice as the Executive may desire, concerning the interpretation and effect of this Agreement; and 19.4. this Agreement is entered into voluntarily and without any pressure. IN WITNESS WHEREOF the parties have executed this Agreement. ) VIVENTIA BIOTECH INC. ) ) ) ) ) ) By: /s/ Nick Glover --------------------------------------------- Name: Nick Glover Title: President and Chief Executive Officer I/We have the authority to bind the corporation -11- SIGNED, SEALED AND DELIVERED in the presence of /s/ Michael A. Byrne /s/ Dimitiri Fitsialos - ----------------------------------- --------------------------------------- Witness Michael A. Byrne Dimitri Fitsialos VIVENTIA BIOTECH INC. CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT In consideration of my employment with Viventia Biotech Inc. ("VIVENTIA"), I acknowledge, understand and agree with Viventia as follows: 1. PROTECTION OF CONFIDENTIAL INFORMATION. All Confidential Information (as defined in paragraph 2 below) whether it is developed by me or by others employed or engaged by or associated with Viventia, is the exclusive and confidential property of Viventia and will at all times be regarded, treated and protected as such, as provided in this Agreement. Failure to mark any written material as confidential will not affect the confidential nature of such written material or the information contained therein. 2. DEFINITION OF CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means all information, intellectual property (including trade secrets) and facts, relating to and used or proposed to be used in the business of Viventia and its affiliates, acquired by the Executive during any period in which the Executive was affiliated with Viventia in the capacity of an Executive, director or shareholder which is confidential based upon its nature or the circumstances surrounding its disclosure, and includes, without limiting the generality of the foregoing information: (i) relating to Viventia's or an affiliate's products and services or to Viventia's or an affiliate's research and development projects or plans; (ii) relating to Viventia's or an affiliate's trade secret, technology, patentable and unpatentable inventions, discoveries, processes, test procedures and results, records, specifications, data formulations, formulas, know-how, samples, specimens, manufacturing processes and regulatory information; or (iii) relating to Viventia's or an affiliate's business policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, Viventia's or an affiliate's clients or suppliers. 3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" will not include information publicly known that is generally used by persons in my current position with Viventia, and the general skills and experience gained during my employment with or engagement by Viventia which I could reasonably have been expected to acquire in similar employment with or engagement by other companies. The phrase "PUBLICLY KNOWN" shall mean readily accessible to the public in written publications without breach of this or similar agreements. The burden of proving that information or skills and experience are Confidential Information shall be on the party asserting such exclusion. "CONFIDENTIAL INFORMATION" shall also not include information the disclosure of which is Appendix A - Page 2 required to be made by any law, regulation, governmental authority or court, provided that before disclosure is made, notice of the requirement is provided to Viventia, and (to the extent possible in the circumstances) Viventia is afforded an opportunity to dispute the requirement. 4. COVENANTS RESPECTING CONFIDENTIAL INFORMATION. As a consequence of my acquisition of Confidential Information, I will occupy a position of trust and confidence with respect to Viventia's affairs and business. In view of the foregoing and of the consideration to be provided to me by Viventia, I agree that it is reasonable and necessary for me to make the following covenants regarding my conduct during and subsequent to my employment with or engagement by Viventia. I hereby agree as follows: (i) Non-Disclosure. During and after my employment with or engagement by Viventia, I will not disclose Confidential Information to any person or entity other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia's consent, and I will take all reasonable precautions to prevent inadvertent disclosure of such Confidential Information. This prohibition against disclosure of Confidential Information includes, but is not limited to, disclosing the fact that any similarity exists between the Confidential Information and information independently developed by another person or entity, and I understand that such similarity does not excuse me from abiding by my covenants and other obligations under this Agreement. (ii) Using, Copying, etc. During and after my employment with or engagement by Viventia, I will not use, copy, transfer or destroy any Confidential Information other than as necessary in carrying out my duties on behalf of Viventia, without first obtaining Viventia's consent, and I will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Confidential Information. The prohibition against my use, copying, transfer or destruction of Confidential Information includes, but is not limited to, licensing or otherwise exploiting, directly or indirectly, any products or services (including software in any form) which embody or are derived from Confidential Information, or exercising judgment or performing analysis based upon knowledge of Confidential Information. 5. INTELLECTUAL PROPERTY RIGHTS. I agree to disclose to Viventia all information relating to Intellectual Property (as defined below) prior to any public disclosure thereof, including but not limited to the nature of the Intellectual Property, production data, technical and engineering data, test data and test results, the status and details of research and development of products and services, and information regarding acquiring, protecting, enforcing and licensing proprietary rights developed by me during my employment with Viventia, either individually or in collaboration with others, which relates directly or indirectly to the business of Viventia. I acknowledge and agree that all right, title and interest whatsoever in and to the Intellectual Property, including the foregoing and any copyright, is and will be the exclusive property of Viventia and it will have absolute discretion to determine how such Intellectual Property is used. All work done while I am employed by Viventia is a Appendix A - Page 3 work for hire under which Viventia is the first owner for copyright purposes and any and all copyright will vest in Viventia. I hereby waive all moral rights that I may have in the Intellectual Property and agree that this waiver may be invoked by Viventia, and by any of its authorized agents or assignees, to use any of the Intellectual Property. I agree that, in performing my duties as an Executive of Viventia, I will not use or disclose any information that is confidential to any third party or that is subject to the copyright, patent, trade secret, or topography, rights of any third party. I agree to execute all such instruments and do all such things as may be reasonably necessary or desirable to give full effect to the foregoing and will cooperate and assist Viventia in enforcing its rights under this paragraph. "INTELLECTUAL PROPERTY" means all legally recognized rights, including patents, copyrights, trade marks, topographies, and trade secrets which result or derive from my services provided to Viventia or with the knowledge or use of Confidential Information, and includes, but is not limited to developments, inventions, designs, works of authorship, improvements and ideas, whether or not patentable or copyrightable, conceived or made by me (individually or in collaboration with others) during my employment with Viventia or which result from or derive from Viventia's resources or which are reasonably related to the business of Viventia. 6. NON-SOLICITATION. (a) No Solicitation of Customers, Clients and Suppliers. I acknowledge the importance to the business carried on by Viventia of the customer, client and supplier relationships developed by it and the unique opportunity that my employment and my access to the Confidential Information offers to interfere with these relationships. Accordingly, I will not while employed or engaged by Viventia and for 24 months thereafter, directly or indirectly, contact or solicit any person who I know to be a prospective, current or former customer, client or supplier of Viventia for the purpose of selling to the customer or client or buying from the supplier any products or services that are the same as or substantially similar to, or in any way competitive with, the products or services sold or purchased by Viventia during my employment or at the end thereof, as the case may be. Appendix A - Page 4 (b) No Solicitation. I acknowledge the importance to the business carried on by Viventia of the human resources engaged and developed by it and the unique access my employment offers to interfere with these resources. Accordingly, I will not while employed or engaged by Viventia and for 12 months thereafter, hire, engage or retain or induce or solicit, attempt to induce or solicit or assist any third party in hiring, engaging or retaining or inducing or soliciting any employee or consultant of the Company, to leave the Company or to accept employment or engagement elsewhere. 7. NON-COMPETITION. I will not, while employed or engaged by Viventia and for 12 months thereafter, directly or indirectly, in any manner whatsoever including either individually, or in partnership, jointly or in conjunction with any other person, or as principal, agent, owner, consultant, contractor, Executive, officer, director, advisor or shareholder: (i) be engaged in any undertaking; (ii) have any financial or other interest (including an interest by way of royalty or compensation arrangements) in or in respect of the business of any person which carries on a business; or (iii) advise, render or provide services to, lend money to or guarantee the debts or obligations of any person that carries on a business; in any province of Canada or any state of the United States, if, at the relevant time, Viventia is carrying on business in such province or state, which is a Competitive Business (as defined below). "COMPETITIVE BUSINESS" means any Bio-Pharmaceutical Business in Canada and the United States. 8. CERTAIN WARRANTIES, COVENANTS AND REMEDIES. (a) I agree that my obligations as set forth in this Agreement will commence as of the date on which I was first employed by Viventia. (b) I acknowledge that a breach by me of this Agreement will result in Viventia, its affiliates and shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, I agree that Viventia will be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which Viventia may become entitled if I breach or threaten to breach this Agreement. (c) My obligations under this Agreement are to remain in effect in accordance with each of their terms and will exist and continue in full force and effect notwithstanding any breach Appendix A - Page 5 or repudiation, or alleged breach or repudiation, of this Agreement or my employment agreement by Viventia. 9. BINDING EFFECT This Agreement shall be binding on me and my heirs, executors and legal representatives. 10. GOVERNING LAWS This Agreement shall be governed by the laws in force in the Province of Ontario. 11. OTHER AGREEMENTS This Agreement is supplemental to and separate from the agreement under which I am employed or engaged by Viventia. However, if there is any conflict or inconsistency between the provisions of such other agreement and this Agreement, the provisions of this Agreement will govern and prevail. IN WITNESS WHEREOF, I have signed and sealed this Agreement as of the date set forth below. SIGNED, SEALED AND DELIVERED in the presence of /s/ Michael A. Byrne /s/ Dimitri Fitsialos - ----------------------------------- --------------------------------------- Witness Michael A. Byrne Dimitri Fitsialos EX-3.12 19 t17062exv3w12.txt EXHIBIT 3.12 EXHIBIT 3.12 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. BIOVATION LIMITED EXCLUSIVE LICENSE AGREEMENT This Exclusive License Agreement (this "Agreement") is made as of the 8th day of March, 2004 (the "Effective Date") between BIOVATION LIMITED OF CROMBIE LODGE, ABERDEEN SCIENCE PARK, BALGOWNIE DRIVE, ABERDEEN AB22 8GU, UK (hereinafter called "Biovation," which expression includes its successors and assigns) of the one part and VIVENTIA BIOTECH, INC., OF 10 FOUR SEASONS PLACE, SUITE 501, TORONTO, ONTARIO, CANADA M9B 6H7 (hereinafter called "Viventia," which expression includes its successors and permitted assignees) of the other part. Each of Biovation and Viventia are herein sometimes referred to individually as a "Party" and collectively as "Parties." WHEREAS, Biovation Controls certain proprietary Technology related to the genetic engineering of biological materials, including proteins and the removal of immunogenic sequences from proteins to produce genetic variants of such proteins for therapeutic or in vivo diagnostic purposes. WHEREAS, Biovation and Viventia have entered into that certain Research Agreement (the "Research Agreement") dated as of September 20, 2002. WHEREAS, Viventia has exercised its option to obtain an exclusive license to certain proprietary Technology under Section 3.7 of the Research Agreement. NOW, THEREFORE, IT IS HEREBY AGREED as follows: 1. DEFINITIONS. Throughout this Agreement, where the context so requires, the use of the singular form of a word shall be construed to include the plural and the use of the plural shall be construed to include the singular, and the use of any gender shall include all genders. Any words used but not otherwise defined herein shall have the meanings ascribed to them in Section 1 of the Research Agreement. In this Agreement the following words and expressions shall be construed as follows: (a) "Affiliate" shall mean any corporation, company, firm, partnership or other entity that directly or indirectly controls, is controlled by or is under common control with either Party to this Agreement. For purposes of this definition, "control" shall mean the ownership, directly or indirectly, of fifty percent (50%) or more of the issued share capital or shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other entity or the legal power to direct or cause the direction of the general management and policies of the entity in question. (b) "Biovation Technology" shall mean Technology Controlled by Biovation as of the Effective Date or developed hereafter whether or not in the course of the Research Program, by Biovation or jointly by Biovation and Viventia or a third party that is related to the genetic engineering of biological materials, including proteins and plasmids and the removal of immunogenic sequences from proteins or plasmids and the generation of genetic variants thereof, provided that, any Technology Controlled by Viventia or developed by Viventia that is related to the Protein shall be deemed to be Viventia Technology and Viventia shall have exclusive ownership and control of same. (c) "BLA" shall mean a Biologics License Application, or similar application for marketing approval of a Licensed Product for use in the Field submitted to the FDA, or a foreign equivalent of the FDA. (d) "Confidential Information" shall have the meaning set forth in Section 15 of this Agreement. (e) "Contract Year" shall mean the period beginning on the Effective Date and ending on the first anniversary thereof ("Contract Year 1"), and each succeeding twelve (12) month period thereafter during the term of this Agreement (referred to herein as "Contract Year 2," "Contract Year 3," etc.). (f) "Control" or "Controlled" shall mean (i) with respect to any Technology (other than proprietary materials of a Party) and/or Patent Rights, the possession by a Party of the ability to grant a license or sublicense of such Technology and/or Patent Rights as provided herein without violating the terms of any agreement or arrangement between such Party and any third party and (ii) with respect to proprietary materials, the possession by a Party of the ability to supply such proprietary materials to the other Party as provided herein without violating the terms of any agreement or arrangement between such Party and any third party. (g) "DeImmunised Proteins" shall mean the DeImmunised genetic variants of the Protein developed by Biovation under the Research Agreement identified on Schedule A, attached hereto and incorporated herein by reference. (h) "DeImmunised Plasmids" shall mean the genetically engineered plasmids that encode the DeImmunised Protein identified on Schedule A, attached hereto and incorporated herein by reference. (i) "Effective Date" shall have the meaning set forth above in the introduction to this Agreement. (j) "FDA" means the United States Food and Drug Administration or its successor. (k) "Field" shall mean the use of the DeImmunised Protein for therapeutic and in vivo diagnostic purposes in humans. 2 (l) "First Commercial Sale" shall mean the date of the first commercial sale (other than for purposes of obtaining Regulatory Approval) of a Licensed Product by or on behalf of Viventia or any sublicensee. (m) "IND" shall mean Investigational New Drug application filing in the USA or its equivalent in any country in the European Union for approval to undertake a controlled and lawful study in humans of the Licensed Product that is designed to demonstrate statistically whether such Licensed Product is safe for use in humans in a manner sufficient to file a BLA or New Drug Application or its equivalent to obtain regulatory approval to market and sell that Licensed Product in the United States or any country in the European Union. (n) "Joint Patent Rights" shall mean all Patent Rights that claim Joint Program Technology. Joint Patent Rights as of the Effective Date are listed in Schedule B, attached hereto and incorporated herein by reference. (o) "Joint Program Technology" shall mean any and all Technology relating to the Protein or any DeImmunised Plasmid or DeImmunised Protein jointly made, developed conceived and/or reduced to practice (a) by employees of, or consultants to, both Parties, or (b) by Viventia through the material use of Biovation Technology, provided that Joint Program Technology shall not include Technology relating to (i) the Protein (ii) the composition, manufacture, or use of antibodies, antibody fragments (including single chain or single domain antibodies), or peptide-based antibody mimics, whether by themselves or conjugated to or associated with an active molecule, or (iii) fusion proteins.. (p) "Licensed Patent Rights" shall mean all Patent Rights which are Controlled by Biovation as of the Effective Date (including Biovation's interest in Joint Patent Rights). Licensed Patent Rights as of the Effective Date are listed in Schedule C, attached hereto and incorporated herein by reference. (q) "Licensed Product" shall mean any product that (i) incorporates DeImmunised Protein, (ii) is produced by use of a DeImmunised Plasmid, or (iii) the manufacture, use, or sale of which would, absent the license granted to Viventia hereunder, infringe one or more of the claims included in the Licensed Patent Rights that has not expired, been revoked or disclaimed, or found to be invalid or unenforceable in an unappealed or unappealable decision of a court of competent jurisdiction. (r) "Licensed Technology" shall mean all Biovation Technology and Biovation's interest in Joint Program Technology. (s) "New Drug Application" shall mean a new drug application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) filed with the FDA or its foreign 3 equivalent seeking regulatory approval to market and sell any Licensed Product in the United States or any country in the European Union. (t) "Net Sales" shall mean gross proceeds measured in Dollars as of the date of sale resulting from the invoice price less (a) usual trade and/or cash discounts actually allowed or taken; (b) forwarding expenses, freight, postage and duties actually paid or allowed and taxes imposed directly on licensee for sales, all if separately identified in the invoice; and (c) credits for goods actually returned. No deductions shall be made for commissions paid or for the cost of collections. For Licensed Products sold or otherwise transferred other than for money, "Net Sales" shall be calculated based upon the "fair market value" of the Licensed Product determined in an arm's-length transaction. Net Sales shall be calculated on the price from Viventia, a licensee, a sublicensee, or their Affiliates to the first purchaser who is not a licensee, a sublicensee or Affiliate and not on sales between or among licensees, sublicensees, or their Affiliates. (u) "Patent Rights" shall mean the rights and interests in and to (i) issued patents and pending patent applications without limitation to any country, including, without limitation, all provisional applications, substitutions, continuations, continuations-in-part, divisionals and renewals, all letters patent granted thereon, if any, and all reissues, reexaminations and extensions thereof, and supplemental protection certificates of invention and utility models and (ii) copyrights with respect to data Controlled by a Party. (v) "Phase III Clinical Trial" shall mean, as to a particular Licensed Product for a particular indication, a controlled and lawful study in humans of the safety and efficacy of such Licensed Product for such indication, which is prospectively designed to demonstrate statistically whether such Licensed Product is safe and effective for use in such indication in a manner sufficient to file a BLA or New Drug Application or its equivalent to obtain regulatory approval to market and sell that Licensed Product in the United States or any country for the indication under investigation in such study. (w) "Protein" shall mean the starting protein as specified in Schedule A hereto. (x) "Technology" shall mean and include all inventions, discoveries, improvements, trade secrets and proprietary methods and materials, whether or not patentable, including, but not limited to (i) samples of, methods of production or use of, and structural and functional information pertaining to, chemical compounds, proteins or other biological substances and (ii) technical and scientific information (including any negative results), data, formulations, techniques and know-how. (y) For clarity, is is agreed that "Deliverables" (as defined in the Research Agreement and incorporated in this Agreement) include deimmunised 4 [ ] and the expression products of the inserts of such plasmids. 2. COMMENCEMENT. This Agreement shall be deemed to have been made as of the Effective Date and shall be read and construed accordingly. 3. GRANT OF RIGHTS. (a) Biovation hereby grants to Viventia an exclusive world-wide, royalty-bearing license under Licensed Technology and Licensed Patent Rights solely to develop, have developed, make, have made, use, sell, distribute for sale, have sold, import and/or have imported Licensed Products in the Field, together with the right to grant sublicenses. For clarity, this grant of an exclusive license to Viventia with respect to Licensed Products (including Deliverables, Deimmunised Plasmids and Deimmunised Proteins) shall not prevent Biovation from granting licenses to others under the Biovation Technology, Biovation Patent Rights and Biovation's interest in Joint Program Technology and Joint Patent Rights outside the scope of the exclusive license granted to Viventia. (b) Viventia shall notify Biovation of the grant of each sublicense within thirty (30) days of its effective date, such notification to include the name and address of the sublicensee and the general nature and subject matter of the sublicense. Viventia shall use its best efforts to ensure that any sublicensee performs its obligations under any such sublicense and shall remain liable for the performance of Viventia's obligations hereunder. Biovation will not establish any contact with the sublicensee in relation to the sublicense without the prior written consent of Viventia. 4. PAYMENTS. 4.1 General. The Parties acknowledge that the principal value contributed by Biovation under this Agreement is the Licensed Technology. Viventia acknowledges and agrees that the value it receives hereunder is in its access to the Licensed Technology. Accordingly, Viventia has agreed to pay the license fees and milestones for access to and use of Licensed Technology as set forth herein even though Biovation may not Control patent applications or patents covering the manufacture, sale, use or importation of a particular Licensed Product and, regardless of whether a Licensed Product is covered by a patent application or patent within the Licensed Patents. 4.2 Upfront Payment. In consideration for the exclusive license granted pursuant to Section 3(a) hereof Viventia shall pay to Biovation the sum of [ ] upon signature of this Agreement. 4.3 Milestone Payments. Viventia shall pay Biovation the following amounts upon the achievement of the milestones set forth below: 5 (a) [ ] upon the commencement of [ ] of each and every Licensed Product for a distinct indication. By way of example, the start of two such trials would incur two milestones if the same product was being tested for two indications or if two different products were being tested for the same indication, but would incur only one milestone if each was of the same product for the same indication. Each such milestone payment shall be reduced to a minimum of [ ] according to the following formula if the event triggering such milestone also triggers a milestone payment by Viventia to a third party: Milestone Rate in U.S. dollars = [ ] (b) [ ] upon [ ] the commencement of which triggered a milestone under subsection (a) above. Each such milestone payment shall be reduced to a minimum of [ ] according to the following formula if the event triggering such milestone also triggers a milestone payment by Viventia to a third party: Milestone Rate in U.S. dollars = [ ] (c) [ ] upon submission of [ ] for each and every Licensed Product for each and every clinical indication. Each such milestone payment shall be reduced to a minimum of [ ] according to the following formula if the event triggering such milestone also triggers a milestone payment by Viventia to a third party: Milestone Rate in U.S. dollars = [ ] (d) [ ] upon approval of [ ] the submission of which triggered a milestone payment under subsection (c) above. Each such milestone payment shall be reduced to a minimum of [ ] according to the following formula if the 6 event triggering such milestone also triggers a milestone payment by Viventia to a third party: Milestone Rate in U.S. dollars = [ ] 4.4 Fees. (a) Viventia shall pay Biovation a sublicense fee of [ ] for each and every sublicense that it grants hereunder. (b) Viventia shall also pay to Biovation an annual license fee of [ ] for the maintenance of the license granted pursuant to Section 3 of this Agreement for each Contract Year during the term of this Agreement. Such annual license fees shall be due and payable to Biovation on the first day of each Contract Year during the term of this Agreement and are not creditable against amounts owed by Viventia to Biovation pursuant to Sections 4.3 and 4.5. In the event that Licensee does not receive approval for an IND by the end of Contract Year 5, then the Licensee shall make an additional annual payment of [ ] in addition to the annual license fee payable for the relevant Contract Year (each, an "Additional Annual Payment"). Such Additional Annual Payments shall be due and payable on the first day of Contract Year 6 and each subsequent Contract Year until an IND is approved at which time such Additional Annual Payments will cease. All Additional Annual Payments to be paid under this Section 4.4(b) shall be creditable against amounts required to be paid by Viventia to Biovation under Section 4.3 of this Agreement subsequent to the payment of such Additional Annual Payment. (c) All of the payments set forth in sections 4.2, 4.3 and 4.4 are to be understood net, exclusive of Value Added Tax. 4.5 Royalties. Viventia shall pay Biovation a [ ]% royalty based on aggregate Net Sales of each Licensed Product sold during the License Term (as defined in Section 5 below) by Viventia and/or its Affiliates and sublicensees. The [ ]% royalty rate to be paid to Biovation shall be subject to a reduction if Viventia's total undiscounted royalty to Biovation and third parties on aggregate Net Sales of each Licensed Product would otherwise exceed [ ]%. In such an event, the royalty payable to Biovation will be discounted based on the following formula: [ 7 ] 4.6 Accounting. (a) All payments under this Agreement shall be due in the case of Section 4.3 within thirty (30) days of the occurrence of the relevant milestone event and, in the case of Section 4.4(a) within thirty (30) days of the execution of the sublicense, in each case without the requirement for an invoice from Biovation. Viventia will promptly notify Biovation of the achievement of any milestone event for which a payment to Biovation is required under this Section 4. After the beginning of commercialization of each Licensed Product, all payments relating thereto under this Agreement pursuant to Section 4.5 above shall be due within thirty (30) days following the end of each calendar quarter. (b) The Net Sales used for computing the royalties payable hereunder shall be computed and the royalties shall be paid, in U.S. Dollars. For purposes of determining the amount of royalties due from Viventia, the amount of Net Sales in any foreign currency shall be computed by converting such amount into dollars at the prevailing commercial rate of exchange for purchasing dollars with such foreign currency as reported in The Wall Street Journal as of the last business day of the relevant quarter. (c) Viventia agrees to keep true and accurate records and books of account containing all data necessary for the calculation of the royalties payable to Biovation under Section 4 of this Agreement. Such records and books of account shall upon reasonable notice having been given by Biovation be open during business hours for inspection by a duly authorised, but neutral and independent accountant, who shall be acceptable to both parties without prejudice. Biovation will bear the full cost of such audit unless such audit discloses an underpayment of more than five percent (5%) from the amount of total payments due. In such case, Viventia shall bear the full cost of such audit. The terms of this Section 4.6(c) shall survive any termination or expiration of this Agreement for a period of three (3) years. (d) Viventia shall prepare a statement in respect of each calendar quarter of this Agreement which shall show for the calendar quarter in question Viventia's Net Sales on sales by it, its Affiliates or sublicensees of the Licensed Products on a country by country basis, details of the quantities of Licensed Products manufactured and sold in each country and the royalty and VAT due, if any, to Biovation thereon pursuant to Section 4 above. Such statement shall be submitted to Biovation within thirty (30) days following the end of the calendar quarter or part thereof to which it relates together with a remittance for the royalties and VAT due to Biovation, if any. If Biovation shall give notice to Viventia within thirty (30) days of the receipt of any such statement that it does not accept the same such statement shall be 8 certified by an independent chartered accountant appointed by mutual agreement between the parties hereto or, in default of such an agreement, within fourteen (14) days, by the President for the time being of the Institute of Chartered Accountants of England and Wales in London. Viventia shall make available all books and records required for the purpose of such certification at reasonable times during normal business hours and the statement so certified shall be binding between the parties to this Agreement. The costs of such certification shall be the responsibility of Biovation if the certification shows the original statement to have been accurate and otherwise shall be the responsibility of Viventia. Following any such certification the Parties shall make any adjustments necessary in respect of the royalties already paid to Biovation in relation to the year in question. (e) Viventia shall pay royalties to Biovation free and clear of and without deduction or deferment in respect of any demand, set-off, counterclaim or other dispute and so far as is legally possible such payment shall be made free and clear of any taxes imposed by or under the authority of any government or public authority and in particular but without limitation where any sums due to be paid to Biovation hereunder are subject to any withholding or similar tax. Viventia shall pay such additional amount as shall be required to ensure that the net amount received by Biovation hereunder will equal the full amount which would have been received by it had not such tax, including VAT, been imposed or withheld. Viventia and Biovation, without prejudice to the foregoing, shall use their best endeavours to do all such lawful acts and things and to sign all such lawful deeds and documents as will enable Viventia to take advantage of any applicable legal provision or any double taxation treaties with the object of paying the sums due to Biovation without imposing or withholding any tax. Sums are expressed in this Agreement as exclusive of value added tax. Biovation agrees to provide Viventia with a VAT invoice in respect of every payment affected by VAT. (f) Where Biovation does not receive payment of any sums due to it within the period specified hereunder in respect thereof, interest shall accrue on the sum outstanding at the rate of one percent (1%) per month calculated on a daily basis without prejudice to Biovation's right to receive payment on the due date therefor. 5. LICENSE TERM AND TERMINATION. (a) Subject to the terms and conditions of this Agreement, the term of the license (the "License Term") granted pursuant hereto shall commence upon the Effective Date and continue in force on a country-by-country and product-by-product basis until the longer of (a) the expiration of the last to expire of the Licensed Patent Rights in the country covering the Licensed Product and (b) ten (10) years from the first commercial sale in such country of such Licensed Product. Upon expiration of the Licence Term for each Licensed Product, Viventia shall have a worldwide, exclusive fully paid up, royalty-free licence under any and 9 all Licensed Technology and/or Licensed Patent Rights covering the Licensed Product to the extent necessary or useful to develop, have developed, make, have made, use, sell, distribute for sale, have sold, import and/or have imported Licensed Products in the Field. (b) Viventia may terminate this Agreement and the licenses granted pursuant hereto by giving to Biovation six (6) months prior written notice to Biovation of the same. Such termination shall not prejudice Biovation in its enforcement of the Licensed Patents in the event of subsequent manufacture of Licensed Products by Viventia. (c) Termination of this Agreement or of such licenses shall be without prejudice to any rights of either Party against the other which may have accrued up to the date of such termination and Viventia shall pay to Biovation the appropriate royalties hereunder on all inventory of Licensed Products (on which royalties have not already been paid) held at the date of termination by Viventia or any person engaged by Viventia to manufacture the Licensed Products and shall thereafter be free to sell such Licensed Products on which applicable royalties have been paid to Biovation. Sections 5(a), 9, 11, 14, 15, 16, 19, 20 and 21 shall survive the expiration or termination of this Agreement. (d) Neither Party may terminate this Agreement for breach without first giving the alleged breaching Party written notice of the acts or omissions alleged to constitute a breach and providing a reasonable period of time to cure such alleged breach of not less than sixty (60) days with respect to the payment of money and not be less than one hundred twenty (120) days for any other acts. 6. MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and warrants to the other Party as follows: (a) It is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and has full power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement, including, without limitation, the right to grant the licenses granted hereunder. (b) As of the Effective Date, (i) it has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder; and (iii) the Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms. (c) As of the Effective Date, it has sufficient legal and/or beneficial title under its intellectual property rights necessary to perform activities 10 contemplated under this Agreement and to grant the licenses contained in this Agreement exclusively to Viventia free and clear of the rightful claim of any third party. 7. LIMITATION ON WARRANTIES. (a) Nothing in this Agreement or in any licenses granted pursuant to this Agreement shall be construed as a representation or warranty that any of the Licensed Patent Rights are valid or that any manufacture, use, sale or other disposal of the Licensed Products is not an infringement of any patents or other rights not vested in Biovation. (b) BIOVATION MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE LICENSED TECHNOLOGY AND LICENSED PATENT RIGHTS, DEIMMUNISED PLASMIDS, OR DEIMMUNISED PROTEINS, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY REGARDING VALIDITY, ENFORCEABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, INCLUDING ANY CLINICAL PURPOSE OR OTHER USE WITH RESPECT TO HUMANS OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS. ALL TECHNOLOGY PROVIDED TO VIVENTIA BY BIOVATION HEREUNDER IS PROVIDED "AS IS." 8. VIVENTIA COVENANTS. (a) Viventia shall promote the sale of the Licensed Products of good marketable quality and shall use reasonable endeavours to meet the market demand therefore. (b) Viventia will use all Licensed Technology and Licensed Patent Rights, licensed hereunder, in compliance with all applicable laws and regulations, including but not limited to, those relating to animal testing, biotechnological research or the handling and containment of biohazardous materials. 9. INDEMNIFICATION BY VIVENTIA. Viventia shall indemnify, defend and hold harmless Biovation, its Affiliates and their respective directors, officers, employees, and agents and their respective successors, heirs and assigns (the "Biovation Indemnitees"), against any liability, damage, loss or expense (including reasonable attorneys' fees and expenses of litigation) (collectively, "Losses") incurred by or imposed upon the Biovation Indemnitees, or any one of them, in connection with any claims, suits, actions, demands or judgments of third parties, including without limitation personal injury and product liability matters and claims of suppliers and Viventia employees (except in cases where such claims, suits, actions, demands or judgments result from a material breach of this Agreement, negligence or wilful misconduct on the part of Biovation) arising out of (a) the breach or alleged breach of any representation, warranty or covenant of 11 Viventia under Sections 6, 7 or 8 hereof, (b) the negligence or misconduct of Viventia, its Affiliates or their respective employees or agents; or (c) the development, testing, production, manufacture, promotion, import, sale or use by any person of any Licensed Product which is manufactured or sold by Viventia or by an Affiliate, sublicensee, distributor or agent of Viventia. 10. DILIGENCE. Viventia agrees to exercise reasonable commercial efforts to seek regulatory approval to market Licensed Products and develop markets for and market Licensed Products. 11. OWNERSHIP OF LICENSED TECHNOLOGY AND LICENSED PATENT RIGHTS. (a) Viventia acknowledges and agrees that as between the Parties, Biovation shall own all Licensed Technology, and Licensed Patent Rights. (b) Except as provided in paragraph (c) below, Biovation and its Affiliates shall have the right, but not the obligation to prosecute, file and maintain any patent applications or patents relating to any Licensed Patent Rights. To the extent that Biovation decides not to prosecute, file, or maintain any Licensed Patent Rights, it shall notify Viventia of same and Viventia shall have the right, but not the obligation to prosecute, file and maintain any patent applications or patents with respect to Licensed Patent Rights reasonably related to Licensed Products; Biovation shall reasonably cooperate with Viventia in such filings. (c) Viventia shall have the right, but not the obligation, to prosecute, file and maintain any patent applications or patents relating to any Licensed Patent Rights that claim or are otherwise directed to Deliverables, Deimmunised Plasmids and Deimmunised Proteins (including compositions comprising same and methods of making or using all of the foregoing. To the extent that Viventia decides not to prosecute, file or maintain any such patents or applications, it shall notify Biovation of same and Biovation shall have the right, but not the obligation to prosecute, file and maintain them; Vivenia shall reasonably cooperate with Biovation in such filings. 12. INFRINGEMENT. (a) Each Party shall notify the other promptly after such Party becomes aware of any alleged infringement of any Licensed Patent Rights in any country through the sale of a Licensed Product. (b) If any of the Licensed Patent Rights under which Viventia holds a license is infringed by a third party through the sale of a Licensed Product, Biovation shall have the right and option, but not the obligation, to bring an action for infringement, at its sole expense, 12 against such third party in the name of Biovation and/or in the name of Viventia, and to join Viventia as a plaintiff if required. Biovation shall promptly notify Viventia of any such action and shall keep Viventia informed as to the prosecution of any action for such infringement. Biovation shall have the full control over the conduct of such litigation including settlement thereof; provided, however, that Biovation shall make no decision, including, but not limited to, any settlement with respect to such infringement which adversely affects the validity or enforceability or scope of the Licensed Patent Rights or detracts from the exclusivity of the license granted to Viventia hereunder without the prior written consent of Viventia. In the event that Biovation does not institute an infringement proceeding against an infringing third party within one hundred twenty (120) days after becoming aware or receiving notice of any alleged infringement through the sale of a Licensed Product for which it has a right and option to bring an action under this Section 12(b), then Viventia shall have the right and option, but not the obligation, to institute such an action and to retain any recovered damages. If by statute or regulation, a delay of one hundred twenty (120) days would result in a diminshment of rights, including by way of example but not limitation loss of the opportunity for a stay of approval of an infringing product, then the one hundred twenty (120) day period above shall be shortened to the extent required to end ten (10) days before the date on which the diminishment of rights would occur. (c) In any infringement suit either Party may institute to enforce any rights pursuant to this Agreement, the other Party hereto shall, at the request of the Party initiating such suit, cooperate in all respects and, to the extent reasonably possible (without adversely affecting the other Party's normal business operations), have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like. All reasonable out-of-pocket costs incurred in connection with rendering cooperation requested hereunder shall be paid by the Party requesting cooperation. (d) The costs and expenses of any action instituted pursuant to this Section 12 including reasonable fees of attorneys and other professionals) shall be borne by the Party instituting the action, or, if the Parties elect to cooperate in instituting and maintaining such action, such costs and expenses shall be borne by the Parties in such proportions as they may agree in writing. Each Party shall execute all necessary and proper documents and take such actions as shall be appropriate to allow the other Party to institute and prosecute such infringement actions (if such other Party has the right to institute and prosecute such infringement actions pursuant to this Section 12). 13. INSURANCE. Viventia shall maintain comprehensive general liability insurance in the amount of [ ] per occurrence during the term of this Agreement and Product Liability Insurance in the amount of 13 [ ] per occurrence for all periods during which it has a Licensed Product for sale. Viventia shall list Biovation as an "Additional Insured" under its insurance policies described above and shall provide a certificate of insurance to Biovation reflecting the same. 14. NOTICES. (a) All notices and statements to either Party required under this Agreement shall be made in writing delivered via certified mail, return receipt requested, courier, provided that evidence of delivery is made, or facsimile with confirmation of such transmission addressed to such Party at the following addresses or faxed to the appropriate numbers set forth below (with the copies to other parties set forth below) or to such other address as may be designated from time to time: To Biovation: With a copy to: Biovation Limited Mintz, Levin, Cohn, Ferris, Glovsky and Crombie Lodge Popeo PC Aberdeen Science Park One Financial Center Balgownie Drive Boston, MA 02111 Aberdeen AB22 8GU Attention: Jeffrey M. Wiesen, Esquire Scotland Tel: 617-542-6000 Attention: Dr. Frank J. Carr Fax: 617-542-2241 President Tel: 44 1224 707337 Fax: 44 1224 708816 To Viventia: With a copy to: Viventia Biotech, Inc. Kenyon & Kenyon 10 Four Seasons Place One Broadway Suite 501 New York, NY 10004-1050 Toronto, ON M9B 6H7 Attention: Richard L. DeLucia, Esq. Canada Tel: 212-425-7200 Attention: Dr. Nick Glover Fax: 212-425-5288 President & CEO Tel: 1 416 291 1277 Fax: 1 416 335 9306 (b) All notices and statements provided to a Party hereunder shall be deemed to have been given as of the date received, or at the time of delivery of a facsimile to the relevant facsimile number above. (c) Each Party hereto may change its address and contact information set forth above for the purpose of this Agreement by providing written notice to the other Party of the same from time to time. 14 15. TREATMENT OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, "Confidential Information" shall mean with respect to a Party (the "Receiving Party"), all information, including without limitation, any Technology disclosed by the other Party (the "Disclosing Party") to the Receiving Party or to any of its employees, consultants, Affiliates, or sublicensees, whether in writing, or by oral or visual disclosure or presentation, provided, however, that "Confidential Information" shall not include information that: (a) was known to Receiving Party at the time such Confidential Information was received by the Receiving Party or its Affiliates, as shown by written documentation, other than by virtue of a prior confidential disclosure to such Receiving Party or its Affiliates; or (b) was publicly known when received from Disclosing Party or thereafter becomes publicly known through no fault or omission of Receiving Party; or (c) is made known to Receiving Party by a third party who did not derive it from Disclosing Party and who has a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (d) is independently developed by or for the Receiving Party without reference to or reliance upon any Confidential Information; or (e) is approved for disclosure by prior written consent of Disclosing Party; or (f) is required to be disclosed by government authority; provided; however, that Receiving Party has provided reasonable advance notice of the impending disclosure to Disclosing Party and will disclose the Confidential Information to the extent necessary and to such authority only. The Receiving Party agrees that it will hold the Confidential Information received from the Disclosing Party in secrecy and confidence and will not disclose it to any third party, nor use it for any purpose other than for the purpose of the performance of this Agreement (which includes with respect to Viventia the full enjoyment of the license rights granted to it by Biovation). Each Party further agrees that it will restrict disclosure of the Confidential Information within its own organisation and affiliates to those persons having a need to know it for the purpose of this Agreement, and that such persons will be advised of the obligation set forth in this Agreement and obligated in like fashion. The above obligations of the Receiving Party with respect to its treatment of Confidential Information shall commence as of the Effective Date and continue through the term of this Agreement and for a period of five (5) years thereafter. This Agreement shall not be construed as granting any license rights with respect to the Confidential Information. Except as otherwise required by applicable laws and regulations, the Parties hereby 15 agree that any disclosure of the terms and conditions of this Agreement (including disclosure in connection with potential stock exchange listings, if any) shall be subject to the other Party's prior written mutual agreement; provided, however, that each Party may disclose the terms and conditions of this Agreement to a prospective investor, and Viventia may disclose the terms of this Agreement to a prospective sublicensee or marketing partner for a Licensed Product, pursuant to a written confidentiality agreement. 16. WAIVER. The waiver by Biovation of any breach, default or omission in the performance or observance of any of the terms of this Agreement by Viventia shall not be deemed to be a waiver of any other such breach, default or omission. 17. FORCE MAJEURE. If the performance of this Agreement or any obligation hereunder (except for the payment of money) is prevented, restricted or interfered with by reason of fire or other casualty or accident, strikes or labour disputes, inability to procure raw materials, power or supplies, war, invasion, civil commotion or other violence, compliance with any order of any governmental authorities or any other act or conditions whatsoever beyond reasonable control of either Party hereto, the Party so affected upon giving a prompt notice to the other Party shall be excused from such performance to the extent of such prevention, restriction or interference; provided however that the Party so affected shall use commercially reasonable efforts to avoid or remove such causes of non-performance and shall continue performance hereunder with the utmost dispatch whenever such causes are removed, to the extent commercially reasonable. 18. ASSIGNMENT. This Agreement shall not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, in the event of a merger, consolidation or similar reorganization of either Party with or into another party, or in the event of a sale of all or substantially all of the assets of a Party, or with respect to Viventia in the event of the sale of the business unit or Licensed Product to which this Agreement pertains, this Agreement shall be assigned to or become the obligation and liability of the acquiring entity, subject to the written notification of such acquisition or merger to the other Party. Any purported assignment in violation of this Section 18 shall be void. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties. 19. GOVERNING LAW. This Agreement shall be governed and interpreted in accordance with the laws of New York without reference to its choice-of-law rules, except that any issue 16 concerning interpretation, infringement, validity, enforceability, term, or effect of a patent shall be governed by national law of the country of such patent. 20. ARBITRATION. All disputes, differences or controversies arising out of or in connection with this Agreement, its interpretation, performance, or termination, which may arise between the Parties arising out of, or related to, this Agreement shall be amicably settled between the Parties. In case of failure of amicable settlement between the Parties, it shall be finally settled by binding arbitration conducted in New York City in accordance with the Rules of Concilliation and Arbitration of the International Chamber of Commerce (Paris, France) (the "ICC"). The arbitration panel shall be composed of three arbitrators, one of whom shall be selected by Biovation, one of whom shall be selected by Viventia and the third of whom shall be selected by the two so selected. If both or either of Biovation or Viventia fails to select an arbitrator or arbitrators within fourteen (14) days after receiving notice of commencement of arbitration or if the two arbitrators fail to select a third arbitrator within fourteen (14) days after their appointment, the ICC shall, in accordance with said rules, upon the request of both or either of the Parties to the arbitration, appoint the arbitrator or arbitrators required to complete the panel. Notwithstanding the terms contained in Section 19 of this Agreement, U.S. patent law shall govern any disputes with respect to inventorship under Sections 4.4, 4.5 and 4.6 of this Agreement. The Parties shall share the costs of the arbitration, including administrative and arbitrators' fees equally. Each Party shall bear its own costs and attorneys' and witnesses' fees; provided, however, that the prevailing Party, as determined by the arbitration panel, shall be entitled to an award against the other Party in the amount of the prevailing Party's costs and reasonable attorneys' fees. If judicial enforcement or review of the arbitrator's decision is sought, the prevailing Party shall be entitled to costs and reasonable attorneys' fees in addition to any amount of recovery ordered by the court. Any dispute between the Parties related to or arising from this Agreement or the Parties' relationship hereunder that is not arbitrable, including any action to confirm, enforce, modify, or set aside an arbitration award, shall be heard exclusively in the state or federal courts located in New York County, New York, to the exclusion of all other courts, and the parties consent to the jurisdiction and venue of such courts for such purpose. 21. MISCELLANEOUS. 21.1 Acknowledgement. Each Party acknowledges that it has negotiated and entered into this Agreement in good faith. 21.2 Severability. In the event any one of the provisions of this Agreement is held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining provisions shall not be affected by such holding. The Parties agree to negotiate and amend in good faith such provision in a manner consistent with the intentions of the Parties as expressed in the Agreement if 17 any invalid or unenforceable provision affects the consideration of either Party. 21.3 Interpretation. The Parties acknowledge and agree that: (i) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement. 21.4 Entirety of Agreement. This Agreement contains the entire understanding of the Parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, covenants or understandings other than those expressly set forth herein, and no rights or duties on the part of either Party are to be implied or inferred beyond those expressly herein provided for. The Parties may, from time to time during the term of this Agreement, amend, modify, vary, waive or alter any of the provisions of this Agreement, but only by a written instrument that makes specific reference to this Agreement which is duly executed by each Party, or in the case of waiver, by the Party or Parties waiving compliance. 21.5 Further Assurances. Each Party agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the filing of such additional assignments, agreements, documents and instruments, that may be necessary or as the other Party hereto may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement. 21.6 No Partnership. For the purposes of this Agreement and all obligations to be performed hereunder, each Party shall be, and shall be deemed to be, an independent contractor and not an agent, partner, joint venturer or employee of the other Party. Neither Party shall have authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on the other Party, except as may be explicitly provided for herein or authorized in writing. 21.7 Research Agreement. This Agreement supersedes the Research Agreement with respect to any subject matter addressed herein or any inconsistency. 18 IN WITNESS whereof the Parties have caused this Agreement to be duly executed in duplicate originals by their respective officers hereunto duly authorized, of which one original is to be held by each Party. BIOVATION LIMITED VIVENTIA BIOTECH, INC. By: /s/ Frank J. Carr By: /s/ Nick Glover ----------------- ------------------ Dr. Frank J. Carr Nick Glover, Ph.D. President President & CEO 19 SCHEDULE A VIVENTIA'S PROTEIN = [ ] DEIMMUNISED PROTEIN = [ ] 20 SCHEDULE B JOINT PATENT RIGHTS 21 SCHEDULE C LICENSED PATENT RIGHTS DEIMMUNISATION PATENT FAMILIES DEIMMUNISATION I WO 98/52976 (international publication date 26-Nov-98) Method for the production of non-immunogenic proteins Regional Applications: USA US 10/300215 Europe EPO 98922932.3 Japan 550129/98 Canada 2290485 Australia 75393/98 DEIMMUNISATION II WO 00/34317 (international publication date 15-Jun-00) Modifying protein immunogenicity Regional Applications: USA 09/633516 Europe EPO 99959535.8 Japan 2000-586759 China 99804401.6 Australia 16676/00 Mexico 0007746 Canada 2342967 DEIMMUNISATION III WO 02/069232 (international publication date 6-Sept-02) Method for identification of T-cell epitopes and use for preparing molecules with reduced immunogenicity 22 EX-3.13 20 t17062exv3w13.txt EXHIBIT 3.13 EXHIBIT 3.13 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXCLUSIVE LICENSE AGREEMENT AGREEMENT, dated as of June 23, 2003 (the "Effective Date"), between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York non-profit corporation ("Columbia"), and VIVENTIA BIOTECH, INC., a Canadian corporation ("Company"). WHEREAS, Columbia, has established a laboratory directed by Dr. Ilya Trakht at its Health Sciences Division, engaged in research relating to the use of MFP-2 for human hybridoma production, and WHEREAS, Company has supported Dr. Trakht's research relating to MFP-2 by entering into a Research Agreement with Columbia dated March 1, 2002, as amended by the First Amendment to Research Agreement effective as of February 28, 2003 (the "Research Agreement"), and obtained certain rights to such research as set forth in that agreement, and WHEREAS, Columbia is the owner of the United States issued patent and technology incorporated and encompassed in the invention known as: United States Patent No. 6,197,582, entitled "Development of human monoclonal antibodies and uses thereof", issued March 6, 2001, together with any additional inventions and discoveries arising under and pursuant to the Research Agreement or to be made hereunder (collectively referred to herein as "Columbia Technology"); and WHEREAS, Columbia and Company entered into a License Option Agreement dated March 1, 2002, which granted, inter alia, Company the exclusive option to enter into an exclusive license of and under the Columbia Technology, and WHEREAS, Company has herein exercised its exclusive rights to such exclusive license, and the Company and Columbia further wish to continue the Research Agreement as set forth in the First Amendment to Research Agreement effective as of February 28, 2003; NOW, for good and valuable consideration, Columbia and Company agree as follows: 1. DEFINITIONS. 1 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. a. "Affiliate" shall mean any corporation or other business entity that directly or indirectly controls, is controlled by, or is under common control with the Company. Control means ownership or other beneficial interest in 50% or more of the voting stock or other voting interest of a corporation or other business entity. b. "MFP-2 Field" shall mean the treatment, diagnosis and imaging of cancer, except the MFP-2 Field shall not include cancer vaccines based on fusions of MFP-2 with a patient's autologous cells. c. "Collaboration Field" shall mean the MFP-2 Field unless otherwise expanded or modified by written agreement of the parties and amendment of this Agreement. d. "Licensed MFP-2 Patents" shall mean the United States patents, and the United States, foreign, and international patent applications (including provisional applications) listed in Exhibit A which is attached hereto and incorporated as a part hereof; United States and foreign patents issuing from the patent applications listed in Exhibit A and from any divisionals and continuations of those applications, and any reissues of such United States patents; claims of continuation-in-part applications, and patents directed to subject matter specifically described in the patents and patent applications listed in Exhibit A; claims of all foreign patent applications and patents or related patent documents owned or controlled by Columbia which are directed to subject matter specifically described in any United States patent, or any United States or international patent application listed in Exhibit A, including any provisionals, substitutes, renewals, reissues, extensions, confirmations, reexaminations or registrations thereof; claims of all patent applications and patents owned or controlled by Columbia directed to Licensed MFP-2 Products or uses thereof; and claims of patent applications and patents owned or controlled by Columbia directed to Licensed MFP-2 Technical Information. Exhibit A shall only be amended to reflect: (i) the filing of any regular patent applications claiming priority based on provisional applications listed therein, (ii) the issuance or grant of any patents from United States, international or foreign patent applications listed therein, (iii) the filing of any continuations or divisionals of patent applications listed therein, (iv) the nationalization of international patent applications listed therein, and (v) the filing of any foreign or international patent applications corresponding to United States patent applications listed therein. In the event that a Licensed MFP-2 Patent also satisfies the definition of a Licensed Collaboration Patent, it shall be treated for purposes of this Agreement as a Licensed Collaboration Patent. e. "Licensed Collaboration Patents" shall mean United States, foreign, and international patents and patent applications owned or controlled by Columbia that disclose or claim "Inventions" made by Columbia in the course of performance of, and as defined in the Research Agreement. 2 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. f. "Licensed Patents" shall mean Licensed MFP-2 Patents and Licensed Collaboration Patents. g. "Licensed MFP-2 Products" shall mean: (i) any product within the MFP-2 Field consisting of, including, incorporating, or derived from, in whole or in part, MFP-2, the development, manufacture, use, sale, distribution, rental or lease of which is covered by a claim of a Licensed MFP-2 Patent that has neither expired nor has been declared invalid by a court from which no appeal has been or can be taken, and/or, (ii) the development, manufacture, use, sale, distribution, rental or lease of any product within the MFP-2 Field consisting of, including, incorporating, or derived from, in whole or in part, the Licensed MFP-2 Technical Information, including but not limited to MFP-2. In the event that a Licensed MFP-2 Product also satisfies the definition of a Licensed Collaboration Product, it shall be treated for purposes of this Agreement as a Licensed Collaboration Product. h. "Licensed Collaboration Products" shall mean (i) any product within the Collaboration Field the development, manufacture, use, sale distribution, rental or lease of which is covered by a claim of a Licensed Collaboration Patent that has neither expired nor has been declared invalid by a court from which no appeal has been or can be taken, and/or, (ii) the development, manufacture, use, sale, distribution, rental or lease of any product within the Collaboration Field consisting of, including, incorporating, or derived from, in whole or in part, the Licensed Collaboration Technical Information. i. "Licensed Products" shall mean Licensed MFP-2 Products and Licensed Collaboration Products. j. "Licensed MFP-2 Technical Information" shall mean all such know-how, data, research, reports, formulations, confidential information, and physical materials owned or controlled by Columbia existing as of the Effective Date relating to MFP-2, and conveyed by Columbia to the Company, and all such information owned or controlled by Columbia relating to the Licensed MFP-2 Patents, as generally set forth and listed in Exhibit B, which is attached hereto and incorporated herein. In the event that any Licensed MFP-2 Technical Information also satisfies the definition of Licensed Collaboration Technical Information, it shall be treated for purposes of this Agreement as Licensed Collaboration Technical Information. k. "Licensed Collaboration Technical Information" shall mean all such know-how, data, research, reports, formulations, confidential information, and physical materials made by Columbia in the course of performance of the Research Agreement including all such "Invention" and/or "Research Information" provided to the Company under the Research Agreement and/or to be made under this Agreement, and all such information owned or 3 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. controlled by Columbia relating to the Licensed Collaboration Patents. For the avoidance of doubt, Licensed Collaboration Technical Information shall also include any and all data, research, reports, formulations, confidential information, and physical materials furnished by Columbia to Company under the Research Agreement or this Agreement. l. "Licensed Technical Information" shall mean Licensed MFP-2 Technical Information and Licensed Collaboration Technical Information. m. "Company Net Sales" shall mean the total of all fees, amounts, payments, and other consideration charged by the Company, any Affiliate, or a Collaborative Sublicensee to a third party for the manufacture, use, sale, rental or lease of Licensed Products, less returns and customary trade discounts actually taken, outbound freight, value added, sales or use taxes, and custom duties. In the case of transfers of Licensed Products by the Company to an Affiliate or Collaborative Sublicensee for sale, rental, or lease of such Licensed Products by such Affiliate or Collaborative Sublicensee to third parties, Net Sales shall be based upon the greater of the total fees, amounts, payments, and other consideration charged by the Company to the Affiliate or Collaborative Sublicensee and the total fees, amounts, payments, and other consideration charged by the Affiliate or Collaborative Sublicensee to third parties, provided that the multiple sale, resale, or disposition of the same unit of Licensed Products shall not be counted more than once in calculating Company Net Sales. n. "Sublicensee" shall mean any third party to whom the Company has granted a sublicense pursuant to this Agreement. "Technology Sublicensee" shall mean a Sublicensee to whom the Company has granted a naked sublicense, i.e., wherein the transaction between the Company and the Sublicensee is substantially limited to a sublicense of the Licensed Patents and/or the Licensed Technical Information and does not include, contemplate, or provide for (i) a transfer of rights in or to a Licensed Product that has been developed or shown to be feasible by the Company, (ii) joint or collaborative development of one or more Licensed Products by the Company and the Sublicensee (which need not include participation by the Company in the marketing, sale, or distribution of such products), or (iii) other forms of joint or collaborative research, development, or testing of Licensed Products or possible Licensed Products between the Company and the Sublicensee. "Collaborative Sublicensee" shall mean a Sublicensee that is not a Technology Sublicensee. o. "Technology Sublicensee's Net Sales" shall mean the total of all fees, amounts, payments, and other consideration charged by a Technology Sublicensee for the manufacture, use, sale, rental or lease of Licensed Products, less returns and customary trade discounts actually taken, outbound freight, value added, sales or use taxes, and custom duties. 4 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. p. "Territory" shall mean the entire world, excluding The People's Republic of China, Hong Kong and Taiwan (collectively "China"). q. "First Anniversary Date" shall mean the date occurring one year after the Effective Date of this Agreement, and each such annual period ("Annual Period") thereafter shall be defined as Second Anniversary Date, Third Anniversary Date, etc. r. "MFP-2" shall mean [ ] and clones thereof, including but not limited to MFP-2S, existing as of the Effective Date. 2. CONDUCT OF RESEARCH. Columbia will continue the research specified under the Research Agreement and otherwise conduct in a laboratory at its Health Sciences campus, under the direction of Dr. Ilya Trakht, the research set forth therein (the "Research"). 3. LICENSE GRANT. a. Columbia grants to the Company, upon and subject to all the terms and conditions of this Agreement: i. an exclusive license under the Licensed MFP-2 Patents to research, develop, manufacture, have made, use, sell, have sold, offer for sale, import, distribute, rent or lease Licensed MFP-2 Products in the MFP-2 Field throughout the Territory, together with a right to grant sublicenses in accordance with subsection (b) below, and the terms of this Agreement; ii. an exclusive license under the Licensed Patents to research, develop, manufacture, have made, use, sell, have sold, offer for sale, import, distribute, rent or lease Licensed Collaboration Products in the Collaboration Field throughout the Territory, together with a right to grant sublicenses in accordance with subsection (b) below, and the terms of this Agreement; provided further that in the event the Collaboration Field is modified or amended so that it is expanded beyond the MFP-2 Field, by written agreement of the parties, Columbia reserves the right to revise or modify the royalty rate and other payments due under Section 5 of this Agreement, subject to Company's written agreement (which would be included as part of the written agreement of the parties regarding expansion of the MFP-2 Field), with respect to such Licensed Collaboration Products in the expanded Collaboration 5 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. Field; iii. an exclusive license to use Licensed MFP-2 Technical Information to research, develop, manufacture, have made, use, sell, have sold, offer for sale, import, distribute, rent or lease Licensed MFP-2 Products in the MFP-2 Field throughout the Territory, together with a right to grant sublicenses in accordance with subsection (b) below, and the terms of this Agreement; and iv. an exclusive license to use Licensed Technical Information to research, develop, manufacture, have made, use, sell, have sold, offer for sale, import, distribute, rent or lease Licensed Products in the Field throughout the Territory, together with a right to grant sublicenses in accordance with subsection (b) below, and the terms of this Agreement. b. Columbia grants to the Company the right to grant sublicenses to third parties, provided that: (i) the Sublicensee agrees to abide by all applicable terms and provisions of this Agreement; (ii) the Company remains fully liable for the performance of its and its Sublicensee's obligations hereunder; (iii) each such sublicense is royalty-bearing or otherwise provides for is supported by consideration; and (iv) no such sublicense shall relieve the Company of its obligations under Section 7 hereof concerning diligence to develop and market Licensed Products, nor relieve Company of its obligations to pay Columbia any license fees, royalties and other payments under Section 5 of the Agreement. c. All rights granted by Columbia to the Company under this Agreement are subject to, and shall be construed in accordance with, the requirements of 35 U.S.C. Sections 200 et seq., as amended, and its implementing regulations and policies and, to the extent applicable, the requirements of Internal Revenue Procedure 97-14 as regards royalty rates on any Licensed Collaboration Products. Without limitation of the foregoing, the Company agrees that, to the extent required under applicable law, any Licensed Products used, sold, distributed, rented or leased by the Company, an Affiliate or a Sublicensee in the United States will be manufactured substantially in the United States. To the extent that such laws, regulations, or policies apply to the Licensed Patents and/or the Licensed Technical Information, as of the Effective Date, the funding agreements concerning same are listed in Exhibit C to this Agreement. d. All rights not specifically granted in this Agreement are reserved to Columbia. 4. RESERVATION OF RIGHTS FOR RESEARCH PURPOSES; FREEDOM OF PUBLICATION. a. Columbia reserves the right to use the Licensed Patents and Licensed 6 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. Technical Information solely for its own academic, noncommercial research purposes in the Field and to permit other academic research entities or personnel in active collaboration with Columbia in such research to use such Licensed Patents and Licensed Technical Information solely for academic, noncommercial research purposes in the Field. Columbia shall first obtain from all entities or individuals who are to be given permission to use the Licensed Patents and Licensed Technical Information a written agreement, in a form reasonably acceptable to the Company, to limit such use to academic, noncommercial research purposes and shall inform the Company of the identity of all such entities and individuals. Nothing in this Agreement shall be interpreted to limit in any way the right of Columbia, and/or its employees to use the Licensed Patents and Licensed Technical Information for any purpose outside the Field, or to license or permit such use outside the Field by third parties. b. The Company acknowledges that Columbia is dedicated to free scholarly exchange and to public dissemination of the results of its scholarly activities. Columbia acknowledges that the premature publication or dissemination of information may jeopardize or detract from the value of the Licensed Patents or the Licensed Technical Information relating to the Field, to the detriment of the Company. To balance these interests, Columbia and its faculty and employees shall have the right to publish, disseminate or otherwise disclose the Licensed Patents or Licensed Technical Information relating to the Field, but shall not do so without first providing the Company with a reasonable opportunity to review the proposed publication and sufficient time to apply for a patent. Prior to any public disclosure of information within the Licensed Patents or Licensed Technical Information relating to the Field, whether in a publication, abstract, conference, poster, grant application, or otherwise, Columbia shall provide the Company with a copy of the proposed disclosure. The Company shall have thirty (30) days to review said proposed disclosure. If within such 30-day review period the Company determines to file a patent application, public disclosure will be delayed until a patent application is filed, which will be accomplished within 90 days of the end of the 30-day review period Columbia will provide prompt and timely cooperation with the Company in order to assure the expeditious filing of the patent application. 5. ROYALTIES AND PAYMENTS. a. In consideration of the licenses granted under this Agreement, the Company shall pay to Columbia: i. License Fees: Within thirty (30) days of the Effective Date, the non-refundable sum of [ ] shall be paid to Columbia by Company. 7 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. ii. Royalties: Company, Affiliate and its Sublicensees shall pay to Columbia a royalty of [ ] percent on Company, Affiliate and Technology and/or Collaborative Sublicensee Net Sales, provided that in the event that with respect to any Licensed Product, Company, Affiliate and/or Collaborative Sublicensee, as the case may be, shall be entitled to deduct the amount that it is obligated to pay under other agreements it enters into with third parties for technology necessary to secure patent or other intellectual property rights, without which Company would not be permitted under law to make, use, and/or sell the Licensed Product(s), and provided further that such deduction shall in no case reduce the royalty owed to Columbia under this Agreement to less than [ ]% on Company Net Sales of Licensed Products in the Territory, and further provided that all such rates and minimums shall be reduced by one-half for Net Sales in countries where the manufacture, use, or sale of Licensed Products, although not within the scope of the Licensed Patents, uses Licensed Technical Information. b. Technology Sublicense Royalties/Fees: In consideration of the Company's right to grant sublicenses to Technology Sublicensees under this Agreement, Company shall make the following payments: i. [ ]% of all royalties received by the Company on account of a Technology Sublicensee's Net Sales, and ii. [ ]% of all other gross revenues, fees, payments and consideration (including any debt and/or equity securities or instruments, but not consideration received by Company as a bona fide debt or equity investment in the Company), or any part thereof, received by Company from a Technology Sublicensee in consideration for the grant of a sublicense hereunder. c. Milestone Payments: Company shall pay Columbia the following payments upon meeting the following milestones: i. for diagnostic or imaging products, the sum of [ ] upon the first (but not subsequent) [ ] of each Licensed Product by Company or a Collaborative Sublicensee; ii. for therapeutic products, [ ] upon the first (but not subsequent) entry into [ ] Licensed Product by Company or a Collaborative Sublicensee; 8 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. iii. [ ] upon the first (but not subsequent) entry into [ ] Licensed Product by Company or a Collaborative Sublicensee; and iv. [ ] upon the first (but not subsequent) [ ] Licensed Product by Company or a Collaborative Sublicensees. d. Currency conversion: With respect to revenues obtained by the Company outside the United States, the Company shall make royalty payments to Columbia in the United States in United States dollars. Royalty payments for transactions outside the United States shall first be determined in the currency of the country in which they are earned, and then converted to United States dollars using the buying rates of exchange quoted by Citibank, N.A. (or its successor) in New York, New York for the last business day of the calendar quarter in which the royalties were earned. 6. REPORTS AND PAYMENTS. a. On or before the last business day of each calendar quarter of each Annual Period of this Agreement in which there has been a commercial sale of a Licensed Product or receipt of consideration from a Technology and/or Collaborative Sublicensee, the Company shall submit to Columbia a written report with respect to the preceding calendar quarter (the "Payment Report") stating: i. Company Net Sales during such quarter; ii. In the case of transfers of Licensed Products by the Company to an Affiliate for sale, rental, or lease of such Licensed Products by the Affiliate to third parties, Net Sales by the Company to the Affiliate and Net Sales by the Affiliate to third parties during such quarter; iii. Amounts accruing to, and received by, the Company from its Technology Sublicensees during such quarter; iv. Technology Sublicensees' Net Sales during such quarter; and v. A calculation of the amounts due to Columbia, making reference to the application of each subsection thereof. b. Simultaneously with the submission of each Payment Report, the Company 9 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. shall make payments to Columbia of the amounts due for the calendar quarter covered by the Payment Report. Payment shall be by check payable to The Trustees of Columbia University in the City of New York and sent to the following address: Columbia Innovation Enterprise Science and Technology Ventures General Post Office P.O. Box 29944 New York, NY 10087-9944 or to such other address as Columbia may specify by notice hereunder. c. The Company shall maintain at its principal office usual books of account and records showing its actions under this Agreement. Upon reasonable notice, such books and records shall be open to inspection and copying, during usual business hours, by an independent certified public accountant to whom the Company has no reasonable objection, for three years after the calendar quarter to which they pertain (but not more than once per year), for purposes of verifying the accuracy of the amounts paid by the Company under this Agreement. In the event that such review reveals that any payment to Columbia was understated by more than 5%, the Company shall pay, within ten days after demand by Columbia, the reasonable cost of such review. 7. DILIGENCE. a. The Company shall use reasonable commercial efforts to research, develop and market at least one Licensed Product for commercial sale and distribution in the Territory. b. Commencing on the First Anniversary Date of this Agreement, and continuing for each Annual Period up to the eighth Anniversary Date of this Agreement, Company shall be required to demonstrate to the reasonable satisfaction of Columbia that it has expended or caused to be expended no less than [ ] in direct expenditures (not including salaries, overhead and the like) during each such Annual Periods for the bona fide research and development of Licensed Products, including but not limited to the conduct of clinical trials. c. In addition, Company shall use its best efforts to make a [ ] Anniversary Date of this Agreement. d. No less often than every twelve (12) months after the Effective Date of this Agreement, the Company shall report in writing to Columbia on progress made toward the 10 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. diligence objectives set forth above, including updated development plans, together with the amount of research and development monies related to Licensed Products and expended during that time period. e. In the event of failure to achieve any of Company's diligence obligations under this Section, Columbia and the Company shall review the causes for such failure and establish new Diligence obligations. Failure by Company to achieve the modified diligence obligations shall result in Columbia having the option of terminating all of the exclusive licenses granted hereunder in accordance with Section 16 of this Agreement, or converting any or all of such exclusive licenses to nonexclusive licenses. 8. DISCLAIMER OF WARRANTY; LIMITATIONS OF LIABILITY. a. Nothing in this Agreement shall be construed as a warranty or representation by either party as to the validity of any Licensed Patent. Nothing in this Agreement shall be construed as a warranty or representation by either party that anything developed, manufactured, used, sold, rented, leased, or otherwise disposed of under any license granted under this Agreement is or will be free from infringement of domestic or foreign patents or other proprietary interests (including copyright) of other parties. COLUMBIA IS LICENSING THE LICENSED PATENTS, LICENSED TECHNICAL INFORMATION, AND THE SUBJECT OF ANY OTHER LICENSE HEREUNDER TO THE COMPANY, ON AN "AS IS" BASIS. COLUMBIA MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED OF ANY KIND, AND HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES OF ANY KIND (EXCEPT TITLE) AS TO THE LICENSED PATENTS, LICENSED TECHNICAL INFORMATION, THE SUBJECT OF ANY LICENSE HEREUNDER AND/OR LICENSED PRODUCTS, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, FITNESS, ADEQUACY OR SUITABILITY FOR A PARTICULAR PURPOSE, USE OR RESULT, AND ANY WARRANTIES OF FREEDOM OF INFRINGEMENT OF ANY PATENTS, COPYRIGHTS, TRADE SECRETS OR OTHER PROPRIETARY RIGHTS. NEITHER COLUMBIA, NOR ANY EMPLOYEE OR AGENT OF COLUMBIA, SHALL HAVE ANY LIABILITY TO THE COMPANY, ITS AFFILIATES OR ANY OTHER PERSON ARISING OUT OF THE USE OF LICENSED PATENTS, LICENSED TECHNICAL INFORMATION, THE SUBJECT OF ANY LICENSE HEREUNDER OR LICENSED PRODUCTS BY COMPANY, ITS AFFILIATES, OR ANY OTHER PARTY FOR ANY REASON, INCLUDING BUT NOT LIMITED TO THE UNMERCHANTABILITY, INADEQUACY OR UNSUITABILITY OF THE LICENSED PATENTS, LICENSED TECHNICAL INFORMATION, THE SUBJECT OF ANY LICENSE HEREUNDER OR LICENSED PRODUCTS FOR ANY PARTICULAR PURPOSE OR TO PRODUCE ANY PARTICULAR RESULT, OR FOR ANY LATENT DEFECTS THEREIN. 11 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. b. In no event will Columbia, or its respective trustees, officers, agents or employees be liable to the Company or to any other party, for any loss or damages, consequential, incidental, indirect or otherwise, including, but not limited to time, money, or good will, arising from the use, operation or application of the Licensed Patents, Licensed Technical Information, the subject of any license hereunder or Licensed Products by the Company or its Affiliates. In no event shall Columbia's liability to the Company exceed the payments made to Columbia by Company under this Agreement. The parties expressly acknowledge and agree that this limitation of liability has been negotiated for and that without such limitation of liability the consideration charged by Columbia to Company under this Agreement would be substantially greater. 9. PROHIBITION AGAINST USE OF COLUMBIA'S NAME. Except as may be required by law or regulation, or in connection with factual reports of its license and sublicensing rights hereunder, the Company will not use the name, insignia, or symbols of Columbia, its respective faculties or departments, or any variation or combination thereof, or the name of any trustee, faculty member, other employee, or student of Columbia for any purpose whatsoever without Columbia's prior written consent, such consent not to be unreasonably withheld. 10. COMPLIANCE WITH GOVERNMENTAL OBLIGATIONS. a. Notwithstanding any provision in this Agreement, Columbia disclaims any obligation or liability arising under the license provisions of this Agreement if the Company is charged in a governmental action for not complying with or fails to comply with governmental regulations in the course of taking steps to bring any Licensed Products to a point of practical application. b. The Company shall comply upon reasonable notice from Columbia with all governmental requests directed to either Columbia or the Company and provide all information and assistance necessary to comply with the governmental requests. c. The Company shall insure that research, development, manufacturing and marketing under this Agreement complies with all government regulations in force and effect including, but not limited to, Federal, state, and municipal legislation. 11. PATENT PROSECUTION, MAINTENANCE AND INFRINGEMENT. a. Columbia, by counsel it selects to whom the Company has no reasonable 12 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. objection, in cooperation and consultation with counsel appointed by the Company, will prepare, file, prosecute and maintain all Licensed Patents in Columbia's name (or in the name of both Columbia and the Company in the case of joint inventorship by Columbia and the Company) and in countries designated by the Company. Company will reimburse Columbia for all out-of-pocket expenses it has incurred prior to the Effective Date of this Agreement and will pay expenses incurred following the Effective Date of this Agreement in filing, prosecuting and maintaining such Licensed Patents, including attorneys' fees, the costs of any interference proceedings, reexaminations, or any other ex parte or inter partes administrative proceeding before patent offices, taxes, annuities, issue fees, working fees, maintenance fees and renewal charges, provided, however, that if any Licensed Patent is licensed by Columbia to a third party or third parties, the expenses incurred after the effective date of such license to such third party in filing, prosecuting and maintaining such Licensed Patent in any country covered by such license shall be shared equally by Company and the third party or third parties. b. Any reimbursable patent expenses under this Section 11 shall be invoiced by and reimbursed to Columbia by Company on a semiannual basis. c. If the Company does not wish to have a Licensed Patent application filed or prosecution continued in a particular country or countries, Columbia may file such application or continue prosecution at its own expense, and Columbia will be free to enter into a licensing agreement for or otherwise dispose of such application or patent, except, in the case of joint inventorship by Columbia and the Company, then Columbia shall have such rights only to the extent of its interest in such application or patent. d. Except as provided in paragraph (e) below, Columbia will have the right to protect its Licensed Patents from infringement and prosecute infringers at its own expense when in its sole judgment such action may be reasonably necessary, proper, and justified. e. If the Company shall have supplied Columbia with written evidence reasonably demonstrating the likely infringement or future infringement of a claim of a Licensed Patent by a third party selling products in competition with the Company or any of its Affiliates or Sublicensees, the Company may by notice request that Columbia take steps to assert the Licensed Patent. In the event that Columbia initiates legal proceedings under this subsection (e), any recovery shall first be used to reimburse Columbia for its reasonable costs and legal fees incurred to conduct such proceedings. The balance shall be divided [ ]% to the Company and [ ]% to Columbia. Unless Columbia shall within ninety (90) days of the receipt of such notice either: (i) cause such infringement to terminate or (ii) initiate legal proceedings against the infringer, the Company, upon notice to Columbia, may initiate legal proceedings against the infringer at the Company's expense. In such event the Company may deduct from payments due hereunder to Columbia reasonable costs and 13 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. legal fees incurred to conduct such proceedings, but in no event shall any payment due in any calendar quarter be reduced by more than [ ]% of the amount otherwise due to Columbia hereunder. Any recovery by the Company in such proceedings shall first be used to reimburse the Company for its reasonable costs and legal fees incurred to conduct such proceedings and next to pay to Columbia an amount equal to all amounts withheld from Columbia by the Company under this Section 11 during the pendency of the proceedings. The balance shall be retained by Company and such balance amount shall be deemed to be Company Net Sales of such Licensed Products (s) and shall be subject to Company's royalty and other payment obligations to Columbia with respect to Company Net Sales as set forth in this Agreement. f. In the event one party shall initiate or carry on legal proceedings to enforce any Licensed Patent against an alleged infringer, the other party shall use its best efforts to reasonably cooperate fully with and shall supply all assistance reasonably requested by the party initiating or carrying on such proceedings. The party that institutes any proceeding to protect or enforce a Licensed Patent shall have sole control of that proceeding and shall be responsible for the reasonable expenses incurred by said other party in providing such assistance and cooperation as is requested pursuant to this paragraph. In no event shall Company settle any action or claim hereunder without Columbia's written consent where (a) such settlement would include any admission of liability on the part of Columbia, (b) such settlement would impose any restrictions on Columbia's conduct of its activities; or (c) such settlement would not include an unconditional release of Columbia from all liability of all claim(s) that are the subject matter of the settled action or claim. g. For the avoidance of doubt, nothing in this Agreement shall be deemed to grant Columbia the right to control or direct prosecution of, or legal proceedings on, any patent or patent application solely owned by Viventia, or to grant Columbia a license or other rights in or to any such patent or patent application. 12. INDEMNITY AND INSURANCE. a. The Company will indemnify and hold Columbia harmless against any and all third-party actions, suits, claims, demands, prosecutions, liabilities, costs, expenses, damages, deficiencies, loss or obligations (including reasonable attorneys' fees) based on or arising out of this Agreement, including, without limitation, (i) the development, manufacture, packaging, use, sale, rental or lease of Licensed Products, even if altered for use for a purpose not intended, (ii) the use of Licensed Patents or Licensed Technical Information by the Company, its Affiliates, its Sublicensees or its (or their) customers and (iii) any representation made or warranty given by the Company, its Affiliates or Sublicensees with respect to Licensed Products, Licensed Patents or Licensed Technical Information. The Company will reimburse Columbia for any out-of-pocket costs incurred by 14 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. Columbia in enforcing this paragraph 12(a). b. The Company shall maintain, during the term of this Agreement, commercial general liability insurance, including product liability insurance, with reputable and financially secure insurance carriers to cover the activities of the Company, its Affiliates and its Sublicensees, for minimum limits of [ ] combined single limit for bodily injury and property damage per occurrence and in the aggregate. Such insurance shall include Columbia, its respective trustees, directors, officers, employees and agents as additional insureds. The Company shall furnish a certificate of insurance evidencing such coverage, with thirty (30) days' written notice to Columbia of cancellation or material change. c. The Company's insurance shall be primary coverage; any insurance Columbia may purchase shall be excess and noncontributory. Such insurance shall be written to cover claims incurred, discovered, manifested, or made during or after the expiration of this Agreement. 13. PATENT MARKING. To the extent required by and in conformance with any applicable laws, the Company will, prior to the issuance of patents, mark Licensed Products made, sold, or otherwise disposed of by it under the license granted in this Agreement with the words "Patent Pending," and following the issuance of one or more patents, with the numbers of such patents. Company shall use its reasonable efforts to ensure that all Licensed Products bear all other notices and legends required by applicable laws to preserve and protect the validity of the Licensed Patents and Licensed Technical Information and Columbia's rights therein. 14. EXPORT CONTROL LAWS. This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States of America which may be imposed from time to time by the government of the United States of America. Furthermore, each party hereto agrees that it will not export or re-export, directly or indirectly, any technical information acquired from the other under this Agreement or any products using such technical information to any country for which the United States government or any agency thereof at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the Department of Commerce or other agency of the United States government when required by an applicable statute or regulation. 15. BREACH AND CURE. 15 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. a. In addition to applicable legal standards, the Company shall be considered to be in material breach of this Agreement for: (i) failure to pay fully and promptly amounts due pursuant to Section 5 and payable pursuant to Section 6 of this Agreement; (ii) failure of the Company to meet its obligations under Section 7 of this Agreement; (iii) failure to reimburse Columbia for or pay fully and promptly the costs of prosecuting and maintaining Licensed Patents pursuant to Section 11; or (iv) failure to comply with governmental requests directed to Columbia or the Company pursuant to Section 10(b). b. Either party shall have the right to cure its material breach. The cure shall be effected within a reasonable period of time but in no event later than sixty (60) days after notice of any breach given by the non-breaching party, provided that, in the case of failure of the Company to meet its obligations under Section 7 of this Agreement, such period shall be six (6) months plus any period for which such failure was beyond the Company's reasonable control, and the Company shall have the right to further extend such period by one (1) year upon payment to Columbia of a one-time fee of [ ] that shall not be creditable against any amounts owed by Company to Columbia under this Agreement. 16. TERM OF AGREEMENT. a. This Agreement shall be effective as of the date first set forth above and shall continue in full force and effect until its expiration or termination in accordance with this Section 16. b. Unless terminated earlier under any provision of this Agreement, the term of the licenses granted hereunder shall extend, on a country-by country basis, until the date of expiration of the last to expire of the Licensed Patents, at which time the licenses granted hereunder shall become fully paid-up. c. The license granted under this Agreement may be terminated by Columbia: (i) upon thirty (30) days written notice to the Company if Columbia elects to terminate in accordance with Section 7(e); (ii) upon written notice to the Company for the Company's material breach of this Agreement and the Company's failure to cure such material breach in accordance with Section 15(b); or (iii) should the Company commit any act of bankruptcy, become insolvent, file a petition under any bankruptcy or insolvency act or have any such petition filed against it. d. Notwithstanding the foregoing, Company shall have the right, on a country-by-country basis, to terminate, upon ninety (90) days written notice to Columbia, the license rights granted under Section 3 of this Agreement with respect to any Licensed Patent(s) and/or Licensed Technical Information. In such event, such license rights granted to 16 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. Company under Section 3 of this Agreement, with respect to such Licensed Patent(s), Licensed Technical Information and/or specific country in the Territory shall terminate, and Columbia shall be free, in the exercise of its sole discretion, to license or otherwise transfer such right(s) to any party as it deems appropriate. In the event of such termination by Company under this subsection (d), all other terms and conditions of this Agreement shall remain in full force and effect. e. Upon any termination of this Agreement pursuant to Section 16(c), any Sublicensees of Company under this Agreement shall survive and shall be assigned to Columbia. f. Sections 4, 8, 9, 10, 12, 16(f), 17, and 22 will survive any termination or expiration of this Agreement. 17. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and shall be considered given: (i) when mailed by certified mail (return receipt requested), postage prepaid, or (ii) on the date of actual delivery by hand or overnight delivery, with receipt acknowledged, if to Columbia, to: Executive Director Science and Technology Ventures Columbia Innovation Enterprise Columbia University Engineering Terrace, Suite 363 500 West 120th Street, Mail Code 2206 New York, New York 10027 -- copy to: General Counsel Columbia University 412 Low Memorial Library 535 West 116th Street, Mail Code 4308 New York, New York 10027 -- if to Company, to: Vice President, Corporate Development Viventia Biotech, Inc. 10 Four Seasons Place Toronto, Ontario M9B 6H7 Canada copy to: Chief Financial Officer 17 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. Viventia Biotech, Inc. 10 Four Seasons Place Toronto, Ontario M9B 6H7 Canada or to such other address as a party may specify by notice hereunder. 18. ASSIGNMENT. This Agreement and all rights and obligations hereunder may not be assigned by either party without the written consent of the other party, such consent not to be unreasonably withheld; except no consent shall be required for the Company to assign to an Affiliate or to a purchaser of all or substantially all of the assets of Company related to the subject matter hereof or to the purchaser of rights in or to a Licensed Product. Any attempt to assign without compliance with this provision shall be void. 19. WAIVER. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party thereafter of the right to insist upon strict adherence to that term or any other term of this Agreement. All waivers must be in writing and signed by an authorized representative of the party against which such waiver is being sought. 20. NO AGENCY OR JOINT VENTURE. Company is not an agent, joint venturer, or partner of Columbia, and the parties have not created and do not intend to create an agency, joint venture, or partner relationship. 21. ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the Exhibits, sets forth the entire agreement between the parties concerning the subject matter hereof and supersedes all previous agreements, written or oral, concerning such subject matter. This Agreement may be amended only by written agreement duly executed by the parties. 22. GOVERNING LAW. 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. This Agreement shall be governed by New York Law applicable to agreements made and to be performed in New York. IN WITNESS THEREOF, Columbia and the Company have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above. THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK By: /s/Michael Cleare -------------------------------------------- Executive Director, Science and Technology Ventures Columbia Innovation Enterprise VIVENTIA BIOTECH, INC. By: /s/Nick Glover -------------------------------------------- Name: Nick Glover, Ph.D. Title: Vice President, Corporate Development 19 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT A 1. Ilya Trakht and Gavreel Kalantarov, "Development of Human Monoclonal Antibodies Directed To Tumor-associated Antigens, Tumor Cells Infectious Agents, Infection-specific Antigens, etc.", U.S. Serial No. 09/040,833, filed March 18, 1998, now U.S. Patent No. 6,197,582, issued March 6, 2001. 2. PCT International Application No. PCT/US99/05828, filed March 8, 1999. 3. Canadian Patent Application No. 2,323,681, filed March 18, 1999. 4. European Patent Application No. 99913925.6, filed March 18, 1999. 5. Japanese Patent Application No. 2000-537073, filed March 18, 1999. 6. Ilya Trakht, "Development of Human Monoclonal Antibodies And Uses Thereof," U.S. Serial No. 09/664,485, filed September 18, 2000, continuation of PCT International Application No. PCT/US99/05828, filed March 18, 1999, on behalf of The Trustees of Columbia University in the City of New York, claiming priority of and a continuation-in-part of U.S. Serial No. 09/040,833, filed March 18, 1998. 7. Ilya Trakht, "Development of Human Monoclonal Antibodies And Uses Thereof," U.S. Serial No. 09/767,578, filed January 23, 2001, a continuation of U.S. Serial No. 09/040,833, filed March 18, 1998, now allowed. 20 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT B 1. Hybridoma cell lines generated using MFP-2 that are producing potentially useful antibodies. 2. Reasonable quantities of purified antibodies for further characterization by the Company. 3. Information on the identity of antigens recognized by selected monoclonal antibodies generated as a result of research sponsored by the Company. 21 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT C No related Federal funding as of Effective Date. 22 EX-3.14 21 t17062exv3w14.txt EXHIBIT 3.14 EXHIBIT 3.14 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. AMENDMENT NUMBER 1 This AMENDMENT, dated as of December 19, 2003 to the Exclusive License Agreement between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK and VIVENTIA BIOTECH, INC. dated June 23, 2003. WHEREAS, the parties entered into an Exclusive Option Agreement dated March 1, 2002, attached hereto and incorporated herein as Exhibit A, (the "Option") relating to certain research of Dr. Ilya Trakht at Columbia relating to MFP-2 (the "Field"); and WHEREAS, the parties have entered into an Exclusive License Agreement dated June 23, 2003, attached hereto and incorporated herein as Exhibit B, (the "License") relating to the Field; and WHEREAS, the parties wish to amend the License in accordance with the financial terms in the Option; NOW, THEREFORE, the parties agree as follows: 1) The first three lines of the first sentence in Section 5(a)(ii) of the License are deleted and replaced by the following: "Company, Affiliate, and Collaborative Sublicensees shall pay to Columbia a royalty of [ ] ( %) on Company, Affiliate, and Collaborative Sublicensee Net Sales, provided that in the event that with ... " (the remainder of the sentence being the same as in Section 5(a)(ii) of the License). 2) All terms that are defined in the License shall have the same meaning in this Amendment #1. 3) All other terms and conditions of the License are confirmed and remain in full force and effect.. IN WITNESS WHEREOF, Columbia and the Company have caused this Amendment #1 to be executed by their duly authorized representatives as of the day and year first written above. [SIGNATURES ON FOLLOWING PAGE] CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK By: /s/Michael Cleare --------------------------------------------- Michael J. Cleare, PhD Executive Director Science & Technology Ventures Date: January 5, 2004 --------------------------------------------- VIVENTIA BIOTECH, INC. By: /s/Nick Glover --------------------------------------------- Nick Glover, Ph.D. Vice President, Corporate Development & Product Operations Date: December 19, 2003 --------------------------------------------- EX-3.15 22 t17062exv3w15.txt EXHIBIT 3.15 EXHIBIT 3.15 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. LICENSE AGREEMENT BETWEEN MCGILL UNIVERSITY AND NOVOPHARM LIMITED EFFECTIVE THE TWENTY-EIGHTH (28TH) DAY OF APRIL, 1994 1 PREAMBLE 1.1 IDENTIFICATION OF THE PARTIES 1.1.1 This LICENSE AGREEMENT is entered into between MCGILL UNIVERSITY (hereinafter referred to as "MCGILL"), with principal offices at 845 Sherbrooke St. W., Montreal, Quebec, Canada H3A 2T5, and NOVOPHARM LIMITED (hereinafter referred to as "NOVOPHARM"), a pharmaceutical company having its principal office at 30 Nably Court, Scarborough, Ontario, Canada M1B 2K9. 1.1.2 This LICENSE AGREEMENT is effective as of the twenty- eighth (28th) day of April, 1994. 1.2 LICENSEE REPRESENTATIONS NOVOPHARM desires to obtain exclusive license rights to the LICENSED TECHNOLOGY, under the terms and conditions of this LICENSE AGREEMENT. 1.3 LICENSOR REPRESENTATIONS 1.3.1 MCGILL is the owner of the entire right, title and interest in the LICENSED TECHNOLOGY. 1.3.2 Dr. G.B. Price of the McGill Cancer Centre, the original inventor of the ideas embodied in the LICENSED TECHNOLOGY, as defined herein, has assigned his interest(s) in the LICENSED TECHNOLOGY to MCGILL which has the exclusive right to issue this LICENSE AGREEMENT granting NOVOPHARM rights to the LICENSED TECHNOLOGY. 1.3.3 MCGILL is an institution of higher education and is not in the business of commercially developing ideas, inventions, or other types of intellectual properties which are a by-product of research performed to further MCGILL's goals and objectives. 1.4 NOW THEREFORE In consideration of the foregoing premises, the mutual covenants and obligations hereinafter contained, and other good and valuable consideration, MCGILL and NOVOPHARM agree as follows: 1 2 DEFINITIONS 2.1 USAGE For the purposes of this LICENSE AGREEMENT, the following terms, words, and phrases, when used in the singular or plural, shall have the meanings given to them in this Section. 2.2 LICENSOR "MCGILL UNIVERSITY," as abbreviated "MCGILL," means the university by that name having its principal office at 845 Sherbrooke St. W., Montreal, Quebec, Canada H3A 2T5, and shall also include all AFFILIATES. MCGILL is the licensor in this LICENSE AGREEMENT. 2.3 LICENSEE "NOVOPHARM LIMITED," as abbreviated "NOVOPHARM," means the pharmaceutical company by that name having its principal office at 30 Nably Court, Scarborough, Ontario, Canada M1B 2K9 and shall also include all AFFILIATES. NOVOPHARM is the licensee in this LICENSE AGREEMENT. 2.4 TECHNOLOGY TO BE LICENSED The intellectual property licensed in this LICENSE AGREEMENT shall be known as a myeloma-like cell line [ ] which is identified in the publication entitled [ ] with a similar pattern of reactivity against a panel of human tumor cell lines and a lack of reaction with normal human astrocytes. 2.5 AFFILIATE "AFFILIATE" means, with respect to a party of this LICENSE AGREEMENT, any individual or entity which directly or indirectly controls, is controlled by, or is under common control with such party. The term "control" means possession, direct or indirect, of the powers to direct or cause the direction of the management or policies of a person or entity; whether through ownership of equity participation, voting securities, or beneficial interests; by contract; by Agreement; or otherwise. 2.6 CALENDAR YEAR "CALENDER YEAR" means a period of twelve (12) months in the Gregorian Calender beginning on January 1 and ending on December 31. 2.7 DATE OF COMMERCIALIZATION "DATE OF COMMERCIALIZATION" means the date that the LICENSED PRODUCT(S) are first marketed or publicly made available. 2 2.8 EFFECTIVE DATE "EFFECTIVE DATE" means the twenty-eighth (28th) day of April, 1994, which is the date upon which this LICENSE AGREEMENT becomes effective. 2.9 FAIR MARKET VALUE "FAIR MARKET VALUE" means the gross sales price or value which NOVOPHARM would realize from an unaffiliated, unrelated buyer in an arm's length sale or exchange of consideration for an identical item or service sold or provided in the same quantity and at the same time and place as the sale or exchange for which the FAIR MARKET VALUE is to be determined. 2.10 GROSS REVENUES "GROSS REVENUES" means all sales, revenues, receipts, monies, and considerations, directly or indirectly, collected or received by NOVOPHARM from the sale, lease, or other transfer of LICENSED PRODUCTS, whether such is received in cash or by way of other benefit, advantage, or concession. If received in a form other than cash, the applicable revenue will be the monetary equivalent or FAIR MARKET VALUE of the benefit, advantage, or concession. 2.11 LICENSE AGREEMENT "LICENSE AGREEMENT" means the license agreement, defined by the document in which this paragraph appears. This LICENSE AGREEMENT is between MCGILL UNIVERSITY, as licensor, and NOVOPHARM LIMITED as licensee. Also included in this LICENSE AGREEMENT are all Exhibits attached hereto and all amendments which may be made thereto. 2.12 LICENSED PRODUCT "LICENSED PRODUCT" means any product, apparatus, method, or SERVICE the production, manufacture, sale, lease, USE, or practice of which incorporates or makes USE of any part (including progeny, mutants, derivatives or part thereof) of the LICENSED TECHNOLOGY. 2.13 LICENSED TECHNOLOGY "LICENSED TECHNOLOGY" means all technology within the scope of the [ ] cell line, owned or controlled by MCGILL, as of the EFFECTIVE DATE with the exclusion of the [ ] already covered, by the Sponsored Research and [ ] more specifically, [ ] and since abandoned. 2.14 NET SALES "NET SALES" means the gross sales price or fees; whether or not invoiced, billed, or received by NOVOPHARM from a third party attributable to NOVOPHARM's sale, lease, or transfer of any LICENSED PRODUCT; less qualifying costs directly attributable to such USE, sales, lease, or transfer and actually allowed and borne by NOVOPHARM. Such qualifying costs shall be limited to costs of the following: 3 2.14.1 Credits or refunds, not exceeding the original or customary billing or invoice amount, for claims or returns. 2.14.2 Packaging. 2.14.3 Prepaid transportation insurance premiums. 2.14.4 Prepaid outbound transportation expenses. 2.14.5 Handling charges. 2.14.6 Taxes; including sales, use, turnover, excise, import, export, and other taxes or duties, separately billed or invoiced, and borne by NOVOPHARM, imposed by a government agency on such sales, lease, or transfer. 2.14.7 Samples and discounts, in amounts customary in the trade, for quantity purchases, cash payments, prompt payments, wholesalers and distributors. 2.15 OCCURRENCE OF SALE A LICENSED PRODUCT shall be deemed sold, leased, or transferred at the time NOVOPHARM bills, invoices, ships, or receives payment for such LICENSED PRODUCT, whichever event occurs first. 2.16 INCORPORATION OF LICENSED PRODUCT In the event any LICENSED PRODUCT is incorporated into a larger product or broader use, not considered in its totality to be a LICENSED PRODUCT, the monetary value of such incorporated LICENSED PRODUCT shall be the higher of (A) the money received by NOVOPHARM for similar LICENSED PRODUCT in an equivalent quantity and in an arm's length transaction, with a nonaffiliated third party, occurring, at or near the same time and location; or (B) after taking into consideration NOVOPHARM's cost of the larger product or service without the incorporated LICENSED PRODUCT as compared to their cost of the larger product or service without the incorporated LICENSED PRODUCT as compared to their cost of the larger product or service with the incorporated LICENSED PRODUCT, that portion of the money or monetary equivalent of the larger product or service, fairly attributable to the value added or saved by incorporation of the LICENSED PRODUCT. 2.17 SERVICE "SERVICE" means, if used as a verb, to repair, adjust, maintain or otherwise recondition a licensed product after it has been USED, sold, leased or transferred, directly or indirectly, by NOVOPHARM. "SERVICE" means, if used as a noun, any USE of the LICENSED TECHNOLOGY by NOVOPHARM, or any other party authorized, directly or indirectly, by NOVOPHARM with rights to USE the LICENSED TECHNOLOGY to facilitate the desires of another party. 2.18 TERRITORY "TERRITORY" means the world. 4 2.19 USE "USE" means any form of practice or utilization of the LICENSED TECHNOLOGY, LICENSED PRODUCT(S), or any portion thereof. 3 GRANT 3.1 GRANT OF RIGHTS Subject to the terms and conditions of this LICENSE AGREEMENT, MCGILL hereby grants to NOVOPHARM exclusive royalty bearing license rights to sell in the TERRITORY, where MCGILL may lawfully grant such license rights, the LICENSED TECHNOLOGY for the term of this LICENSE AGREEMENT. 3.2 RIGHTS RESERVED Notwithstanding the exclusive license granted herein, MCGILL specifically reserves the rights to USE the LICENSED TECHNOLOGY for its own internal purposes, including continuing research, development, testing, and all other related USES. 4 TERM AND TERMINATION 4.1 TERM OF AGREEMENT The term of this LICENSE AGREEMENT shall commence on its EFFECTIVE DATE and this LICENSE AGREEMENT shall terminate ten (10) years from the DATE OF COMMERCIALIZATION of the first LICENSED PRODUCT or on the twentieth (20th) year anniversary of the EFFECTIVE DATE, whichever date shall occur first, unless this LICENSE AGREEMENT earlier terminates by operation of law or by acts of the parties in accordance with the terms of this LICENSE AGREEMENT. 4.2 LICENSEE'S RIGHTS TO TERMINATION NOVOPHARM may terminate this LICENSE AGREEMENT after it has been in effect for one year. In order to terminate, NOVOPHARM must give written notice of its intent to terminate at least sixty (60) days prior to actual termination. 4.3 LICENSOR'S RIGHTS TO TERMINATION 4.3.1 Upon any material breach of or default under this LICENSE AGREEMENT by NOVOPHARM, MCGILL may terminate this LICENSE AGREEMENT. 4.3.2 MCGILL shall give NOVOPHARM written notice of termination prior to terminating this LICENSE AGREEMENT. Such notice shall state the cause(s) for termination and the procedures, if any, NOVOPHARM must follow to prevent such termination. NOVOPHARM shall have thirty (30) days after the effective date of the notice to remedy the stated cause(s) for termination, according to the procedures stated, otherwise this LICENSE AGREEMENT and all rights granted NOVOPHARM, shall automatically terminate at the end of the thirtieth (30th) day. 5 4.3.3 In the event NOVOPHARM ceases conducting business in a normal course, becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes subject to, any proceeding under the Federal Bankruptcy Act or any other statute of any state or country relating to insolvency or the protection of creditor rights, this LICENSE AGREEMENT shall immediately and automatically terminate at the occurrence of any such event. 4.4 RESULTS OF TERMINATION 4.4.1 Termination of this LICENSE AGREEMENT shall not release MCGILL or NOVOPHARM from any obligation or liability to the other which shall have matured prior to termination, nor shall termination rescind or require repayment of any payment or consideration made or given by either party, except as otherwise provided herein. If the terms of this LICENSE AGREEMENT expressly state that a right or obligation shall survive termination of this LICENSE AGREEMENT, such right or obligation shall survive termination to the degree necessary to allow complete fulfillment or discharge of the right or obligation. The following rights and obligations, in addition to others as provided herein, shall survive termination. (A) NOVOPHARM shall make all reports as required herein prior to termination, and additionally shall prepare a termination report as reasonably required by MCGILL. (B) NOVOPHARM shall pay all royalties or other payments due MCGILL accrued or accruable for payment prior to or after termination, and all such royalties and payments accruable prior to termination shall become immediately due and payable at the time of termination. (C) At all times, both before and after termination, NOVOPHARM shall maintain all records required to be kept herein and shall allow MCGILL audit privileges as defined herein, upon fifteen (15) days' prior written notice to NOVOPHARM. (D) All claims and causes of action MCGILL may have against NOVOPHARM shall survive termination of this LICENSE AGREEMENT. 4.4.2 Should this LICENSE AGREEMENT be terminated for any reason, excepting a material breach by MCGILL, NOVOPHARM shall cease all USE of the LICENSED TECHNOLOGY, and excepting sales of inventory, which shall be subject to the terms of this LICENSE AGREEMENT, NOVOPHARM shall cease all sale or transfer of the LICENSED PRODUCT(S). 5 LICENSING CONSIDERATION 5.1 LICENSE ISSUE FEE In consideration of the license granted herein, the costs incurred and services rendered by MCGILL, NOVOPHARM shall, on the EFFECTIVE DATE, pay to MCGILL a license issue fee of [ ] The license issue fee shall be nonrefundable and may not be credited toward the payment of any royalties or other consideration required by this LICENSE AGREEMENT. 6 ROYALTIES 6.1 EARNED ROYALTIES In consideration for the license granted in this LICENSE AGREEMENT, 6 NOVOPHARM shall make payments to MCGILL in the manner designated below, an earned royalty of 3% of NET SALES beginning on the DATE OF COMMERCIALIZATION and continuing until termination of this LICENSE AGREEMENT. 6.2 ANNUAL MAINTENANCE FEES 6.2.1 In order to maintain the license granted herein, NOVOPHARM shall pay to MCGILL an assessed minimum annual maintenance fee of [ ] on the second and each succeeding anniversary of the EFFECTIVE DATE, for as long as this LICENSE AGREEMENT is in effect. 6.2.2 Annual maintenance fees shall be nonrefundable and shall be credited only against earned royalties payable by NOVOPHARM to MCGILL in the calendar year for which the minimum is payable and shall not be commuted from one calendar year to the next. 6.3 DILIGENCE PAYMENTS If NOVOPHARM has not filed [ ] with the Canadian Dept. of Health and Welfare and/or the U.S. Food and Drug Administration, relating to the LICENSED PRODUCT, within forty-eight (48) months of the EFFECTIVE DATE, NOVOPHARM shall pay MCGILL [ ] in order to maintain rights under this LICENSE AGREEMENT. If NOVOPHARM has not commenced [ ] on LICENSED PRODUCT within [ ] of the EFFECTIVE DATE, NOVOPHARM shall pay MCGILL [ ] in order to maintain rights under this LICENSE AGREEMENT. If NOVOPHARM has not commenced [ ] on LICENSED PRODUCT within [ ] of the EFFECTIVE DATE, NOVOPHARM shall pay MCGILL [ ] in order to maintain rights under this LICENSE AGREEMENT. 6.4 MILESTONE PAYMENTS NOVOPHARM shall, upon meeting the following development milestones, immediately make payments to MCGILL of the amounts listed below:
Event Amount ----- ------ Filing of [ ] on LICENSED PRODUCT [ ] [ ] submission on [ ] LICENSED PRODUCT [ ] Approval of LICENSED PRODUCT [ ]
7 6.5 RESEARCH PROGRAM Contemporaneously with this Agreement NOVOPHARM shall enter into a Research Agreement with MCGILL in the form attached hereto as EXHIBIT A. 7 PAYMENTS AND REPORTS 7.1 PAYMENTS 7.1.1 Any amount due MCGILL as the result of each LICENSED PRODUCT being USED, sold, leased, or transferred pursuant to the license rights granted through this LICENSE AGREEMENT; shall accrue at the time NOVOPHARM USES or performs SERVICES USING such LICENSED PRODUCT, bills, invoices, ships, or receives payment for such LICENSED PRODUCT; whichever event occurs first. All amounts accrued for the benefit of MCGILL shall be deemed held in trust for the benefit of MCGILL until payment of such amounts is made pursuant to this LICENSE AGREEMENT. 7.1.2 Unless otherwise specified in this LICENSE AGREEMENT, all payment amounts due MCGILL under this LICENSE AGREEMENT shall be paid within thirty (30) days following the end of the CALENDAR YEAR in which such payment accrues or NOVOPHARM otherwise incurs the obligation to pay such amounts. 7.1.3 All such payments shall be remitted to MCGILL's address given in the notification provision of this LICENSE AGREEMENT or to such other address as MCGILL shall direct. 7.1.4 NOVOPHARM shall pay to MCGILL a one-time late fee of 20% of any payment required under this LICENSE AGREEMENT, if the payment is more than fifteen (15) days late. Such late fee shall be paid within thirty (30) days after the date on which the required payment was due. In addition, NOVOPHARM shall pay to MCGILL interest on any amounts not paid when due. Such interest will accrue from the fifteenth (15th) day after the payment was due at a rate of five percent (5%) per annum, and the interest payment will be due and payable on the first day of each month after interest begins to accrue until full payment of all amounts due MCGILL is made. 7.2 PAYMENTS IN CANADIAN DOLLARS NOVOPHARM shall make payment of any amounts due MCGILL under this LICENSE AGREEMENT in Canadian dollars. 7.3 REPORTS 7.3.1 NOVOPHARM shall keep, at its own expense, accurate books of account, using accepted accounting procedures, detailing all data necessary to calculate and easily audit any payments due MCGILL from NOVOPHARM under this LICENSE AGREEMENT. 8 7.3.2 Each payment made to MCGILL shall be accompanied by a written report summarizing, in sufficient detail to allow MCGILL to verify all payment amounts, the data used to calculate the amounts paid. Each report pertaining to royalty payments for the applicable accounting period shall specifically include the following, as applicable: (A) NET SALES amounts. (B) Royalties due. 7.3.3 Each periodic payment and associated written report shall be certified as true, complete, and accurate by a statement signed by one of NOVOPHARM's directors or officers. 8 PERFORMANCE During the term of this LICENSE AGREEMENT, NOVOPHARM shall use its best efforts to commercialize the LICENSED TECHNOLOGY within the TERRITORY. 9 WARRANTIES 9.1 NO WARRANTY OF MERCHANTABILITY OF LICENSED TECHNOLOGY MCGILL MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE LICENSED TECHNOLOGY, NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. ALL MCGILL DELIVERABLES ARE MADE AVAILABLE TO NOVOPHARM STRICTLY ON AN "AS IS" BASIS. MCGILL DOES NOT WARRANT THAT THE LICENSED TECHNOLOGY IS ERROR FREE OR THAT IT WILL MEET NOVOPHARM REQUIREMENTS. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY DISCLAIMED AND EXCLUDED. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF LICENSED TECHNOLOGY, DELIVERABLES, AND ANY PRODUCTS, SERVICES OR METHODS BASED ON THE LICENSED TECHNOLOGY IS ASSUMED BY NOVOPHARM. 9.2 NO WARRANTY OF LIABILITY FOR LICENSED PRODUCT MCGILL MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES,EXPRESS OR IMPLIED, AND ASSUMES NO LIABILITIES OR RESPONSIBILITIES WITH RESPECT TO THE USE, SALE, OR OTHER DISPOSITION BY NOVOPHARM, ANY AFFILIATE, VENDEES OR TRANSFEREES OF LICENSED PRODUCT(S) OR THE LICENSED TECHNOLOGY. 10 GENERAL PROVISIONS 10.1 ASSIGNMENT This LICENSE AGREEMENT may not be assigned or transferred by NOVOPHARM without the prior written consent of MCGILL. Such consent shall not be unreasonably withheld. 9 10.2 ATTORNEYS' FEES In the event any suit or other proceeding is reasonably necessary and is commenced to construe, enforce, or terminate any provision of this LICENSE AGREEMENT, the nonprevailing party shall pay the prevailing party, in addition to all other amounts to which the prevailing may be entitled, a reasonable sum for attorneys' fees and costs incurred by the prevailing party in such suit or proceeding. 10.3 ENTIRE AGREEMENT This LICENSE AGREEMENT constitutes the entire agreement and understanding between MCGILL and NOVOPHARM with respect to the LICENSED TECHNOLOGY, and any modification of this LICENSE AGREEMENT shall be in writing and shall be signed by a duly authorized representative of both MCGILL and NOVOPHARM. There are no understandings, representations, or warranties between MCGILL and NOVOPHARM concerning the LICENSED TECHNOLOGY except as expressly set forth in this LICENSE AGREEMENT. 10.4 GOVERNING LAW This LICENSE AGREEMENT shall be deemed to have been made in Province of Ontario and shall be governed and construed in accordance with the laws of the Province of Ontario. 10.5 FORCE MAJEURE Neither MCGILL not NOVOPHARM shall be in default of the terms of this LICENSE AGREEMENT because the party delays performance or fails to perform such terms; provided such delay or failure is not the result of the party's intentional or negligent acts or omissions, but the result of causes beyond the reasonable control of such party. Causes reasonably beyond the control of MCGILL and NOVOPHARM shall include, but not be limited to, revolutions; civil disobedience; fires; acts of God, war, or public enemies; blockades; embargoes; strikes; labor disputes; laws; governmental, administrative or judicial orders, proclamations, regulations, ordinances, demands, or requirements; delays in transit or deliveries; or inability to secure necessary permits, permissions, raw materials, or equipment. 10.6 MEDIATION Any disputes which arise between the parties under this LICENSE AGREEMENT, shall be referred to the senior staff of both parties respectively, who shall meet and make a good faith effort to resolve the matter. In the event the parties fail to resolve such dispute by negotiations the matter shall be submitted first to mediation by a mediator chosen jointly by the parties involved. If after ninety (90) days the dispute has not been resolved by mediation, the dispute shall automatically go to arbitration. 10.7 ARBITRATION 10.7.1 Arbitration shall be governed by the International Commercial Arbitration Act (Ontario) and shall take place in Toronto, Ontario if the party desiring arbitration is MCGILL and shall take place in Montreal, Quebec if the party desiring arbitration is NOVOPHARM and the arbitrators shall apply Ontario law in reaching decisions. 10 10.7.2 The party desiring such arbitration shall give written notice to that effect and shall in such notice appoint as one of the arbitrators a disinterested person of recognized competence in the medical field, who shall have experience in arbitrating disputes arising under agreements dealing with subject matters similar to the subject matter hereof. Within fifteen (15) business days thereafter, the other party shall, by written notice to the originating party, appoint as one of the arbitrators a second disinterested person having the foregoing qualifications. Unless the parties have agreed upon and appointed a third arbitrator within ten (10) business days of the appointment of the second arbitrator, the two arbitrators appointed by NOVOPHARM and MCGILL shall select a third disinterested person having the foregoing qualifications within twenty (20) business days of the appointment of the second arbitrator. If the two arbitrators fail to agree upon the selection of such third arbitrator within such twenty (20) business day period, either NOVOPHARM or MCGILL upon written notice to the other may apply to the Ontario Court (General Division) for the appointment of a third arbitrator. If the second arbitrator shall not have been appointed as aforesaid, the first arbitrator shall proceed to determine the matter in dispute. The arbitrators thus appointed shall use all reasonable efforts to determine the matter in dispute as soon as practicable and in any event within thirty (30) business days of the appointment of the third arbitrator. 10.7.3 Each party shall be entitled to present evidence and argument to the arbitrators. The arbitrators shall have the right only to interpret and apply (and not change) the provisions of this LICENSE AGREEMENT and may not deprive NOVOPHARM or MCGILL of any right or remedy provided by this LICENSE AGREEMENT or at law. 10.7.4 The determination of the majority of the arbitrators shall be conclusive and binding upon the parties and judgment upon the same may be entered in any court having jurisdiction. The arbitrators shall give written notice to the parties stating their determination and shall furnish to each party a signed copy of such determination. 10.7.5 In the event of failure, refusal or inability of any arbitrator to act, a new arbitrator shall be appointed in his stead, which appointment shall be made in the same manner as provided above for the appointment of the arbitrator so failing, refusing or unable to act. 10.7.6 The expenses of any arbitration hereunder shall be borne as awarded by the arbitrators, or, in the absence of such an award, shall be borne equally by NOVOPHARM and MCGILL. 10.7.7 The parties shall act in good faith and shall act diligently to proceed with and complete the arbitration proceedings. 10.8 HEADINGS The section and subsection titles and headings contained in this LICENSE AGREEMENT are for convenience and reference only. Such titles and headings do not form a part of this LICENSE AGREEMENT, shall not define or limit the scope of the sections or subsections, and shall not affect the construction or interpretation of any of the sections or subsections. 10.9 NOTICES All notices, reports, payments, requests, consents, demands and other communications between MCGILL and NOVOPHARM, pertaining to subjects related to this 11 LICENSE AGREEMENT, shall be in writing and shall be deemed duly given and effective (A) when actually received by mail or personal delivery, or (B) when mailed by prepaid registered or certified mail to the receiving party at the address set faith below, or to such other address as may be later designated by written notice from either party to the other party, or (C) when sent by telecopier, telex or other similar means of electronic communication on the second day following the sending thereof: MCGILL's Notification Address: Director, Office of Technology Transfer, MCGILL UNIVERSITY, 3550 University St., Montreal, Quebec, Canada H3A 2A7; tel. (514) 398-4201, fax. (514) 398-8479. NOVOPHARM's Notification Address: President, NOVOPHARM LIMITED, 30 Nably Court, Scarborough, Ontario, Canada M1B 2K9; tel. (416) 291-8876, fax. (416) 291-2162. 10.10 USE OF NAME NOVOPHARM shall not, without prior written consent from MCGILL in each specific case, use MCGILL's name, trademark(s), or any adaptations thereof. 10.11 CONFIDENTIALITY 10.11.1 MCGILL and NOVOPHARM agree that, except as may otherwise be required by applicable laws, regulations, or orders, no information concerning this LICENSE AGREEMENT, and the transactions contemplated herein shall be made public by either party without the prior written consent of the other. 10.11.2 MCGILL and NOVOPHARM agree that they shall be released from their respective obligations under this section 10.11 hereof on the date when, through no fault or omission of the party seeking such release, such information (A) is disclosed in published literature; or (B) is generally available to the relevant industry; or (C) is obtained by the party seeking such release from a third party without binder of secrecy, provided, however, that such third party has no confidentiality obligations to the other party to this LICENSE AGREEMENT. 10.12 PUBLICATION In the event that MCGILL wishes to publish or make available to the public, any material with respect to (without limitation), the LICENSED TECHNOLOGY and/or the LICENSED PRODUCT, MCGILL shall furnish to NOVOPHARM a copy of such proposed publication at least thirty (30) days in advance of the proposed publication date. NOVOPHARM shall have the right to object to said publication if, in NOVOPHARM's opinion, the aforesaid publication may result in a disclosure of confidential information or information that may be detrimental to the sale of the LICENSED PRODUCT, NOVOPHARM shall provide to MCGILL within the said thirty (30) days, particulars of its objections to said publication. Upon receiving such notification from NOVOPHARM, MCGILL shall edit the information to NOVOPHARM's satisfaction prior to publication. 12 10.13 WAIVER OF RIGHTS In order to be effective, any waiver, by either party, of any right under this LICENSE AGREEMENT, must be in writing signed by an authorized representative of the party making the waiver. No such waiver or failure of MCGILL or NOVOPHARM to enforce a right or strict performance under this LICENSE AGREEMENT shall be deemed to be a waiver or forbearance which would in any way prevent MCGILL or NOVOPHARM from subsequently asserting or exercising any such rights, making a claim not specifically waived, or requiring strict performance of this LICENSE AGREEMENT. No such waiver or failure to enforce shall affect the validity of this LICENSE AGREEMENT or be a continuing waiver excusing compliance with any provision of this LICENSE AGREEMENT in the future. 10.14 LANGUAGE The parties hereto hereby acknowledge that they have required this LICENSE AGREEMENT to be drawn up in the English language. Les parties reconnaissent avoir demande que le present contrat de licence soit redige en langue anglaise. 10.15 SIGNATURES IN WITNESS WHEREOF, MCGILL and NOVOPHARM have caused this LICENSE AGREEMENT to be executed in duplicate originals by their duly authorized representative. LICENSOR: LICENSEE: MCGILL UNIVERSITY NOVOPHARM LIMITED Representing Licensor: Representing Licensee: /s/ R.D. Brassinga /s/ Leslie L. Dan - ---------------------- ----------------------- Signature Signature April 26, 1994 April 28, 1994 - ---------------------- ----------------------- Date Date R.D. Brassinga Leslie L. Dan - ---------------------- ----------------------- Name of Representative Name of Representative Assoc. Dir., OTT Chairman and CEO - ---------------------- ----------------------- Title of Representative Title of Representative /s/ Gerald B. Price /s/ Amita Kent - ---------------------- ----------------------- Witness Witness 13 EXHIBIT A SPONSORED RESEARCH AGREEMENT - MCGILL UNIVERSITY This will confirm the agreement between NOVOPHARM LTD. of Scarborough, Ontario M1P 2Y1 ("NOVOPHARM") and McGill University ("MCGILL") whereby NOVOPHARM is prepared to support studies conducted at MCGILL on "An exploration of the regulation of polyamine transport in human disease" ("Project") as described in Appendix A, under the direction of Dr. G.B. Price of the McGill Cancer Centre. Dr. G.B. Price will direct and conduct the research in accordance with the research policy and guidelines of MCGILL. DURATION Funding under this Agreement is awarded to conduct research for a twenty four-month period starting April 28, 1994. ALLOTTED FUNDS The total amount of funding shall not exceed Cdn [ ] except with the prior written approval of NOVOPHARM. Funding includes expenses for personnel, animals, equipment, consumables and administration (as described in Appendix B). Payments shall be received in two bi-annual instalments commencing with the starting date of the Project. The execution of the research may also be supported by funds from other research organizations and the University. The investigator shall have freedom within the allotted amount to rebudget within the categories outlined in Appendix B in order to utilize funds in the best interest of the study. REPORTING NOVOPHARM shall receive a comprehensive report on the activities and results of the research project no later than 90 days after its completion. A report of expenditure shall accompany this report. If the project period exceeds 12 months, NOVOPHARM shall receive brief annual reports on the progress of the research. INVENTIONS, DISCOVERIES AND OTHER INTELLECTUAL PROPERTY All inventions, discoveries, and other intellectual property resulting from research supported under this Agreement shall belong to the investigator and MCGILL. OPTION TO LICENSE During the period of support, NOVOPHARM shall receive an option to exclusively license from MCGILL 1/4 (under terms to be negotiated) inventions and other useful results derived from the project. CONFIDENTIAL MATERIAL In the course of the research project, MCGILL and NOVOPHARM may share confidential materials and data with each other. Such materials shall be kept confidential for a period of five years and shall not be disclosed to anyone without a "need to know" within NOVOPHARM or MCGILL. Each party shall also strictly protect such information from disclosure to third parties. The obligation to keep confidential shall however not apply to information which: a) is already known to the party to which it is disclosed; b) becomes part of the public domain without breach of this Agreement; c) is obtained from third parties which have no obligations to keep confidential to NOVOPHARM and MCGILL. PUBLICATION MCGILL and the principal investigator shall have the right to publish any material resulting from Research under this Agreement. In this regard, the investigator shall furnish NOVOPHARM with a copy of any proposed publication at least 30 days in advance of the proposed publication date. Within this 30-day period, NOVOPHARM shall review said proposed publication for the disclosure of any NOVOPHARM confidential information, and shall inform MCGILL in writing of the location and content of such specific information. Upon receiving the appropriate written notification from NOVOPHARM, the investigator shall edit the information before publication. NOVOPHARM shall have the option of receiving an acknowledgement in the publication of its sponsorship of the research. TERMINATION NOVOPHARM agrees to support the research for twenty four months. MCGILL shall promptly inform NOVOPHARM of any events (death or departure of Principal Investigator) that could prevent the project from being continued as proposed. Upon such notification, NOVOPHARM and MCGILL will attempt to agree upon an investigator to be named to continue the research project. If the parties fail to agree on an alternate investigator within 30 days after notice from MCGILL, NOVOPHARM may terminate this Agreement and will be obligated to pay MCGILL only for costs and expenses which have already been incurred or which cannot be reasonably avoided. LIABILITY AND INDEMNITY i) NOVOPHARM agrees to hold MCGILL and its staff free and harmless from any and all claims or rights of action which may result from the use by NOVOPHARM, or its customers or licensees, of project results developed under this Agreement. 2/4 ii) MCGILL shall indemnify NOVOPHARM against all costs, suits or claims on account of injuries (including death) to persons participating in the conduct of the Project or damage to MCGILL property during the performance of this Agreement. FORCE MAJEURE: Neither party to this Agreement shall be liable to the other for any failure or delay in performance caused by circumstances beyond its control, including but not limited to, acts of God, fire, labor difficulties or governmental action. PUBLICITY: NOVOPHARM will not use the name of MCGILL nor of any member of its staff in any publicity without prior written approval of an authorized representative of MCGILL. NOTICES: MCGILL notices shall be sent to: McGill University The Office of Technology Transfer Attention: Director 3550 University St. Montreal, Quebec H3A 2A7 Tel.: (514) 398-4201 Fax: (514) 398-8479 NOVOPHARM notices shall be sent to: Novopharm Limited Attention: President 30 Nably Court Scarborough, Ontario M1B 2K9 Tel.: (416) 291-8876 Fax : (416) 291-2162 MCGILL payments shall be sent to: McGill University Accounting Department, Special Funds Attention: Mr. Terry Monteiro James Administration Building 853 Sherbrooke Street West Montreal, Quebec H3A 2T5 3/4 GENERAL This Agreement will be governed by and construed in accordance with the laws of the Province of Quebec. The parties confirm hereby that they each required that this Agreement and all documents and notices in connection therewith be drawn up in English. Les parties reconnaissent par Ies presentes que chacune d'elles a exige que cette convention et tout document ou avis y afferent soient rediges en anglais. Executed at Montreal this twenty-eighth day of April, 1994. NOVOPHARM LTD. MCGILL UNIVERSITY By: /s/ Leslie L. Dan By: /s/ Gerald B. Price ---------------------- ---------------------- Name: LESLIE L. DAN Name: Gerald B. Price Title: CHAIRMAN AND CEO Title: Principal Investigator Date: April 28, 1994 Date: April 26, 1994 By: /s/ R.D. Brassinga ---------------------- Name: R.D. Brassinga Title: Assoc. Dir., OTT Date: April 26, 1994 4/4 1 APPENDIX A AN EXPLORATION OF THE REGULATION OF POLYAMINE TRANSPORT IN HUMAN DISEASE Polyamines are now known to be critical in the growth and differentiation of many normal and malignant tissues. In particular, various neurologic disorders and malignancies have been associated with disruption of the regulation of polyamine levels through biosynthesis and transport. Whereas some of the genes important in the biosynthesis and regulation of polyamine Ievels have been characterized, no polyamine transport gene has yet been characterized in mammals. In some of our recent work, we believe that we have identified a potential probe for a human polyamine transport protein. The expression of mRNA homologous with this probe has been shown to be distributed among human tissues similarly to known levels of polyamine and polyamine metabolism; furthermore, exposure of various types of cells to either mitogens or poisons of polyamine metabolism resulted in the anticipated up- or down-regulation of the expression of the gene homologous to the putative human polyamine transport probe. In order to verify the identity of the gene homologous to this probe as a regulator of polyamine transport, we will identify the yeast gene and its location (preliminary data suggests that the yeast gene can be readily identified and cloned; the yeast gene is undoubtedly nearly identical to the human gene and will make it possible to quickly obtain the exact human gene(s).) In addition, we are proceeding to "knock-out" the yeast gene in order to unequivocally prove the function as a transport protein for polyamines. In the first year, we would hope to complete the yeast work and begin, if not conclude, the cloning of the putative human polyamine transport protein. During the rest of the first and in the second year, we would expect to use the probe on various cell lines and tissues (in Northern blot and FISH, fluorescence in situ hybridization, assays) to demonstrate the role played by this putative polyamine transport in nonmalignant neurologic disorders like Alzheimer's Disease as well as malignancies of the brain, colon, prostate, skin, etc. The isolation and demonstration of the identity of this human polyamine transport protein would provide diagnostic and research tools. In addition, the characterization of the gene and its regulatory control would be crucial to the design of chemotherapeutic agents to modify disease conditions. Finally, the isolation of the gene would provide an opportunity to consider the use of gene therapy to selectively knockout or up-regulate polyamine levels as may be needed to normalize tissue and organ function. EXAMPLES OF PERTINENT REFERENCES: Casero RA Jr. Pegg AE. Spermidine/spermine N1-acetyltransferase--the turning point in polyamine metabolism. [Review] FASEB Journal. 7(8):653-61, 1993 May. Basu HS. Pellarin M. Feuerstein BG. Shirahata A. Samejima K. Deen DF. Marton LJ. Interaction of a polyamine annalogue, 1,19-bis-(ethylamino)-5,10, 15-triazanonadecane (BE-4-4-4-4), with DNA and effect on growth, survival, and polyamine levels in seven human brain tumor cell lines [published erratum appears in Cancer Res 1993 Oct I5;53(20):5063] Cancer Research. 53(17):3948-55, 1993 Sep 1. Basu HS. Pellarin M. Feuerstein BG. Deen DF. Marton LJ. Effects of the polyampol analogs BE-3-7-3, 3-8-3, and BE-3-8-3 on human brain tumor cell growth and survival. Anticancer Research. 13(5A):1525-32, 1993 Sep-Oct. Quemener V. MoulinouJP. Lucas J. Khan N. Darcel F. Martin LA. Primault R. Seiler N. The effects of structural analogs of putrescine on proliferation, morphology and karyotype of glioblastoma cells in culture. Biology of the Cell. 77(2):195-9, 1993. 2 Kurihara H. Matsuzaki S. Yamazaki H. Tsukahara T. Tamura M. Relationship between tissue polyamine levels and malignancy in primary brain tumors. Neurosurgery. 32(3):372-5, 1993 Mar. (SEE ALSO JOURNAL OF NEUROONCOLOGY 16:243-272,1993.) McGarrity TJ. Peiffer LP. Hartle RJ. Effect of selenium on growth, S-adenosylmethionine and polyamine biosynthesis in human colon cancer cells. Anticancer Research. 13(3):811-5,1993 May-Jun. Cipolla B. Guille F. MoulinouJP. Quemener V. Staerman F. Corbel L. Lobel B. Polyamines and prostatic carcinoma: clinical and therapeutic implications. European Urology. 24(1):124-31, 1993. Snyder RD. Schroeder KK. Radiosensitivity of polyamine-depleted HeLa cells and modulation by the aminothiol WR-1065. Radiation Research. 137(1):67-75, 1994 Jan. Palmer AM. Burns MA. Preservation of redox, polyamine, and glycine modulatory domains of the N-methyl-D-aspartate receptor in Alzheimer's disease. Journal of Neurochemistry. 62(1): 187-96, 1994 Jan. Morrison LD. Bergeron C. Kish SJ. Brain S-adenosylmethionine decarboylase activity is increased in Alzheimer's disease. Neuroscience Letters. 154(1-2):141-4, 1993 May 14. Sjoholm A. Role of polyamines in the regulation of proliferation and hormone production by insulin-secreting cells. [Review] American Journal of Physiology. 264(3 Pt 1):C501-18, 1993 Mar. APPENDIX B BUDGET 1st year 2nd year -------- -------- [ ] [ ] [ ] B. Stipends to graduate students and postdoctoral -- -- fellows C. Fringe benefits [ ] [ ] D. Purchase or rental of equipment [ ] [ ] E. Materials, supplies and incidentals [ ] [ ] F. Travel -- -- G. Computing costs -- -- H. Others (specify) -- -- I. Indirect costs [ ] [ ] TOTAL [ ] [ ] EX-3.16 23 t17062exv3w16.txt EXHIBIT 3.16 EXHIBIT 3.16 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. LICENSE AGREEMENT BETWEEN TANOX, INC. AND VIVENTIA BIOTECH, INC. 1. DEFINITIONS...........................................................1 2. LICENSE GRANT.........................................................3 3. CONSIDERATION.........................................................4 4. PAYMENTS, REPORTS, AND AUDITS.........................................5 5. TRANSFER OF LICENSED TECHNOLOGY.......................................6 6. INTELLECTUAL PROPERTY AND GRANTBACKS..................................6 7. ADDITIONAL COLLABORATION AND LICENSES ................................7 8. PERFORMANCE REQUIREMENTS..............................................7 9. TERM AND TERMINATION..................................................8 10. POST-TERMINATION RIGHTS AND OBLIGATIONS...............................9 11. CONFIDENTIALITY.......................................................9 12. INDEMNIFICATION......................................................10 13. REGULATORY APPROVALS.................................................10 14. MARKING..............................................................10 15. DISPUTE RESOLUTION...................................................10 16. REPRESENTATIONS AND WARRANTIES.......................................10 17. LIABILITY AND INSURANCE..............................................11 18. PROSECUTION AND MAINTENANCE OF LICENSED PATENTS......................12 19. INFRINGEMENT - LICENSED PATENTS......................................12 20. INFRINGEMENT - LICENSED PRODUCTS.....................................13 21. COMPLIANCE WITH LAW AND EXPORT CONTROL...............................13 22. NOTICES AND COMMUNICATIONS...........................................14 23. MISCELLANEOUS PROVISIONS.............................................14 LICENSE AGREEMENT THIS AGREEMENT is by and between Tanox, Inc., 4888 Loop Central Drive, Houston, Texas 77081-2225 (hereinafter "Licensor") and Viventia Biotech, Inc., 10 Four Seasons Place, Suite 501, Toronto, ON, Canada, M9B 6H7 (hereinafter "Licensee"). WHEREAS, Licensor has acquired exclusive rights to certain technology, know-how, trade secrets, and patent rights relating to the compound [ ]; WHEREAS, Licensee is in the business of developing and marketing drugs for the treatment of diseases in humans, including novel drugs based upon immunotoxin molecules for the treatment of cancer; WHEREAS, Licensee wants to obtain an exclusive license to make, use and sell, have made, have sold, or import products using Licensor's technology and protected by Licensor's patent rights; and WHEREAS, Licensor is willing to grant to Licensee an exclusive license to utilize Licensor's technology and patent rights for making, using, and selling immunotoxins [ ]. NOW, THEREFORE, in consideration of these premises and the mutual covenants contained herein, the parties hereto stipulate and agree as follows: 1. DEFINITIONS 1.1. "Licensor" shall mean Tanox, Inc. and its Affiliates. 1.2. "Licensee" shall mean Viventia Biotech, Inc. and its Affiliates. 1.3. "Affiliates" shall mean a company or other entity controlling, controlled by, or under common control with the relevant party, where "control" shall mean direct or indirect control by ownership or otherwise of more than fifty percent (50%) of the outstanding voting shares or similar measure of control. 1.4. "Agreement" shall mean this License Agreement. 1.5. "Effective Date" shall mean August 20, 2002. 1.6. "Licensed Technology" shall mean all technology, confidential information, data, inventions, materials, know-how, trade secrets, and all other information or materials relevant to the business or research interests associated with this Agreement, including but not limited to products and product plans, ongoing research and development efforts, and other information of a technical or economic nature made available by Licensor to Licensee in support of the development and marketing of Licensed Products, particularly information and samples relating to the [ ] gene, protein, and their properties and uses. Licensed Technology shall also include any and all [ ] related technology, data, inventions, materials, know-how, trade PAGE 1 OF 15 secrets, and all other information or materials conceived or developed as a result of Licensee's activities under the terms of this Agreement. 1.7. "Licensed Patents" shall mean EP patent application number [ ] and all patent applications, issued patents and/or patents issuing from pending patent applications and all continuations, divisions, reissues, continuations-in-part, renewals, extensions, and the like now or hereafter owned or controlled by Licensor containing claims that would be infringed by importing, making, using, or selling Licensed Products. Licensed Patents includes International Application Number [ ] and published as [ ] and any other patents owned or controlled by Licensor directed to or claiming Licensed Technology that are required to import, make, use, or sell Licensed Products. 1.8. "Licensed Products" shall mean products imported, made, used, or sold using Licensed Technology or under the claims of Licensed Patents, including immunotoxins comprising antibodies conjugated to [ ]. 1.9. "Field" shall mean the prevention or treatment of cancer in humans. 1.10. "Territory" shall mean all countries of the world. 1.11. "Dollars" shall mean dollars of the United States of America ($U.S.). 1.12. "Net Sales" shall mean gross proceeds measured in Dollars as of the date of sale resulting from the invoice price less (a) usual trade and/or cash discounts actually allowed or taken; (b) forwarding expenses, freight, postage and duties actually paid or allowed and taxes imposed directly on Licensee for sales; and (c) credits for goods actually returned. For Licensed Products sold or otherwise transferred other than for money, "Net Sales" shall calculated based upon the "fair market value" of the Licensed Product determined in an arm's-length transaction. Net Sales shall be calculated on the price from Licensee, a sublicense, or their Affiliates to the first purchaser who is not a sublicensee or Affiliate and not on sales between or among Licensee, sublicensees, or their Affiliates. 1.13. "Patent Costs" shall mean out-of-pocket expenses incurred in connection with the preparation, filing, prosecution, and maintenance of Licensed Patents, including the fees and expenses of attorneys and patent agents but excluding expenses incurred in connection with patent infringement claims or other adversary proceedings, including but not limited to reexaminations, interferences, oppositions, revocation proceedings, or nullity actions. 1.14. "FDA" shall mean the United States Food & Drug Administration or any successor agency performing a similar function or an equivalent foreign regulatory agency such as the European Agency for the Evaluation of Medical Products. 1.15. "INDA" shall mean an Investigational New Drug Application or its foreign equivalent filed with the FDA. PAGE 2 OF 15 1.16. "Phase I" shall mean phase I clinical trials conducted with respect to an INDA filed with the FDA. 1.17. "Phase II" shall mean phase II clinical trials conducted with respect to an INDA filed with the FDA. 1.18. "Phase III" shall mean phase III clinical trials conducted with respect to an INDA filed with the FDA. 1.19. "NDA" shall mean a New Drug Application or its foreign equivalent filed with the FDA. 1.20. "Marketing Approval" shall mean the date a Licensed Product is approved for market by the FDA. 1.21. "First Commercial Sale" shall mean the date a Licensed Product is first sold after receiving FDA approval. 1.22. "Licensee Technology" shall mean all Licensee technology, confidential information, data, inventions, materials, know-how, trade secrets, and all other information or materials useful to make fusion proteins, including antibody-protein conjugates. 2. LICENSE GRANT 2.1. Licensor grants to Licensee and Licensee accepts an exclusive license for using Licensed Technology and Licensed Patents in each country of the Territory to research, develop, import, make, have made, use, offer for sale, and sell Licensed Products for use in the Field. 2.2. Licensor grants Licensee the right to grant sublicenses to third parties consistent with the terms of this Agreement. Licensee agrees to notify Licensor in writing of any sublicense granted hereunder within thirty (30) days after granting such sublicense. Licensee agrees to provide Licensor with a copy of any sublicense granted by Licensee along with such notice. Licensor agrees that copies of sublicenses provided to it by Licensee shall be deemed "Confidential Information" as defined herein. 2.3. Licensee agrees to pay royalties to Licensor on sales by sublicensees to the same extent that royalty would be due had the sales been made by Licensee. Licensee further agrees to make milestone payments to Licensor without regard to whether the milestones are achieved by Licensee or its sublicensees. 2.4. Any sublicense granted by Licensee under this Agreement shall be subject and subordinate to terms and conditions of this Agreement, provided, however, that the sublicense may not grant the sublicensee any sublicensing rights and the royalty rates specified in the sublicense may be higher than the royalty rates in this Agreement. 2.5. All sublicenses shall include provisions permitting the sublicense to survive the termination of the Agreement and providing for the transfer of all obligations, including the PAGE 3 OF 15 payment of royalties and other compensation required under the sublicense, to Licensor if the Agreement is terminated. 2.6. Licensee agrees to be responsible for overseeing any operations of its sublicensees with respect to this Agreement and for collecting royalties and other payments from sublicensees. Failure by a sublicensee to meet the obligations under a sublicense shall not excuse Licensee from complying with its obligations under this Agreement. 3. CONSIDERATION 3.1. Licensee agrees to pay to Licensor an up-front fee of [ ] within fifteen (15) days after the Effective Date. 3.2. Licensee agrees to pay to Licensor an annual license maintenance fee on or before the anniversary of the Effective Date as follows: First Anniversary [ ] Second Anniversary [ ] Third and each Subsequent Anniversary [ ]
3.3. The annual license maintenance fees shall be due and payable on the anniversary of the Effective Date. No annual license maintenance fees shall be due after the First Commercial Sale of Licensed Products. 3.4. Licensee agrees to pay to Licensor milestone payments for each Licensed Product as follows, such payments to be due and payable within fifteen (15) days after achieving the milestone: Completion of [ ] [ ] Initiation of [ ] [ ] Filing a [ ] [ ] Marketing Approval [ ]
3.5. Licensee shall be required to make each milestone payment only once for each Licensed Product even if the event that triggers a payment occurs more than once, e.g., Licensee shall not be required to pay additional milestone payments if a Licensed Product is approved for additional indications but shall be required to pay milestone payments for each Licensed Product. 3.6. Licensee agrees to pay to Licensor a royalty based upon annual Net Sales of Licensed Products as follows: [ ] ([ ]%) of Net Sales for each Licensed Product sold by or for Licensee in a country in the Territory where there is an issued claim of a Licensed Patent containing claims covering Licensed Products and for sales less than [ ]; or [ ] ([ ]%) of Net Sales for each Licensed Product sold by or for Licensee in a country in the Territory where there is an issued claim of a Licensed PAGE 4 OF 15 Patent containing claims covering Licensed Products and for sales greater than [ ]; and [ ] ([ ]%) of Net Sales for each Licensed Product sold by or for Licensee in a country in the Territory where there is not an issued claim of a Licensed Patent containing claims covering Licensed Product. 3.7. Licensee agrees to pay to Licensor a minimum annual royalty of [ ] beginning in the year of the First Commercial Sale of Licensed Products and annually thereafter during the term of this Agreement. In any year in which royalties due on sale of Licensed Products are less than the minimum annual royalty for that year, Licensee shall make a supplemental payment to Licensor in an amount such that the sum of royalties due on sales of Licensed Products plus such supplemental payment equal the minimum annual royalty for that year. No minimum annual royalty shall be due Licensor in a particular year if the royalties due on the sale of License Products for that year exceeds the minimum annual royalty due for that year. 3.8. Licensed Products shall be deemed to be sold when billed out by Licensee or its agents or, if they are not billed out, then either when they are delivered to the end user/customer or when they are paid for, whichever first occurs. 3.9. Consideration in the form of up-front payments, milestones, license maintenance fees, minimum royalties, and other such payments made by Licensee to Licensor hereunder are non-refundable and non-creditable against any royalties due under the terms of this Agreement. 4. PAYMENTS, REPORTS, AND AUDITS 4.1. Licensee agrees to make royalty payments to Licensor within thirty (30) days after the end of each calendar quarter beginning after the First Commercial Sale of Licensed Product. Payment shall be accompanied by a report of the Net Sales of Licensed Products and the computation of the royalties due therefor during the preceding calendar quarter. 4.2. Licensee agrees to keep accurate records on Net Sales for a period not to exceed three (3) years unless the records are in dispute. If the records are in dispute, Licensee agrees to keep the records until the dispute is settled. Such records shall be open for examination during reasonable business hours at the place where the records are customarily kept. Licensor shall have the right to verify the accuracy of the records by having an independent certified public accountant, selected by Licensor and acceptable to Licensee, audit the records to determine the accuracy of reports and payments made by Licensee. If such audit shows that Licensee has underreported royalties due Licensor by more than [ ] ([ ]%), Licensee shall reimburse Licensor for the reasonable costs of such audit. Licensor shall not engage an accountant to perform an audit hereunder on a contingency-fee basis or on any other terms by which the accountant's compensation depends on the results of the audit. PAGE 5 OF 15 4.3. Licensee agrees to make a written report and royalty payment to Licensor within sixty (60) days after the expiration or termination of the Agreement. Licensee shall continue to make reports and payments as long as royalties are due Licensor on products made before such expiration or termination but used or sold after such expiration or termination. 4.4. If Licensee fails to make any payment required under this Agreement on or before the due date, Licensee agrees to pay interest on such amount at an annual rate of two (2%) more than the greatest prime rate announced by Citibank NA or its successor as published in the Wall Street Journal at any time during the period when such payment is due. Such interest shall accrue from the date the payment was due until the date such payment is paid in full. If such rate exceeds the rate allowed by applicable law, then the highest rate allowed by law shall apply. 4.5. When calculating Net Sales based upon proceeds received in a currency other than Dollars, conversion of such currency to Dollars shall be made at the conversion rate published in the Wall Street Journal on the date payment is due, provided, however, payments made after the due date shall use the greater of the conversion rate published in the Wall Street Journal on the due date or the date the late payment is actually made. Any and all loss of exchange, value, taxes or other expenses incurred in the transfer or conversion of other currency to Dollars shall be paid entirely by Licensee. 5. TRANSFER OF LICENSED TECHNOLOGY 5.1. Licensor shall prepare and deliver or authorize delivery to Licensee promptly after the Effective Date any Licensed Technology that Licensor deems useful for the research, development and marketing of Licensed Product, including samples of [ ]. Licensee acknowledges and agrees that Licensee may be required to obtain [ ] from Licensor's collaborators and that there may be a nominal cost for obtaining [ ]. 5.2. Licensor acknowledges and agrees that Licensee may disclose Licensed Technical Information and Licensed Patents to other entities that are contracted to provide services for the development and marketing of Licensed Products. Such disclosure shall be made only under terms consistent with this Agreement, particularly confidentiality obligations at least as restrictive as those in this Agreement. 6. INTELLECTUAL PROPERTY AND GRANTBACKS 6.1. Licensee acknowledges that Licensor shall retain all ownership of Licensed Technology and Licensed Patents and any intellectual property embodied therein. 6.2. Licensor and Licensee agree that any and all rights to developments and improvements in Licensed Technology, including any [ ] conjugates and new uses for [ ] and [ ] conjugates, made by Licensee during the term of this Agreement ("Improvements") shall belong to Licensee, and that Licensee shall own the right to any intellectual property embodied in such Improvements. PAGE 6 OF 15 6.3. Licensee agrees to grant Licensor, upon request, a royalty free, exclusive license in the Territory to utilize Improvements, including a license under any patents owned or controlled by Licensee describing or claiming Improvements to make, have made, use, sell, offer for sale, have sold, or import products for the treatment of inflammatory diseases and for no other purpose ("Licensor Field"), but excluding any patents claiming the composition, manufacture, or use of antibodies or antibody fragments (including single chain or single domain antibodies), whether by themselves or conjugated to or associated with an active molecule. 6.4. Licensee agrees to promptly notify Licensor of any Improvements to take any acts reasonably necessary to perfect Licensor's rights in Improvements, including, but not limited to, filing patent applications and obtaining patents for Improvements. If Licensee, in its sole discretion, elects not to file, prosecute, or maintain any patent applications or patents for Improvements, Licensee shall give Licensee written notice of such decision a minimum of thirty (30) days before any failure to act would result in abandonment of rights to such Improvements. Licensor may, at Licensor's option, file, prosecute, or maintain any such patent applications or patents. Licensor shall be responsible for all Patent Costs associated therewith. Licensee agrees to assign all right, title, and interest in any such patent applications or patents to Licensee within thirty (30) days of request. 6.5. For products utilizing Improvements that are outside the Field and the Licensor Field, whether made, use, or sold by Licensee or by third parties under license from Licensee, Licensee agree to pay Licensor one-half of any license fees, royalties, or other economic benefit received from third parties, but not including reimbursement for bona fide research and development expenses, for the grant by Licensee of any license or other exploitation of Improvements. Licensor and Licensee shall from time to time confer regarding the possible joint exploitation, whether by the grant of licenses, through collaborative research, or otherwise of Improvements. 7. ADDITIONAL COLLABORATION AND LICENSES 7.1. Upon request by either party, Licensor and Licensee shall from time to time confer regarding the possible grant to Licensor of a worldwide, non-exclusive, royalty bearing license to use Licensee Technology outside the Field to make fusion proteins, including antibody-protein conjugates, provided, however, that neither party shall have any obligation to agree to enter into any such license. 8. PERFORMANCE REQUIREMENTS 8.1. Licensee agrees to exercise reasonable commercial efforts to seek regulatory approval to market Licensed Products and develop markets for and market Licensed Products. 8.2. Licensee agrees to prepare and submit semi-annual progress reports to Licensor describing is efforts to develop and market Licensed Product beginning six] (6) months after the Effective Date. PAGE 7 OF 15 8.3. Licensee agrees that Licensor may, at its option and in its sole discretion, either (1) convert the license granted herein from an exclusive to a non-exclusive license or (2) terminate this Agreement if Licensee [ ] after the Effective Date or [ ] after the Effective Date. If Licensor intends to convert the license granted herein to a non-exclusive license or terminate this Agreement based on Licensee's failure to meet either deadline set forth above, Licensor shall first give written notice to Licensee, and Licensee shall be permitted to extend such deadline and avoid such action as follows: (i) Licensee shall be permitted to extend the deadline to [ ] by twelve (12) months upon payment to Licensor of [ ] within forty-five (45) days of receipt of such notice; and (ii) Licensee shall be permitted to extend the deadline to [ ] by twelve (12) months upon payment to Licensor of [ ] within forty-five (45) days of receipt of such notice, and for additional twelve (12) month periods by payment to Licensor of [ ] for each such period. 9. TERM AND TERMINATION 9.1. This Agreement shall become effective as of the Effective Date and shall remain in effect (1) until terminated as provided for below or, on a country by country basis, (2) for a term of ten (10) years from the First Commercial Sale of Licensed Product in countries in the Territory where there is no patent protection for Licensed Products or (3) until the expiration of the last to expire of Licensed Patents in countries in the Territory where there are Licensed Patents. Upon expiration of this Agreement in each country, the licenses granted hereunder shall become fully paid-up in that country and no further payments hereunder shall be required. 9.2. This Agreement may be terminated by Licensor should Licensee fail to timely pay the fees, royalties, or other payments required herein, provided, however, that Licensor shall have given Licensee written notice of such breach and Licensee has not cured such failure within thirty (30) days of receipt of such notice. 9.3. Either party may terminate this Agreement if the other shall fail to perform any obligation required hereunder other than the payment of money and shall have failed to take action to promptly remedy such default within sixty (60) days after receipt of written notice describing the nature of the failure to perform. 9.4. To the extent permitted by law, Licensor may immediately terminate this Agreement in the event of any adjudication of bankruptcy, or of insolvency under any statute for the relief of debtors, or the appointment of a receiver by a court of competent jurisdiction, or the assignment for the benefit of creditors, or levy of execution directly involving Licensee. 9.5. This Agreement may be terminated by Licensee in its entirety on its first or any subsequent anniversary date of this Agreement by giving ninety (90) days' written notice to Licensor, provided, however, that such termination shall not affect the payment of royalties and other compensation due hereunder that are incurred prior to the date of such termination. PAGE 8 OF 15 Licensee agrees to pay any fee, milestone, minimum royalty, or other payment due on the date of termination. 10. POST-TERMINATION RIGHTS AND OBLIGATIONS 10.1. As soon as practical but in no event later than three (3) months following termination of this Agreement, Licensee shall cease making, using, or selling Licensed Product. Licensee shall within thirty (30) days of termination pay to Licensor all royalties or other sums which shall have accrued on or prior to the effective date of termination, regardless of whether such royalties would otherwise be due and payable on or prior to that date. Licensee shall within four (4) months of termination pay to Licensor all royalties or other sums which shall have accrued after the effective date of termination. Such payments shall be accompanied by a report of the Net Sales of Licensed Products and the computation of the royalties due therefor. 10.2. The provisions and obligations contained in this Agreement relating to payments, reports, auditing, confidentiality, indemnification, and any other provisions that by their nature are intended to survive shall survive the expiration or termination of this Agreement. 11. CONFIDENTIALITY 11.1. Licensor and Licensee agree to keep the terms of this Agreement and any information exchanged in furtherance of this Agreement, including but not limited to technical information, regulatory information, manufacturing methods and specifications, product specifications, or other technical or business information, strictly confidential and agree that such information ("Confidential Information") will not be (1) disclosed to others, (2) published without express written permission of the disclosing party, (3) used for the receiving party's or any others' benefit, except as provided for herein, or (4) duplicated in any manner. 11.2. The obligations of confidentiality and limited use shall not apply to Confidential Information that (a) is at the time of receipt public knowledge or after its receipt becomes public knowledge through no act or omission on the part of the receiving party; or (b) was known to the receiving party as shown by written records prior to the disclosure thereof; or (c) is subsequently developed by or on behalf of the receiving party without use of or reliance on Confidential Information; or (d) is received from a third party who did not, directly or indirectly, obtain such Confidential Information from the disclosing party; or (e) is submitted to governmental agencies to facilitate marketing approvals for Licensed Product, provided that reasonable measures have been taken to assure confidential treatment of such Confidential Information; or (f) is provided to third parties for development and marketing of Licensed Products under appropriate terms and conditions intended to protect Confidential Information from misappropriation or public disclosure, including confidentiality provisions at least as restrictive as those in this Agreement, or (g) is required to be disclosed by order of a court of component jurisdiction or in connection with any government investigation, provided, however, that the party who may be required to make such disclosure shall notify the other party in writing of any circumstances of which it is aware that may lead to PAGE 9 OF 15 such a requirement or order so as to allow the other party the opportunity to oppose any such requirement or order. 11.3. The parties agree that, upon written request, the receiving party shall return all Confidential Information to the disclosing party, provided, however, that the receiving party may keep one (1) copy of Confidential Information for purposes of determining its obligations under this Agreement. 12. INDEMNIFICATION 12.1. Licensee agrees to hold harmless, indemnify, and defend Licensor against all liabilities, demands, costs, claims, suits, damages, expenses, and losses, including reasonable attorney' fees, resulting from Licensee's performance of this Agreement or the making, using, selling, or other disposition of Licensed Products by Licensee or any party acting on Licensee's behalf. 13. REGULATORY APPROVALS 13.1. Licensee agrees to obtain all necessary legal and/or regulatory licenses and approvals to test, market, and sell Licensed Products. Licensee agrees to pay all costs associated with obtaining such licenses or approvals. 14. MARKING 14.1. Licensee agrees to apply in a manner sufficient to give legal notice of the existence of Licensed Patents on any Licensed Product or its packaging, if appropriate, manufactured or sold by Licensee under this Agreement such patent notice as may be required by the laws of the countries where manufactured or sold, or as may reasonably be requested by Licensor. 15. DISPUTE RESOLUTION 15.1. Any controversy, claim, or other dispute arising solely out of the language and interpretation of this Agreement, or to the breach thereof, shall be subjected to good faith negotiations between the parties in an attempt to settle all such disputes before any alternative method of dispute resolution is employed. 16. REPRESENTATIONS AND WARRANTIES 16.1. Licensee represents and warrants that Licensee has the right to enter into this Agreement and that entering into this Agreement will not result in a breach of any agreement or other undertaking to which Licensee is a party. 16.2. Licensor represents and warrants that Licensor is the licensee or beneficial owner of the entire right, title and interest in and to Licensed Patents and has the right to grant the license as described herein and that the grant of such license will not result in a breach of any agreement or other undertaking to which Licensor is a party. PAGE 10 OF 15 16.3. Licensor represents and warrants that Licensor has no knowledge as of the Effective Date of this Agreement of patent applications, issued patents, or other intellectual property of any third party which may adversely affect any part of this Agreement, Licensed Patents or Licensed Products, and specifically has no actual knowledge that importing, making, selling, or using Licensed Products will constitute an infringement of any adversely held patents. 16.4. EXCEPT AS EXPRESSLY STATED HEREIN, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 16.5. LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SCOPE, ENFORCEABILITY, OR VALIDITY OF LICENSED PATENTS. 16.6. LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, THAT MAKING, USING, IMPORTING, OR SELLING LICENSED PRODUCTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER THIRD PARTY RIGHTS. 17. LIABILITY AND INSURANCE 17.1. Except as expressly stated herein, each party agrees to be liable for any liability, costs, or damages incurred because of its negligent or willful acts or omissions. 17.2. Licensor shall not be liable for any consequential, special, or other indirect damages incurred by licensee, sublicensee, or other third party resulting from making, using, or selling Licensed Products or licensee exercising its rights under this Agreement. 17.3. Licensee agrees to provide occurrence form comprehensive general liability (including products, commercial, and contractual) insurance coverage at a minimum of Five [ ] per occurrence, [ ] aggregate, which includes coverage for Licensee's liability to Licensor under the indemnification provisions of this Agreement ("Licensee Insurance"). Licensee Insurance will (i) be with a U.S. or Canadian based insurance carrier rated by A. M. Best & Co. as A [ V or higher or a reasonably equivalent rating by another reputable rating agency, (ii) provide that it can be canceled only with thirty (30) days prior written notice to Licensor, (iii) name Licensor or its respective assignee as an additional insured, (iv) be primary to any other valid or collectable insurance coverage which Licensor, or any of its parents, subsidiaries, affiliates, principals, agents, or assigns, may have or obtain ("Licensor Insurance"), and (v) provide that no Licensor Insurance will become effective in respect to any claim intended by this Agreement to be covered by Licensee Insurance until all Licensee Insurance is fully exhausted. Upon execution of this Agreement, Licensee agrees to provide Licensor with a Certificate of Insurance evidencing such insurance. Licensee agrees to keep such certificate current and on an annual basis, or more frequently if requested by Licensor, mail a current copy to Licensor. PAGE 11 OF 15 18. PROSECUTION AND MAINTENANCE OF LICENSED PATENTS 18.1. Licensor agrees to prepare, file, prosecute, and maintain Licensed Patents during the term of this Agreement and to pay all associated Patent Costs. Licensee shall reimburse Licensee for all reasonable Patent Costs within thirty (30) days after receiving a written invoice for such Patent Costs, provided, however, that if Licensor grants licenses under Licensed Patents to any other party, then Licensee shall be required to reimburse Licensor only for Licensee's proportionate share of Patent Costs. 18.2. Licensor and Licensee agree to cooperate in preparing, filing, prosecuting, and maintaining Licensed Patents and any patents on Improvements. Except as otherwise agreed, all Licensed Patents shall be filed, prosecuted, and maintained in Licensor's name or such name as Licensor shall designate, and all patents on Improvements shall be filed, prosecuted, and maintained in Licensee's name or such name as Licensee shall designate, provided, however, that Licensee maintains control over such patents in a manner that preserves Licensor's rights to Improvements as defined herein. 18.3. To the extent and in jurisdictions where permitted by law, Licensee agrees not to directly or indirectly contest the enforceability or validity of Licensed Patents during the term of this Agreement. 19. INFRINGEMENT - LICENSED PATENTS 19.1. Should Licensee become aware that any third party is infringing Licensed Patents, Licensee shall give notice of such infringement to Licensor and Licensor shall (1) use reasonable efforts to end such infringement or (2) notify Licensee of its intent not to take action against such third party. If Licensor notifies Licensee of its intent not to or fails to take action against such third party within ninety (90) days of receipt of such notice, Licensee and Licensor shall, upon request from Licensee, meet to discuss future action against such third party including the possibility that Licensee may take action, at its own expense, against the third party. The discussion shall include, but not be limited to, the effect of litigation on the validity of patents and how that may jeopardize Licensor's activities in other fields, the sharing of litigation costs and damages recovered, and the selection of litigation counsel. 19.2. If Licensor takes action against any infringer, Licensor shall pay all costs associated with and control the litigation. Licensor shall be entitled to keep all damages, costs, attorney fees, and other amounts recovered without apportionment to Licensee. 19.3. Should Licensee pursue any alleged infringer, Licensee shall employ counsel reasonably satisfactory to Licensor and shall keep Licensor fully informed of all material developments of such proceedings. Licensee shall be responsible for all costs and expenses of any enforcement activities, including legal proceedings, against infringers which Licensee initiates. Licensor agrees to join in and cooperate with any enforcement proceedings at Licensee's request, and at Licensee's expense, provided that Licensor may be represented by PAGE 12 OF 15 Licensor's counsel in any such legal proceedings, at Licensor's own expense, acting in an advisory but not controlling capacity. In addition, Licensee may name Licensor as party plaintiff as required by law. No settlement, consent judgment, or other final, voluntary disposition of any suit brought by Licensee that waives any rights within the Licensed Patents may be entered into without the prior written consent of Licensor. In the event that a declaratory judgment action alleging the invalidity or non-infringement of the Licensed Patents shall be brought or raised against Licensee, Licensor shall have the right, but not the obligation, to intervene and take over the sole defense of such action. Any recoveries in any action brought by Licensee shall be allocated first to recover litigation expenses for both parties with the balance deemed to be Net Sales subject to payment of royalties. 20. INFRINGEMENT - LICENSED PRODUCTS 20.1. Should importing, making, using or selling Licensed Products constitute an infringement of the rights of a third party, each party shall, as soon as it becomes aware of the same, notify the other thereof in writing, giving in the same notice full details known to it of the rights of such third party and the extent of any alleged infringement. After receipt of such notice the parties shall meet to discuss the situation and, to the extent necessary to permit Licensee to practice the license granted hereunder, the parties shall together use their reasonable endeavors to obtain an appropriate license from such third party. In negotiating such a license, the parties will make every effort to minimize the amount of license fees and royalties payable thereunder. 20.2. Licensee agrees to promptly notify Licensor should Licensee be sued by a third party alleging patent infringement based upon making, selling, or using Licensed Product. Licensee shall defend at its own expense any such infringement litigation suit and shall pay all loss, damage, cost, and expense, including attorney's fees, incurred by Licensee in defending or settling such litigation. Licensor shall cooperate with Licensee as required in defending any such suit. If Licensee should decide to settle any such litigation, Licensee shall notify Licensor and Licensor shall have the opportunity, but not the obligation, to assume responsibility for the litigation and assume complete responsibility for all subsequent expenses. 21. COMPLIANCE WITH LAW AND EXPORT CONTROL 21.1. The parties agree to comply with all applicable laws and regulations while performing under the terms of this Agreement. Anything herein to the contrary notwithstanding, neither party hereto shall be obligated to do any act pursuant to any provision of this Agreement when to do so would be inconsistent with any law or any ruling, regulation, or order of any authoritative governmental body. 21.2. Licensee agrees to comply with all applicable United States and foreign laws with respect to the transfer of Licensed Products and any related technical data or information to foreign countries, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations. PAGE 13 OF 15 22. NOTICES AND COMMUNICATIONS 22.1. All notices and other communications regarding this Agreement sent from Licensee to Licensor shall be addressed to: Tanox, Inc. 4888 Loop Central Drive, Suite 820 Houston, Texas 77081-2225 Attention: Tammy Morehouse All notices and other communications regarding this Agreement sent from Licensor to Licensee shall be addressed to: Viventia Biotech, Inc. 10 Four Seasons Place Suite 501 Toronto, ON Canada, M9B 6H7 Attention: Nick Glover 22.2. All written notices required or permitted to be given under the terms of this Agreement shall be deemed duly delivered upon receipt if (1) delivered in person, (2) sent by facsimile using a machine that confirms delivery and confirmed by sending the original via certified mail, return receipt requested, or (3) sent certified mail, return receipt requested to the above address. Notwithstanding the foregoing, payments, reports, and other routine communications may be sent by regular or electronic mail. 23. MISCELLANEOUS PROVISIONS 23.1. AMENDMENTS IN WRITING. This Agreement may be amended or modified only by a written instrument duly executed by an appropriate officer of each party. 23.2. ASSIGNMENTS. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and permitted assigns, provided that neither party hereto shall be able to assign any right, license, benefit, option, duty, obligation, or privilege hereunder without the prior consent of the other party (such consent not to be unreasonably withheld), except that assignment shall be permitted in the event of the (1) sale of all or substantially all of the business to which this Agreement relates by an assigning party or (2) sale or assignment of rights in or to a Licensed Product. In the event of such assignment upon the sale of all or substantially all of the business to which this Agreement relates, due written notice of such assignment shall be provided to the other party. 23.3. CHOICE OF LAW. This Agreement shall be deemed to have been made in and construed in accordance with the laws of the State of Delaware, United States of America, excluding any choice of law rules that may direct the application of the laws of any other jurisdiction. Any dispute related to or arising out of this Agreement or any aspect of the parties' relationship hereunder shall be heard exclusively in the courts located in Delaware. PAGE 14 OF 15 23.4. IMPLEMENTATION. Each party shall, at the request of the other party, execute any document reasonably necessary to implement the provisions of this Agreement. 23.5. INDEPENDENT CONTRACTORS. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or a joint venture relationship between the parties. The respective activities of the parties hereunder shall be provided as independent contractors. Neither party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein. 23.6. INTEGRATION. This written Agreement embodies the entire understanding between the parties and supersedes and replaces any and all prior negotiations, understandings, arrangements, and/or agreements, whether written or oral, relating to the subject matter hereof. 23.7. PUBLICITY. Each party agrees not to use the name of the other party in any commercial activity, advertisement, sales brochures, or otherwise without written permission. 23.8. SEVERABILITY. This Agreement is divisible and separable. If any provision of this Agreement is held to be or becomes invalid, illegal or unenforceable, such provision shall be reformed to approximate as nearly as possible the intent of the parties and shall remain valid and enforceable to the greatest extent permitted by law. 23.9. WAIVER. The terms of this Agreement may be waived only by a written instrument expressly waiving such term or terms and executed by the party waiving compliance. The waiver of any term or condition of this Agreement by either party hereto shall not constitute a modification of this Agreement, nor prevent a party hereto from enforcing such term or condition in the future with respect to any subsequent event, nor shall it act as a waiver of any other right accruing to such party hereunder. IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly executed by their duly authorized representatives. Viventia Biotech, Inc. Tanox, Inc. By: /s/ Nick Glover By: /s/ Nancy T. Chang ------------------------------------- ----------------------- Title: Vice President, Corporate Development Title: CEO ------------------------------------- ----------------------- Date: August 23, 2002 Date: August 15, 2002 ------------------------------------- ----------------------- WRG/ Contract Number: 200210044 Distribution of Originals: One (1) to Tanox, Inc.. One (1) to Viventia Biotech, Inc. PAGE 15 OF 15 EX-3.17 24 t17062exv3w17.txt EXHIBIT 3.17 EXHIBIT 3.17 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. LICENSE AGREEMENT This agreement ("Agreement") is made by and between THE UNIVERSITY OF ZURICH (HEREINAFTER REFERRED TO AS UNIVERSITY) represented by PROF. ANDREAS PLUCKTHUN INSTITUTE OF BIOCHEMISTRY WINTERTHURERSTR. 190, CH-8057 ZURICH (SWITZERLAND) PD DR. UWE ZANGEMEISTER-WITTKE UNIVERSITY HOSPITAL; DIV. OF ONCOLOGY HALDELIWEG 4, CH-8044 ZURICH (SWITZERLAND) and VIVENTIA BIOTECH INC. 10 FOUR SEASONS PLACE, SUITE 501 TORONTO, ONTARIO M9B 6H7 (CANADA) ("LICENSEE") This Agreement is effective on the date of the last signature ("Effective Date"). RECITALS WHEREAS, UNIVERSITY is owner of Patent Rights as defined below on a stabilized [ ] fragment termed [ ] ("Invention"); WHEREAS, LICENSEE entered into an Option Agreement with UNIVERSITY, effective March 19, 2002, ("Option Agreement"), for the purpose of negotiating this Agreement; WHEREAS, UNIVERSITY is desirous that the Invention be developed and utilized to the fullest possible extent so that its benefits can be enjoyed by the general public; WHEREAS, LICENSEE wishes to obtain, and UNIVERSITY is willing to grant, an exclusive license to the Patent Rights on the terms and conditions set out below. NOW, THEREFORE, the parties agree: page 1 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. ARTICLE 1. DEFINITIONS The terms, as defined herein, shall have the same meanings in both their singular and plural forms. 1.1 "Affiliate" means any corporation or other business entity in which LICENSEE owns or controls, directly or indirectly, at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors, or in which LICENSEE is owned or controlled directly or indirectly by at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors. 1.2 "Sublicensee" means a third party to whom LICENSEE grants a sublicense of certain rights granted to LICENSEE under this Agreement. 1.3 "Field" means the treatment, stasis, and palliation of disease in humans by [ ] antibodies or antibody fragments, whether by themselves or in combination with other materials or methods. 1.4 "Territory" means world-wide. 1.5 "Term" means the period of time beginning on the Effective Date and ending on the expiration date of the longest-lived Patent Rights. 1.6 "Patent Rights" means any of the patent applications set forth in Attachment A to this Agreement and any other patents or patent applications now or in the future owned or controlled by UNIVERSITY describing or claiming the Invention (including methods of making or using same) and continuing applications thereof including divisions, substitutions, and continuations-in-part; any patents issuing on said applications including reissues, reexaminations and extensions. 1.7 "Licensed Method" means any method that is covered by Patent Rights the use of which would constitute, but for the license granted to LICENSEE under this Agreement, an infringement of any pending or issued and unexpired Valid Claim within Patent Rights. 1.8 "Licensed Product" means any composition or product that is covered by the claims of Patent Rights, or that is produced by the Licensed Method, the manufacture, use, sale, offer for sale, or importation of which would constitute, but for the license granted to LICENSEE by UNIVERSITY herein, an infringement of any pending or issued and unexpired Valid Claim within the Patent Rights. 1.9 "Net Sales" means the total of the gross invoice prices of Licensed Products sold by LICENSEE, its Sublicensee, an Affiliate, a distributor or any combination thereof, to end-user customers of Licensed Products less the sum of the following actual and customary deductions where applicable and separately itemized on the invoice and actually paid or allowed: cash, trade, or quantity discounts; value added, sales or use taxes, and custom duties; transportation page 2 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. charges; or credits to customers because of rejections or returns. Net Sales shall be calculated on the price from Licensee, a sublicensee, a distributor or their Affiliates to the first purchaser who is an end-user and not on sales between or among Licensee, sublicensees, distributors or their Affiliates for the purpose of resale. 1.10 "Patent Costs" means all out-of-pocket expenses for the preparation, filing, prosecution, and maintenance of all patents included in Patent Rights in at least the following countries: US, Canada, Japan, Europe (i. e. the following EPC-countries; AT, BE, CH, , DE, DK, , , FR, GB, , , IT, , , , NL, , SE). 1.11 "Valid Claim" means a claim of the Patent Rights which has not been withdrawn, canceled, or disclaimed, nor held invalid by a court of competent jurisdiction in any unappealed or unappealable decision in the country where the product or process was made, use or sold by LICENSEE, its Affiliate or sublicensee. ARTICLE 2. GRANTS 2.1 LICENSE. Subject to the limitations set forth in this Agreement, UNIVERSITY hereby grants to LICENSEE, and LICENSEE hereby accepts, a royalty bearing, exclusive license (with the right to sublicense) under Patent Rights to make, have made, use, sell, offer for sale, and import Licensed Products and to practice Licensed Methods, in the Field within the Territory and during the Term. The license granted herein is exclusive for Patent Rights and UNIVERSITY shall not grant to third parties a further license under Patent Rights in the Field, within the Territory and during the Term. Upon expiration of each patent within the Patent Rights, Viventia shall have a fully paid-up, royalty-free licence under such patent in the respective country to make, have made, use, sell, offer for sale, and import Licensed Products and to practice the Licensed Methods, in the Field. 2.2 SUBLICENSE. (a) The license granted in Paragraph 2.1 includes the right of LICENSEE to grant sublicense to third parties during the Term. (b) With respect to sublicense granted pursuant to Paragraph 2.2(a), LICENSEE shall: (1) to the extent applicable, include all of the rights of and obligations due to UNIVERSITY and contained in this Agreement; page 3 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. (2) promptly provide UNIVERSITY with a copy of each sublicense issued; and (3) collect and guarantee payment of all payments due, directly or indirectly, to UNIVERSITY from Sublicensees and summarize and deliver all reports due, directly or indirectly, to UNIVERSITY from Sublicensees. (c) Upon termination of this Agreement for any reason, UNIVERSITY, at its sole discretion, shall determine whether LICENSEE shall cancel or assign to UNIVERSITY any and all sublicenses. 2.3 RESERVATION OF RIGHTS. UNIVERSITY reserves the right to: (a) use the Invention, and Patent Rights for educational and research purposes; (b) notwithstanding the provisions of Paragraph 5.1.b publish or otherwise disseminate any information about the Invention at any time; and (c) allow other academic, nonprofit institutions to use Invention, and Patent Rights for educational and non-commercial research purposes in their facilities, subject to a written agreement from such institution acknowledging such restriction and agreeing that no Licensed Products will be transferred to any other person or institution. LICENSEE shall have the right to consult UNIVERSITY in setting up such written agreements and UNIVERSITY shall consider LICENSEE's comments in good faith. ARTICLE 3. CONSIDERATIONS 3.1 FEES AND ROYALTIES. The parties hereto understand that the fees and royalties payable by LICENSEE to UNIVERSITY under this Agreement are partial considerations for the license granted herein to LICENSEE under Patent Rights. LICENSEE shall pay UNIVERSITY: (a) a LICENSE ISSUE FEE of [ ] United States Dollars (US$ [ ) upon execution of the this Agreement; (b) MILESTONE PAYMENTS in the amounts payable according to the following schedule or events by LICENSEE, its Affiliates or sublicensees with respect to the first Licensed Product:
Amount Event (1) US$ [ ] Completion of first [ ] studies (2) US$ [ ] First [ ] or equivalent
page 4 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED.
Amount Event (3) US$ [ ] Within 30 days of [ ]
(c) an EARNED ROYALTY of [ ] on Net Sales of Licensed Products by LICENSEE, its Affiliates, or sublicensees; If LICENSEE is required to pay royalties to third parties on sales of Licensed Products under patents claiming the composition and/or method of making or using such Licensed Products and the resulting aggregate royalty rate is 10% or greater, then the royalty [ ]. All fees and royalty payments specified in Paragraphs 3.1(a) through 3.1(c) above shall be paid by LICENSEE pursuant to Paragraph 4.3 and shall be delivered by LICENSEE to UNIVERSITY as noted in Paragraph 10.1. 3.2 PATENT COSTS. LICENSEE shall reimburse UNIVERSITY all Patent Costs within thirty (30) days following receipt by LICENSEE of an itemized invoice from UNIVERSITY. 3.3 DUE DILIGENCE. (a) LICENSEE shall: (1) diligently proceed with the development, manufacture and sale of Licensed Products; (2) upon market entry on a country-by-country basis, use its reasonable efforts to promote the sale of the Licensed Products in the Territory as widely as its resources reasonably permit and reasonably fill the market demand for Licensed Products at any time during the term of this Agreement; and (3) obtain all necessary governmental approvals for the manufacture, use and sale of Licensed Products. (b) If LICENSEE fails to perform any of its obligations specified in Paragraphs 3.3(a)(1)-(3), then UNIVERSITY shall have the right to demand a development and, if applicable, marketing plan, detailing key activities and expected timetables. If UNIVERSITY rejects such a plan, the Parties shall meet to discuss in good faith possible amendments to the development and/or marketing plan. In the absence of agreement to such amendments the UNIVERSITY shall have the right and option to terminate this Agreement. If LICENSEE disagrees with such termination it shall have the right within 60 days of the notification of termination to seek arbitration as foreseen in clause 10.6. The arbitrators shall decide page 5 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. whether the termination is justified or not and if the conclude that the termination is not justified decide which amendments to the development and/or marketing plan shall be done. ARTICLE 4. REPORTS, RECORDS AND PAYMENTS 4.1 REPORTS. (a) PROGRESS REPORTS. (1) Beginning January 1, 2004 and ending on [ ] LICENSEE shall submit to UNIVERSITY annual progress reports covering LICENSEE's (and Affiliate's and Sublicensee's) activities to develop and test all Licensed Products and obtain governmental approvals necessary for marketing the same. Such reports shall include a summary of work completed; summary of work in progress; current schedule of anticipated events or milestones; market plans for introduction of Licensed Products; and summary of resources spent in the reporting period. (2) LICENSEE shall also report to UNIVERSITY, in its immediately subsequent progress report, the date of first commercial sale of a Licensed Product in each country. (b) ROYALTY REPORTS. After the first commercial sale of a Licensed Product anywhere in the world, LICENSEE shall submit to UNIVERSITY quarterly royalty reports on a schedule to be determined by LICENSEE based on its fiscal year or other related license agreements.. Each royalty report shall cover LICENSEE's (and each Affiliate's and Sublicensee's) most recently completed quarter and shall show: (1) the gross sales, deductions as provided in Paragraph 1.9, and Net Sales during the most recently completed quarter and the royalties payable with respect thereto; (2) the number of each type of Licensed Product sold; (3) sublicense fees and royalties received during the most recently completed quarter, payable with respect thereto; (4) the method used to calculate the royalties; and (5) the exchange rates used. If no sales of Licensed Products has been made and no sublicense revenues has been received by LICENSEE during any reporting period, LICENSEE shall so report. page 6 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. 4.2 RECORDS & AUDITS. (a) LICENSEE shall keep, and shall require its Affiliates and Sublicensees to keep, accurate and correct records of all Licensed Products manufactured, used, and sold, and sublicense fees received under this Agreement. Such records shall be retained by LICENSEE for at least three (3) years following a given reporting period. (b) All records shall be available during normal business hours for inspection at the expense of UNIVERSITY by an independent public accountant selected by UNIVERSITY and reasonably acceptable to LICENSEE and in compliance with the other terms of this Agreement for the sole purpose of verifying reports and payments; such accountant shall not be retained on a contingency-fee basis or on any other terms by which the accountant's compensation depends on the results of the audit. Such accountant shall not disclose to UNIVERSITY any information other than information relating to the accuracy of reports and payments made under this Agreement or other compliance issues. In the event that any such inspection shows an under reporting and underpayment in excess of [ ] for any twelve (12) month period, then LICENSEE shall pay the reasonable cost of the audit as well as any additional sum that would have been payable to UNIVERSITY had the LICENSEE reported correctly, plus an interest charge at a rate of [ ] per year. Such interest shall be calculated from the date the correct payment was due to UNIVERSITY up to the date when such payment is actually made by LICENSEE. For underpayment not in excess of [ ] for any twelve (12) month period, LICENSEE shall pay the difference within thirty (30) days without interest charge or inspection cost. 4.3 PAYMENTS. (a) All fees due UNIVERSITY shall be paid to: Zurich Cantonal Bank; CH-8010 Zurich (Switzerland); SWIFT No. ZKBKCHZZ80A; SIC/ABA N0.: 007005 Account No. [ ]; Finance Dept. of the University of Zurich Ref. [ ] (b) Royalty Payments. (1) LICENSEE shall pay earned royalties quarterly on a schedule to be determined by LICENSEE based on its fiscal year or other related license agreements. Each such payment shall be for earned royalties accrued within LICENSEE's most recently completed calendar quarter. (2) Royalties earned on sales occurring or under sublicense granted pursuant to this Agreement shall not be reduced by LICENSEE for any taxes, fees, or other charges imposed by the government of such country on the payment of royalty income, except that all payments made by LICENSEE in page 7 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. fulfillment of UNIVERSITY' tax liability in any particular country may be credited against earned royalties or fees due UNIVERSITY for that country. LICENSEE shall pay all bank charges resulting from the transfer of such royalty payments. (3) In the event that any patent or patent claim within Patent Rights is held invalid in a final decision by a patent office from which no appeal or additional patent prosecution has been or can be taken, or by a court of competent jurisdiction and last resort and from which no appeal has or can be taken, all obligation to pay royalties based solely on that patent or claim or any claim patentably indistinct therefrom shall cease as of the date of such final decision. LICENSEE shall not, however, be relieved from paying any royalties that accrued before the date of such final decision, that are based on another patent or claim not involved in such final decision. (c) Late Payments. In the event royalty, reimbursement and/or fee payments are not received by UNIVERSITY when due, LICENSEE shall pay to UNIVERSITY interest charges at a rate of ten percent (10%) per year. Such interest shall be calculated from the date payment was due until actually received by UNIVERSITY. ARTICLE 5. PATENT MATTERS 5.1 PATENT PROSECUTION AND MAINTENANCE. (a) Provided that LICENSEE has reimbursed UNIVERSITY for Patent Costs pursuant to Paragraph 3.2, UNIVERSITY shall consult in good faith with LICENSEE and diligently prosecute and maintain the patents, and applications in Patent Rights using counsel of its choice and taking in good faith into account any comments of LICENSEE. UNIVERSITY shall provide LICENSEE with copies of all relevant documentation relating to such prosecution and LICENSEE shall keep this documentation confidential. The counsel shall take instructions only from UNIVERSITY, and all patents and patent applications in Patent Rights shall be assigned solely to UNIVERSITY. (b) UNIVERSITY shall provide LICENSEE with (i) drafts of all applications and papers it plans to file with any patent office at least thirty days before filing, and (ii) copies of all communications from patent offices promptly after receipt thereof. UNIVERSITY shall consult in good faith with LICENSEE and/or LICENSEE's patent counsel as to the content of all applications and papers to be filed, and shall act in good faith upon comments received from LICENSEE. UNIVERSITY shall ensure that no public disclosures are made prior to filing of patent applications. (c) LICENSEE shall apply for an extension of the term of any patent in Patent Rights if appropriate under the US Drug Price Competition and Patent Term Restoration Act and/or European, Japanese and other counterparts thereof. LICENSEE shall prepare all documents for such application, and UNIVERSITY page 8 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. shall execute such documents and take any other additional action as LICENSEE reasonably requests in connection therewith. 5.2 PATENT INFRINGEMENT. (a) If LICENSEE learns of any substantial infringement of Patent Rights, LICENSEE shall so inform UNIVERSITY and provide UNIVERSITY with reasonable evidence of the infringement. Neither party shall notify a third party of the infringement of Patent Rights without the consent of the other party. Both parties shall use reasonable efforts and cooperation to terminate infringement without litigation. (b) LICENSEE may request UNIVERSITY to take legal action against such third party for the infringement of Patent Rights. Such request shall be made in writing and shall include reasonable evidence of such infringement and damages to LICENSEE. If the infringing activity has not abated ninety (90) days following LICENSEE's request, UNIVERSITY shall elect to or not to commence suit on its own account. UNIVERSITY shall give notice of its election in writing to LICENSEE by the end of the one-hundredth (100th) day after receiving notice of such request from LICENSEE. LICENSEE may thereafter bring suit for patent infringement in its own name (and in the name of UNIVERSITY if necessary) and at its own expense, if and only if UNIVERSITY elects not to commence suit and the infringement occurred in a jurisdiction where LICENSEE has an exclusive license under this Agreement. If LICENSEE elects to bring suit, UNIVERSITY may join that suit at its own expense. (c) Recoveries from actions brought pursuant to Paragraph 5.2(b) shall belong to the party bringing suit except that in the event that LICENSEE brings suit for infringement of Patent Rights and an acceptable settlement is entered into or monetary damages are awarded in a final non-appealable judgment, UNIVERSITY shall be reimbursed for any amount which would have been due to UNIVERSITY under this Agreement if the products sold by the infringer actually had been sold by LICENSEE. Legal actions brought jointly by UNIVERSITY and LICENSEE and fully participated in by both shall be at the joint expense of the parties and all recoveries shall be shared jointly by them in proportion to the share of expense paid by each party. (d) Each party shall cooperate with the other in litigation proceedings at the expense of the party bringing suit. Litigation shall be controlled by the party bringing the suit, except that UNIVERSITY may choose to be represented by counsel of its choice (at its expense) in any suit brought by LICENSEE. 5.3 PATENT MARKING. LICENSEE shall mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. page 9 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. ARTICLE 6. GOVERNMENTAL MATTERS 6.1 GOVERNMENTAL APPROVAL OR REGISTRATION. If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, LICENSEE shall assume all legal obligations to do so. LICENSEE shall notify UNIVERSITY if it becomes aware that this Agreement is subject to any government reporting or approval requirement. LICENSEE shall make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process. ARTICLE 7. TERMINATION OF THE AGREEMENT 7.1 TERMINATION BY UNIVERSITY. (a) If LICENSEE fails to perform or violates any term of this Agreement, then UNIVERSITY may give written notice of default ("Notice of Default") to LICENSEE. If LICENSEE fails to cure the default within sixty (60) days of the Notice of Default with respect to the failure to make payments required under this Agreement or within one hundred twenty (120) days for any other breach, UNIVERSITY may terminate this Agreement and the license granted herein by a second written notice ("Notice of Termination") to LICENSEE. If a Notice of Termination is sent to LICENSEE, this Agreement shall automatically terminate on the effective date of that notice. Termination shall not relieve LICENSEE of its obligation to pay any fees owed at the time of termination and shall not impair any accrued right of UNIVERSITY. (b) UNIVERSITY shall have the right to terminate this Agreement by giving written notice, in the event of filing by LICENSEE of a petition of bankruptcy or insolvency or both, or in the event of an adjudication that LICENSEE is bankrupt or insolvent or both, or after filing by LICENSEE of any petition or pleading asking reorganization, readjustment or rearrangement of its business under any law relating to bankruptcy or insolvency, or upon or after appointment of a receiver for all or substantially all of the property of LICENSEE or upon or after the making of any assignment for the benefit of creditors or upon or after the institution of any proceedings for the liquidation or winding-up of LICENSEE's business or for the termination of its corporate charter, and this Agreement shall terminate upon the date specified in such written notice. 7.2 TERMINATION BY LICENSEE. (a) LICENSEE shall have the right at any time and for any reason to terminate this Agreement upon a ninety (90) day written notice to UNIVERSITY. Said notice shall state LICENSEE's reason for terminating this Agreement. (b) Any termination under Paragraph 7.2(a) shall not relieve LICENSEE of any obligation or liability accrued under this Agreement prior to termination or page 10 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. rescind any payment made to UNIVERSITY or action by LICENSEE prior to the time termination becomes effective. Termination shall not affect in any manner any rights of UNIVERSITY arising under this Agreement prior to termination. 7.3 SURVIVAL ON TERMINATION. The following Paragraphs and Articles shall survive the termination of this Agreement: (a) Article 4 (REPORTS, RECORDS AND PAYMENTS); (b) Paragraph 7.4 (Disposition of Licensed Products on Hand); (c) Paragraph 8.2 (Indemnification); (d) Article 9 (USE OF NAMES AND TRADEMARKS); (e) Paragraph 10.2 hereof (Secrecy); and (f) Paragraph 10.5 (Failure to Perform). 7.4 DISPOSITION OF LICENSED PRODUCTS ON HAND. Upon termination of this Agreement, LICENSEE may dispose of all previously made or partially made Licensed Product within a period of one hundred and twenty (120) days of the effective date of such termination provided that the sale of such Licensed Product by LICENSEE, its Sublicensees, or Affiliates shall be subject to the terms of this Agreement, including but not limited to the rendering of reports and payment of royalties required under this Agreement. ARTICLE 8. LIMITED WARRANTY AND INDEMNIFICATION 8.1 LIMITED WARRANTY. (a) UNIVERSITY warrants that it has the lawful right to grant this license, that Attachment A to this Agreement is a complete list of all patents and applications owned or controlled by UNIVERSITY pertaining to the Invention, and that it has good and sufficient title to the Licensed Patents to grant the licenses herein free and clear of the rightful claim of any third party. (b) The license granted herein is provided "AS IS" and without WARRANTY OF MERCHANTABILITY or WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE or any other warranty, express or implied. UNIVERSITY makes no representation or warranty that the Licensed Product, Licensed Method or the use of Patent Rights will not infringe any other patent or other proprietary rights. (c) In no event shall UNIVERSITY be liable for any incidental, special or consequential damages resulting from exercise of the license granted herein or the use of the Invention, Licensed Product, or Licensed Method. (d) Nothing in this Agreement shall be construed as: page 11 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. (1) a warranty or representation by UNIVERSITY as to the validity or scope of any Patent Rights; (2) a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or shall be free from infringement of patents of third parties; (3) an obligation to bring or prosecute actions or suits against third parties for patent infringement except as provided in Paragraph 5.2 hereof; (4) conferring by implication, estoppel or otherwise any license or rights under any patents of UNIVERSITY other than Patent Rights as defined in this Agreement, regardless of whether those patents are dominant or subordinate to Patent Rights; (5) an obligation to furnish any know-how not provided in Patent Rights. 8.2 INDEMNIFICATION. (a) LICENSEE shall indemnify, hold harmless and defend UNIVERSITY, its officers, employees, and agents; the sponsors of the research that led to the Invention; and the inventors of the patents and patent applications in Patent Rights and their employers against any and all claims, suits, losses, damage, costs, fees, and expenses resulting from or arising out of exercise of this license or any sublicense. This indemnification shall include, but not be limited to, any product liability. (b) LICENSEE, at its sole cost and expense, shall insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain insurance or an equivalent program of self insurance. (c) UNIVERSITY shall notify LICENSEE in writing of any claim or suit brought against UNIVERSITY in respect of which UNIVERSITY intends to invoke the provisions of this Article. LICENSEE shall keep UNIVERSITY informed on a current basis of its defense of any claims under this Article. ARTICLE 9. USE OF NAMES AND TRADEMARKS 9.1 Nothing contained in this Agreement confers any right to use in advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of either party hereto (including contraction, abbreviation or simulation of any of the foregoing). 9.2 UNIVERSITY may acknowledge the existence of this Agreement and the extent of the grant in Article 2 to third parties, but UNIVERSITY shall not disclose page 12 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. the financial terms of this Agreement to third parties, except where UNIVERSITY is required by law to do so. ARTICLE 10. MISCELLANEOUS PROVISIONS 10.1 CORRESPONDENCE. Any notice or payment required to be given to either party under this Agreement shall be deemed to have been properly given and effective: (a) on the date of delivery if delivered in person, or (b) five (5) days after mailing if mailed by registered mail, postage paid, to the respective addresses given below, or to such other address as is designated by written notice given to the other party. If sent to LICENSEE: Viventia Biotech, Inc. 10 Four Seasons Place Suite 501 Toronto, ON Canada, M9B 6H7 Attention: Dr. Nick Glover If sent to UNIVERSITY: University of Zurich Kunstlergasse 15; CH-8001 Zurich (SWITZERLAND) Attention: Legal Department with copy to: Unitectra; Ref. UZ-03/064 Mohrlistrasse 23; CH-8006 Zurich (SWITZERLAND) 10.2 SECRECY. (a) "Confidential Information" shall mean information relating to the Invention or activities hereunder disclosed by one party to the other during the term of this Agreement, which if disclosed in writing shall be marked "Confidential." (b) The Receiving party of any such Confidential Information shall: (1) use the Confidential Information for the sole purpose of performing under the terms of this Agreement; page 13 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. (2) safeguard Confidential Information against disclosure to others with the same degree of care as it exercises with its own data of a similar nature; (3) not disclose Confidential Information to others (except to its employees, agents or consultants who are bound to it by a like obligation of confidentiality) without the express written permission of the Disclosing party, , except that the Receiving party shall not be prevented from using or disclosing any of the Confidential Information that: (i) it can demonstrate by written records was previously known to it; (ii) is now, or becomes in the future, public knowledge other than through acts or omissions of it; or (iii) is lawfully obtained by it from sources independent of Disclosing party. (iv) is required to be disclosed by government authority; provided; however, that Receiving party has provided reasonable advance notice of the impending disclosure to Disclosing party and will disclose the Confidential Information to the extent necessary and to such authority only. (c) The obligations of the Receiving party with respect to Confidential Information shall continue for a period ending five (5) years from the termination date of this Agreement. 10.3 ASSIGNABILITY. UNIVERSITY and LICENSEE each agree that their rights and obligations under this Agreement may not be transferred or assigned to a third party without the prior written consent of the other party thereto, such consent not to be unreasonably withheld. Notwithstanding the foregoing, in the event of a merger, consolidation or similar reorganization of either Party with or into another party, or in the event of a sale of all or substantially all of the assets of a Party or the business unit or product to which this Agreement pertains, this Agreement shall be assigned to or become the obligation and liability of the acquiring entity, subject to written notification of such acquisition or merger to the other Party. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties.. 10.4 NO WAIVER. No waiver by either party of any breach or default of any covenant or agreement set forth in this Agreement shall be deemed a waiver as to any subsequent and/or similar breach or default. 10.5 FAILURE TO PERFORM. In the event of a failure of performance due under this Agreement and if it becomes necessary for either party to undertake legal action against the other on account thereof, then the prevailing party shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements. page 14 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. 10.6 GOVERNING LAWS; ARBITRATION. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SWITZERLAND, except that matters concerning the validity or infringement of any patent shall be governed by the national laws of the jurisdiction issuing such patent. All disputes, differences or controversies arising out of or in connection with this Agreement, its interpretation, performance, or termination, which may arise between the Parties arising out of, or related to, this Agreement shall be amicably settled between the Parties. In case of failure of amicable settlement between the Parties, it shall be finally settled by binding arbitration conducted in accordance with the Rules of Concilliation and Arbitration of the International Chamber of Commerce (Paris, France) (the "ICC"). The arbitration panel shall be composed of three arbitrators, one of whom shall be selected by UNIVERSITY, one of whom shall be selected by LICENSEE and the third of whom shall be selected by the two so selected. If both or either of UNIVERSITY OR LICENSEE fails to select an arbitrator or arbitrators within fourteen (14) days after receiving notice of commencement of arbitration or if the two arbitrators fail to select a third arbitrator within fourteen (14) days after their appointment, the ICC shall, in accordance with said rules, upon the request of both or either of the Parties to the arbitration, appoint the arbitrator or arbitrators required to complete the panel. The venue of arbitration shall be Zurich. The Parties shall share the costs of the arbitration, including administrative and arbitrators' fees equally. Each Party shall bear its own costs and attorneys' and witnesses' fees; provided, however, that the prevailing Party, as determined by the arbitration panel, shall be entitled to an award against the other Party in the amount of the prevailing Party's costs and reasonable attorneys' fees. The arbitration award shall be final and each Party shall comply in good faith and submit itself to the jurisdiction of the appropriate courts in Zurich for the sole purpose of the entry of such arbitrator's award to render effective such arbitration decision. 10.7 FORCE MAJEURE. A party to this Agreement may be excused from any performance required herein if such performance is rendered impossible or unfeasible due to any catastrophe or other major event beyond its reasonable control, including, without limitation, war, riot, and insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes, lockouts, or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events have abated, the non-performing party's obligations herein shall resume. 10.8 HEADINGS. The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. page 15 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. 10.9 ENTIRE AGREEMENT. This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof. 10.10 AMENDMENTS. No amendment or modification of this Agreement shall be valid or binding on the parties unless made in writing and signed on behalf of each party. 10.11 SEVERABILITY. In the event that any of the provisions contained in this Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it. page 16 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. IN WITNESS WHEREOF, both UNIVERSITY and LICENSEE have executed this Agreement, in duplicate originals, by their respective and duly authorized officers on the day and year first above written. UNIVERSITY Date: December 20, 2002 By: PROF. ANDREAS PLUCKTHUN /s/ Andreas Pluckthun ---------------------------- (SIGNATURE) Date: December 18, 2002 By: PD DR. UWE ZANGEMEISTER-WITTKE /s/ Uwe Zangemeister-Wittke ---------------------------- (SIGNATURE) Approved by the Vice President for Research: Date: December 15, 2002 By: PROF. ALEXANDER BORBELY /s/ Alexander Borbely ---------------------------- (SIGNATURE) LICENSEE Date: January 9, 2003 By: NICK GLOVER, PH.D. /s/ Nick Glover ---------------------------- VP, Corporate Development (SIGNATURE) page 17 of 18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. ATTACHMENT A Patent Applications on "[ ] Country/Region Number United States [ ] Canada [ ] Europe [ ] Japan [ ] page 18 of 18 EX-3.18 25 t17062exv3w18.txt EXHIBIT 3.18 EXHIBIT 3.18 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. NON-EXCLUSIVE LICENSE AGREEMENT This Non-exclusive License Agreement (the "Agreement"), effective as of November 30, 2001 (the "Effective Date"), is entered into by and between XOMA Ireland Limited ("XOMA"), an Irish company having offices located at Shannon Airport House, Shannon, County Clare, Ireland, and Viventia Biotech Inc. ("VIVENTIA"), a Canadian corporation having offices located at 10 Four Seasons Place, Suite 510, Toronto, Ontario, Canada M9B 6H7. BACKGROUND A. XOMA is the owner of certain Patent Rights and Know-How (as such terms are defined below) and VIVENTIA wishes to acquire a non-exclusive license under the Patent Rights and Know-How; and B. XOMA is willing to grant VIVENTIA such a non-exclusive license, on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the promises and the mutual covenants hereinafter recited, the parties agree as follows: ARTICLE 1 -- DEFINITIONS In this Agreement, the following terms shall have the meanings set forth in this Article. 1.1 "Affiliate" means any corporation or other entity which is directly or indirectly controlling, controlled by or under common control with a party hereto. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of at least fifty percent (50%) of the outstanding shares or other voting rights of the subject entity to elect directors. 1.2 "BLA" means a Biologics License Application (or, if applicable, a Product License Application), as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, and any corresponding U.S. or foreign application, registration or certification. 1.3. "Confidential Information" shall mean (i) any proprietary or confidential information or material in tangible form disclosed hereunder that is designated as "Confidential" at the time it is delivered to the receiving party, or (ii) proprietary or confidential information disclosed orally hereunder which is identified as confidential or proprietary when disclosed and such disclosure of confidential information is confirmed in writing within thirty (30) days by the disclosing party. 1 1.4 "Field" shall mean the treatment or prophylaxis of a human or animal disease state or condition and shall exclude Phage Display. 1.5 "Immunoglobulin" means any molecule that has an amino acid sequence by virtue of which it specifically interacts with an antigen and wherein any chains of the molecule contain a functionally operating region of an antibody variable region including, without limitation, any naturally occurring or recombinant form of such a molecule. 1.6 "IND" shall mean an Investigational New Drug application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder for initiating clinical trials in the United States, or any corresponding foreign application, registration or certification. 1.7 "Know-How" means unpatented and/or unpatentable technical information, including ideas, concepts, inventions, discoveries, data, designs, formulas, specifications, procedures for experiments and tests and other protocols, results of experimentation and testing, fermentation and purification techniques, and assay protocols owned by XOMA as of the Effective Date which may be necessary for the practice of the Patent Rights, which XOMA has the right to license, and which have been transmitted to VIVENTIA. Know-How shall not include the Patent Rights. All Know-How shall be Confidential Information of XOMA. 1.8 "Licensed Product" will mean any product within the scope of a Valid Claim or produced using any method within the scope of a Valid Claim, or which incorporates or is made using any Know-How, provided however, that the term Licensed Product shall not include Phage Display Materials or any Product which is discovered, isolated, characterized or produced by the use of Phage Display. 1.9 "Licensed Technology" means the Patent Rights and Know-How. 1.10 "NDA" shall mean a New Drug Application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or any corresponding U.S. or foreign application, registration or certification. 1.11 "Net Sales" shall mean revenues received by VIVENTIA or its Affiliates, as follows: the invoice price of Licensed Products sold by VIVENTIA or its marketing partner(s) to third parties, less, to the extent included in such invoice price the total of: (1) ordinary and customary trade discounts actually allowed; (2) credits, rebates and returns (including, but not limited to, wholesaler and retailer returns); (3) freight, postage, insurance and duties paid for and separately identified on the invoice or other documentation maintained in the ordinary course of business, and (4) excise taxes, other consumption taxes, customs duties and compulsory payments to governmental authorities actually paid and separately identified on the invoice or other documentation maintained in the ordinary course of business. Net Sales shall also include the fair market value of all other consideration received by VIVENTIA or its marketing partner(s) in respect of Licensed Products, whether such consideration is in cash, 2 payment in kind, exchange or another form, but shall not include any payments received for reimbursement of research expenses, including but not limited to the conduct of clinical trials, or for the purchase of debt or equity of VIVENTIA. In the case of pharmacy incentive programs, hospital performance incentive program chargebacks and/or similar programs or discounts on "bundles" of products, VIVENTIA may, with notice to XOMA, discount the bona fide list price of a Licensed Product by the average percentage discount of all VIVENTIA products in a particular "bundle," calculated as follows: [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
[ ] If a Licensed Product is not sold separately and no bona fide list price exists for such Licensed Product, the parties shall negotiate in good faith an imputed bona fide list price for such Licensed Product. 1.12 "Patent Rights" shall mean the patent applications and patents listed on Exhibit A hereto and all divisions, continuations, continuations-in-part, and substitutions thereof; all foreign patent applications corresponding to the preceding applications or directly or indirectly claiming priority to or from any of the forgoing; and all U.S. and foreign patents issuing on any of the preceding applications, including extensions, reissues, and re-examinations. 1.13 "Phage Display" means the use of Phage Display Materials. 1.14 "Phage Display Materials" means (i) any collection or library of polynucleotide sequences which encodes at least one polypeptide and which is contained in filamentous bacteriophage and/or bacteriophage or phagmid cloning vectors capable of propagation in bacteria; or (ii) any collection of library of bacteriophage wherein a polypeptide is expressed as a fusion protein comprising the polypeptide and an outer surface polypeptide of a bacteriophage. For the avoidance of doubt, Phage Display Materials shall include any such materials wherein the polypeptide in an Immunoglobulin. 1.15 "Phase II" or "Phase III" shall mean a Phase II or Phase III clinical trial as prescribed by applicable FDA regulations, or corresponding regulations of any comparable entity. 1.16 "Product" means any composition of matter or article of manufacture, including, without limitation any diagnostic, prophylactic or therapeutic product, which was discovered 3 or created by or arose out of or is related to use of Licensed Materials, and is made or sold under conditions which, if unlicensed, would constitute infringement of the XOMA Patent Rights. 1.17 "Third Party" means any person or entity other than VIVENTIA or XOMA. 1.18 "Valid Claim" means (i) a claim of an issued and unexpired patent included within the Patent Rights which claim has not been held invalid in a final decision of a court of competent jurisdiction from which no appeal may be taken, and which has not been disclaimed or admitted to be invalid or unenforceable through reissue or otherwise, or (ii) a claim of a published patent application within the Patent Rights. ARTICLE 2 -- LICENSE 2.1 Grant. Subject to the terms and conditions of this Agreement, XOMA hereby grants to VIVENTIA a non-exclusive, non-transferable, worldwide license under the Licensed Technology, without the right to grant sublicenses, to make, have made, use, import, offer for sale and sell Licensed Products for use in the Field, provided that VIVENTIA shall have the right to grant one sublicense in each country to a marketing partner for sale of Licensed Products for use in the field. 2.2 No Implied Rights. Only the rights and licenses granted pursuant to the express terms of this Agreement shall be of any legal force or effect. No license or other rights shall be deemed to have been granted to VIVENTIA other than as expressly provided for in this Agreement. For the avoidance of doubt, the license grants pursuant to Section 2.1 do not include, and expressly exclude, the following: (a) any right or license to engage in or cause any Third Party to engage in Phage Display or to use any Phage Display Materials to identify, select, characterize, study or test a polypeptide, including but not limited to an Immunoglobulin; (b) any right or license to engage in any Phage Display activities on behalf of or in collaboration with any Third Party; (c) any right or license under the XOMA Patent Rights to commercialize any Product based upon or derived from use of Phage Display Materials or Phage Display; (d) any right or license under the XOMA Patent Rights to sell, lease, license, transfer or dispose of the ownership or possession of any Phage Display Materials; and (e) any right to release any Third Party from any claim of infringement under the XOMA Patent Rights. 4 2.3 Delivery of Know-How. Within thirty (30) days following receipt by XOMA of VIVENTIA's payment of the access fee under Section 3.1 of this Agreement, XOMA shall deliver to VIVENTIA the Know-How listed on Exhibit B hereto. 2.4 Ownership; Enforcement. At all times XOMA will retain ownership of the [ OMA Patent Rights and may use and commercialize the [ OMA Patent Rights itself or with any Third Party for any purpose whatsoever. XOMA retains the right, at its sole discretion, to enforce, maintain and otherwise protect the XOMA Patent Rights. Within thirty (30) days of the Effective Date, and at all times thereafter during the term of this Agreement, VIVENTIA shall give XOMA prompt notice in writing of all information or facts in its possession which identify or are reasonably likely to lead to the identification of any unauthorized use of the XOMA Patent Rights, including without limitation the conduct of any activities outside of the scope of the license grants pursuant to Section 2.1. VIVENTIA, at XOMA's expense, shall cooperate with XOMA's reasonable written demands to VIVENTIA with respect to any actions XOMA may choose to take related to the enforcement, maintenance or protection of the XOMA Patent Rights. 2.5 Oppositions and/or Appeals. VIVENTIA hereby agrees not to enter into any opposition to and/or appeal from any decision by the patent authorities of any country on the XOMA Patent Rights, and shall not assist or otherwise cooperate with another party in any such opposition or appeal. ARTICLE 3 -- CONSIDERATION 3.1 Access Fee. VIVENTIA shall pay XOMA by wire transfer a technology access fee of [ ] in two (2) payments as follows: [ ] will be paid to XOMA within ten (10) days after the receipt by VIVENTIA of one fully executed copy of this Agreement, and [ ] will be paid to XOMA on or before the first anniversary of the receipt by VIVENTIA of the copy of the Agreement. Technology transfer is included in the access fee and includes up to two person-days of XOMA scientific staff time during the first twelve months of the term of this Agreement. Thereafter, VIVENTIA will be able to consult with XOMA scientific staff at $[ ]/person-day (based on an eight hour day) beyond the two person-days. The cost of all reasonable travel-related expenses, including travel-related expenses for the first two person-days, will be fully reimbursed to XOMA by VIVENTIA. 3.2 Milestone Payments. Within thirty (30) days following the achievement by VIVENTIA of the following milestones with respect to each Licensed Product, VIVENTIA shall pay to XOMA the applicable payments below: 5
Event Payment ----- ------- Initiation of a first [ ] [ ] Initiation of a first [ ] [ ] Regulatory approval [ ] for marketing [ ]
3.3 Royalties. (a) VIVENTIA shall pay to XOMA a royalty of [ ] percent ([ ]%) on all Net Sales of Licensed Products. (b) VIVENTIA shall receive a credit for royalties it pays to third parties on account of Licensed Products on a country-by-country basis against royalties due to XOMA pursuant to this Agreement; provided, however, that in no event shall royalties due to XOMA with respect to Licensed Products be reduced to less than [ ] percent ([ ]%) in any country. (c) The foregoing royalty rates shall be reduced by [ ] percent ([ ]%) with respect to Licensed Products which are not within the scope of a Valid Claim in the country of sale. 3.4 One Royalty. No more than one royalty payment shall be due hereunder with respect to a sale of a particular Licensed Product. No multiple royalties shall be payable because any Licensed Product or its manufacture, sale or use is covered by more than one Valid Claim. 3.5 Royalty Term. Royalties due under this Article 3 shall be payable on a country-by-country and Licensed Product-by-Licensed Product basis from the first commercial sale of such Licensed Product until the expiration of the last-to-expire Patent Right in such country with respect to which a Valid Claim covers the manufacture, use, sale, offer for sale, import or export of such Licensed Product, or until the tenth anniversary of the first commercial sale of a particular Licensed Product in such country, whichever is later. ARTICLE 4 -- PAYMENTS; REPORTS AND RECORDS 4.1 Payments; Currency. All payments due hereunder shall be paid by wire transfer in United States dollars in immediately available funds to an account designated by XOMA. If any currency conversion shall be required in connection with the payment of any royalties hereunder, such conversion shall be made by using the exchange rate for the purchase of U.S. dollars quoted in the U.S. version of the Wall Street Journal on the last business day of the calendar quarter to which such royalty payments relate. 6 4.2 Royalty Reports and Payments. After the first commercial sale of a Licensed Product on which royalties are required to be paid hereunder, VIVENTIA shall make quarterly written reports to XOMA within sixty (60) days after the end of each calendar quarter, stating in each such report, by country, the number, description, and aggregate Net Sales of each Licensed Product sold during the calendar quarter. XOMA shall treat all such reports as Confidential Information of VIVENTIA. Concurrently with the making of such reports, VIVENTIA shall pay XOMA the royalties specified in Section 3.3 hereof. 4.3 Records; Inspection. VIVENTIA shall keep complete, true and accurate books of account and records for the purpose of determining the royalty amounts payable under this Agreement. Such books and records shall be kept at the principal place of business of VIVENTIA for at least three (3) years following the end of the calendar quarter to which they pertain and will be available for inspection during such period by a representative of XOMA for the purpose of verifying the royalty reports and payments. Such inspections shall be made during ordinary business hours. The representative may be obliged to execute a reasonable confidentiality agreement prior to commencing any such inspection. Inspections conducted under this Section 4.3 shall be at the expense of XOMA, unless an underpayment exceeding [ ] percent ([ ]%) of the amount stated for the full period covered by the inspection is identified, in which case all out-of-pocket costs relating to the inspection will be paid immediately by VIVENTIA. Any underpayments or unpaid amounts discovered by such inspections or otherwise will be paid immediately by VIVENTIA, with interest from the date(s) such amount(s) were due at the prime rate reported by the Bank of America plus two percent (2%). ARTICLE 5 -- DILIGENCE 5.1 Reasonable Efforts. VIVENTIA agrees to use reasonable efforts consistent with its prudent business judgment to diligently develop and commercialize the Patent Rights and obtain such approvals as may be necessary for the sale of the Licensed Products in the United States and such other worldwide markets as VIVENTIA elects to commercialize the Licensed Products. 5.2 Reports to XOMA. During the term of this Agreement, VIVENTIA shall keep XOMA reasonably informed of its activities subject to this Agreement, including without limitation, the achievement of the milestones set forth in Section 3.2 for the commercialization of each Licensed Product, and within thirty (30) days following November 30 of each year shall provide XOMA with a written report indicating the current status of each program involving a Licensed Product. When the registration package requesting approval for commercial sale of each Licensed Product is first filed in each of the U.S., Europe and Japan, and in each case when approval is received therefor, VIVENTIA will promptly notify XOMA. VIVENTIA shall notify XOMA within thirty (30) days after the first commercial sale of each Licensed Product. 7 ARTICLE 6 -- CONFIDENTIALITY 6.1 Confidential Information. Except as expressly provided herein, the parties agree that, for the term of this Agreement and for five (5) years thereafter, the receiving party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement any Confidential Information furnished to it by the disclosing party hereto, except that to the extent that it can be established by the receiving party by written proof that such Confidential Information: (a) was already known to the receiving party, other than under an obligation of confidentiality, at the time of disclosure; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement; or (d) was subsequently lawfully disclosed to the receiving party by a person other than a party hereto. 6.2 Permitted Use and Disclosures. Each party hereto may use or disclose information disclosed to it by the other party to the extent such use or disclosure is reasonably necessary in complying with applicable law or governmental regulations or conducting clinical trials; provided that if a party is required to make any such disclosure of another party's Confidential Information, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the latter party of such disclosure and will use its reasonable best efforts to secure confidential treatment of such information prior to its disclosure (whether through protective orders or otherwise). 6.3 Confidential Terms. Except as expressly provided herein, each party agrees not to disclose any terms of this Agreement to any third party without the consent of the other party; provided, disclosures may be made as required by securities or other applicable laws, or to actual or prospective corporate partners, or to a party's accountants, attorneys and other professional advisors. 6.4 Agreement Announcement. The parties hereby agree that the consummation of this Agreement shall be deemed to be in the public domain and may be announced or otherwise referred to by the parties as they deem appropriate. 8 ARTICLE 7 -- REPRESENTATIONS AND WARRANTIES 7.1 Representations and Warranties. XOMA represents and warrants that: (a) it is the sole and exclusive owner of all right, title and interest in the Patent Rights; and (b) it has the right to grant the license granted herein. 7.2 Disclaimer. Nothing in this Agreement is or shall be construed as: (a) A warranty or representation by XOMA as to the validity or scope of any claim or patent within the Patent Rights; (b) A warranty or representation that anything made, used, sold, or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of any patent rights or other intellectual property right of any third party; (c) An obligation to bring or prosecute actions or suits against third parties for infringement of any of the Patent Rights or misappropriation of any Know-How; or (d) Granting by implication, estoppel, or otherwise (except as expressly set forth herein) any licenses or rights under patents or other rights of XOMA or third parties, regardless of whether such patents or other rights are dominant or subordinate to any patent within the Patent Rights. 7.3 No Warranties. EXCEPT AS PROVIDED IN SECTION 7.1 ABOVE XOMA GRANTS NO WARRANTIES WITH RESPECT TO THE LICENSED TECHNOLOGY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND XOMA SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF THE PATENT RIGHTS OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. ARTICLE 8 -- INDEMNIFICATION VIVENTIA agrees to indemnify, defend and hold XOMA and its directors, officers, employees and agents harmless from and against any and all third party liabilities, claims, demands, expenses (including, without limitation, attorneys and professional fees and other costs of litigation), losses or causes of action (each, a "Liability") arising out of or relating in any way to (i) the possession, manufacture, use, sale or other disposition of Licensed Products, whether based on breach of warranty, negligence, product liability or otherwise, (ii) the exercise of any right granted to VIVENTIA pursuant to this Agreement, or (iii) any breach of this Agreement by VIVENTIA, except to the extent, in each case, that such Liability is caused by the negligence or willful misconduct of XOMA, or (b) breach by XOMA as determined by a court of competent jurisdiction. 9 ARTICLE 9 -- TERM AND TERMINATION 9.1 Term. The term of this Agreement will commence on the Effective Date and remain in full force and effect until the expiration of the last patent within the Patent Rights, or the tenth anniversary of the first commercial sale of a Licensed Product, whichever is later, unless earlier terminated in accordance with this Article 9. 9.2 Termination for Cause. Either party may terminate this Agreement in the event the other party has materially breached or defaulted in the performance of any of its obligations hereunder, and such default has continued for sixty (60) days after written notice thereof was provided to the breaching party by the nonbreaching party. The parties hereby agree that a breach of Section 2.5 is considered to be a material breach of this Agreement. Any termination shall become effective at the end of such sixty (60) day period unless the breaching party has cured any such breach or default prior to the expiration of such period. Notwithstanding the above, in the case of a failure to pay any amount due hereunder the period for cure of any such default following notice thereof shall be ten (10) days and, unless payment is made within such period, the termination shall become effective at the end of such period. 9.3 Termination for Insolvency. If voluntary or involuntary proceedings by or against a party are instituted in bankruptcy under any insolvency law, or a receiver or custodian is appointed for such party, or proceedings are instituted by or against such party for corporate reorganization or the dissolution of such party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing, or if such party makes an assignment for the benefit of creditors, or substantially all of the assets of such party are seized or attached and not released within sixty (60) days thereafter, the other party may immediately terminate this Agreement effective upon notice of such termination. 9.4 Effect of Termination. (a) Accrued Rights and Obligations. Termination of this Agreement for any reason shall not release any party hereto from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination nor preclude either party from pursuing any rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement. It is understood and agreed that monetary damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching party may be entitled to injunctive relief as a remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for any such breach of this Agreement, but shall be in addition to all other remedies available at law or in equity. (b) Return of Confidential Information. Upon any termination of this Agreement, VIVENTIA and XOMA shall promptly return to the other party all Confidential Information, including without limitation, any Know-How received from the other party (except XOMA may retain copies of any reports or records referred to in Article 4 or 5). 10 (c) Stock on Hand. In the event this Agreement is terminated for any reason, VIVENTIA shall have the right to sell or otherwise dispose of the stock of any Licensed Product then on hand until six (6) months after such termination, subject to Articles 3 and 4 and the other applicable terms of this Agreement. (d) Licenses. All licenses granted hereunder shall terminate upon the termination of this Agreement. 9.5 Survival. Sections 9.4 and 9.5, and Articles 4, 6, 7, 8 and 10 of this Agreement shall survive the expiration or termination of this Agreement for any reason. 9.6 Contested Validity. If VIVENTIA or any of its Affiliates attacks, contests or otherwise disparages or assists another in attacking, contesting or otherwise disparaging the validity of any of the Patent Rights licensed hereunder in any proceeding in any court of competent jurisdiction, including any patent opposition or appeal proceeding involving or relating to the Patent Rights, XOMA shall have the right to terminate this Agreement by written notice. ARTICLE 10 -- MISCELLANEOUS PROVISIONS 10.1 Governing Law. This Agreement shall be construed in accordance with the laws of Canada, the State of California and/or the United States of America which are applicable to contracts negotiated, executed and performed within the State of California in the United States of America. In addition, the parties agree to comply with all applicable laws, rules and regulations of Canada, California and the United States of America, including all export and import laws, and to do nothing to cause XOMA or VIVENTIA to violate any such laws, rules and/or regulations. 10.2 Assignment. VIVENTIA may not transfer or assign this Agreement or any of VIVENTIA's rights hereunder without the prior written consent of XOMA, such consent not to be unreasonably withheld, provided that VIVENTIA may assign this Agreement to an Affiliate or a purchaser of VIVENTIA or the business unit of VIVENTIA to which this Agreement pertains without consent of XOMA, which consent will not be unreasonably withheld. Any such attempted transfer or assignment shall be void. This Agreement shall be binding upon and inure to the benefit of the parties and their permitted successors and assigns. 10.3 Waiver. No waiver of any rights shall be effective unless consented to in writing by the party to be charged and the waiver of any breach or default shall not constitute a waiver of any other right hereunder or any subsequent breach or default. 10.4 Severability. In the event that any provisions of this Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect without said provision. 11 10.5 Notices. All notices, requests and other communications hereunder shall be in writing and shall be personally delivered or sent by telecopy or other electronic facsimile transmission or by registered or certified mail, and shall be effective upon receipt at the respective address specified below, or such other address as may be specified in writing to the other parties hereto: LICENSEE: Vice President, Corporate Development Viventia Biotech Inc. 10 Four Seasons Place, Suite 501 Toronto, Ontario Canada M9B 6H7 With a copy to: Chief Financial Officer XOMA: XOMA Ireland Limited Shannon Airport House Shannon, County Clare Ireland With a copy to: Christopher J. Margolin Vice President, General Counsel and Secretary XOMA (US) LLC 2910 Seventh Street Berkeley, CA 94710
10.6 Independent Contractors. Both parties are independent contractors under this Agreement. Nothing contained in this Agreement is intended nor is to be construed so as to constitute XOMA or VIVENTIA as partners or joint venturers with respect to this Agreement. Neither party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or to bind the other party to any other contract, agreement, or undertaking with any third party. 10.7 Patent Marking. VIVENTIA agrees to mark all Licensed Products sold pursuant to this Agreement in accordance with the applicable statute or regulations relating to patent marking in the country or countries of manufacture and sale thereof. 10.8 Compliance with Laws. In exercising their rights under this license, the parties shall fully comply in all material respects with the requirements of any and all applicable laws, regulations, rules and orders of any governmental body having jurisdiction over the exercise of rights under this Agreement. VIVENTIA shall be responsible, at its expense, for making any 12 required registrations or filings with respect to this Agreement and obtaining any necessary governmental approvals with respect hereto. 10.9 Use of Name. Except as provided in Section 6.4, neither party shall use the name or trademarks of the other party without the prior written consent of such other party. 10.10 Further Actions. Each party agrees to execute, acknowledge and deliver such further instruments, and do such other acts, as may be necessary and appropriate in order to carry out the purposes and intent of this Agreement. 10.11 Entire Agreement; Amendment. This Agreement constitutes the entire and exclusive Agreement between the parties with respect to the subject matter hereof and supersedes and cancels all previous discussions, agreements, commitments and writings in respect thereof. No amendment or addition to this Agreement shall be effective unless reduced to writing and executed by the authorized representatives of the parties. IN WITNESS WHEREOF, XOMA and VIVENTIA have executed this Agreement in duplicate originals by duly authorized officers.
VIVENTIA BIOTECH INC. XOMA IRELAND LIMITED By: /s/ Anthony Schincariol By: /s/ Alan Kane ------------------------------------- ------------------------------------- Anthony Schincariol, Ph.D. Alan Kane, Director President & CEO duly authorized on behalf of Viventia Biotech Inc. XOMA Ireland Limited in the presence of the following witness: Date: November 26, 2001 ------------------------------------- /s/ Nick Glover /s/ Brian Cunnea ------------------------------------- ------------------------------------- Nick Glover, Ph.D. Solicitor Vice-President, Corporate Development Viventia Biotech Inc. Date: November 26, 2001 Date: November 29, 2001 ------------------------------------- -------------------------------------
13 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PROVISIONS HAVE BEEN OBSCURED. EXHIBIT A Patent Rights Title: Modular Assembly of Antibody Genes, Antibodies Prepared Thereby and Use Inventors: Robinson, Liu, Horwitz, Wall, Better 1) Based on PCT/US86/02269, which is a continuation-in-part of U.S. Serial No. 06/793,980 filed November 1, 1985 (abandoned).
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- *United States 06/793,980 Australia 65981/86 Issued 606,320 Canada 521,909 Abandoned Denmark 3385/87 Pending Taiwan 75105650 Issued 51922 *United States 06/086,266
2) Based on PCT/US88/02514, which corresponds to U.S. Serial No. 07/077,528, which is a continuation-in-part of 06/086,266 (abandoned), which is a continuation-in-part of U.S. Serial No. 06/793,980 (abandoned).
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- Australia 23244/88 Issued 632,462 Austria EP 88907510.7 Granted EP/0371998 Belgium EP 88907510.7 Granted EP/0371998 Canada 572,398 Pending Denmark 192/90 Pending Europe EP 88907510.7 Granted EP/0371998 Europe EP 95119798.7 Allowed (divisional) France EP 88907510.7 Granted EP/0371998 Germany EP 88907510.7 Granted EP/0371998 Italy EP 88907510.7 Granted EP/0371998 Japan 506481/88 Granted 2991720 Luxembourg EP 88907510.7 Granted EP/0371998 Netherlands EP 88907510.7 Granted EP/0371998 Sweden EP 88907510.7 Granted EP/0371998 Switzerland/ Liechtenstein EP 88907510.7 Granted EP/0371998 United Kingdom EP 88907510.7 Granted EP/0371998 Europe EP 93100041.8 Granted EP/0550400 Austria EP 93100041.8 Granted EP/0550400 Belgium EP 93100041.8 Granted EP/0550400 France EP 93100041.8 Granted EP/0550400 Germany EP 93100041.8 Granted EP/0550400 Italy EP 93100041.8 Granted EP/0550400 Luxembourg EP 93100041.8 Granted EP/0550400 Netherlands EP 93100041.8 Granted EP/0550400 Sweden EP 93100041.8 Granted EP/0550400 Switzerland/ Liechtenstein EP 93100041.8 Granted EP/0550400
1
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- United Kingdom EP 93100041.8 Granted EP/0550400 *United States 07/077,528
*Cases abandoned in favor of a continuing application. 3) Based on U.S. Serial No. 07/501,092 filed March 29, 1990, which is a continuation-in-part of U.S. Serial No. 07/077,528 (Modular Assembly of Antibody Genes, Antibodies Prepared Thereby and Use; Robinson, Liu, Horwitz, Wall, Better) and of U.S. Serial No. 07/142,039 (Novel Plasmid Vector with Pectate Lyase Signal Sequence; Lei, Wilcox).
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- *United States 07/501,092 *United States 07/987,555 *United States 07/870,404 *United States 08/020,671 United States 08/235,225 5,618,920 United States 08/299,085 5,595,898 United States 08/357,234 5,576,195 United States 08/472,696 5,846,818 United States 08/472,691 Allowed United States 08/467,140 5,698,435 United States 08/450,731 5,693,493 United States 08/466,203 5,698,417
Title: AraB Promoters and Method of Producing Polypeptides, Including Cecropins, by Microbiological Techniques Inventors: Lai, Lee, Lin, Ray, Wilcox Based on PCT/US86/00131, which is a continuation-in-part of U.S. Serial No. 06/695,309 filed January 28, 1985 (abandoned).
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- Austria EP 86900983.7 Granted EP/0211047 Belgium EP 86900983.7 Granted EP/0211047 Europe EP 86900983.7 Granted EP/0211047 Finland 863891 Granted 94774 France EP 86900983.7 Granted EP/0211047 Germany EP 86900983.7 Granted P3689598.9-08 Italy EP 86900983.7 Granted EP/0211047 Japan 500818/86 Granted 2095930 Japan 094753/94 Granted 2121896 Luxembourg EP 86900983.7 Granted EP/0211047 Netherlands EP 86900983.7 Granted EP/0211047 Norway 863806 Granted 175870 Sweden EP 86900983.7 Granted EP/0211047 Switzerland/ Liechtenstein EP 86900983.7 Granted EP/0211047 United Kingdom EP 86900983.7 Granted EP/0211047
2
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- *United States 06/695,309 *United States 06/797,472 United States 07/474,304 Granted 5,028,530
*Cases abandoned in favor of a continuing application. Title: Novel Plasmid Vector with Pectate Lyase Signal Sequence Inventors: Lei, Wilcox Based on U.S. Serial No. 07/142,039 filed January 11, 1988 and PCT/US89/00077.
COUNTRY SERIAL NO. PATENT NO. ------- ---------- ---------- Australia 29377/89 Issued/627443 Canada 587,885 1,338,807 Europe EP 89901763.6 Granted EP/0396 612 Austria EP 89901763.6 Granted EP/0396 612 Belgium EP 89901763.6 Granted EP/0396 612 France EP 89901763.6 Granted EP/0396 612 Germany EP 89901763.6 Granted EP/0396 612 Italy EP 89901763.6 Granted EP/0396 612 Luxembourg EP 89901763.6 Granted EP/0396 612 Netherlands EP 89901763.6 Granted EP/0396 612 Sweden EP 89901763.6 Granted EP/0396 612 Switzerland/ Liechtenstein EP 89901763.6 Granted EP/0396 612 United Kingdom EP 89901763.6 Granted EP/0396 612 Japan 501661/89 Granted 2980626 *United States 07/142,039
*Cases abandoned in favor of a continuing application. 3 EXHIBIT B Delivery of Know-How (2.3) 1. Plasmid DNA 2. Plasmid Maps 3. Expression Strain 4. Lab-Scale Production (including, but not limited to, recombinant immunotoxin production Know-How) 5. Fermentation Production (including, but not limited to, recombinant immunotoxin production Know-How) 4 EX-3.19 26 t17062exv3w19.txt EXHIBIT 3.19 THIS INDENTURE made as of the 31st day of March, 2000 BETWEEN: ALMAD INVESTMENTS LIMITED (hereinafter called the "Landlord"), OF THE FIRST PART, -and- VIVENTIA BIOTECH INC. (hereinafter called the "Tenant"), OF THE SECOND PART WITNESSETH that in consideration of the rents, covenants and agreements hereinafter reserved and contained on the part of the Tenant to be paid, observed and performed, the Landlord has demised and leased, and by these presents does demise and lease unto the Tenant approximately Twenty One Thousand Five Hundred (21,500) square feet of Rentable Area (the "Leased Premises") commonly known as 136-147 Hamelin Street, in the City of Winnipeg, in the Province of Manitoba forming part of the property (the "Property"), commonly known as 131-147 Hamelin Street in the City of Winnipeg, in the Province of Manitoba; TO HAVE AND TO HOLD the Leased Premises for a term of Three (3) years commencing on the 1st day of April, 2000 and from thenceforth next ensuing and fully to be completed and ended on the 31st day of March, 2003, (hereinafter called the "Term"), and for the minimum rent and additional rent set forth in Section 1.01 hereof. 1.00 TENANT'S COVENANTS The Tenant hereby covenants with the Landlord as follows: 1.01 RENT - The Tenant shall pay rent as follows: (a) MINIMUM RENT - The Tenant shall pay to the Landlord or as the Landlord may direct in writing, in lawful money of Canada, without set-off, compensation or deductions except as may otherwise be provided for in this agreement, yearly in each and every year, Minimum Rent for the Leased Premises in the amount of One Hundred Thirty Nine Thousand and Seven Hundred and Fifty Dollars ($139,750.00) per annum, plus goods and service tax thereon, payable in monthly installments of Eleven Thousand Six Hundred and Forty Five Dollars and Eighty Three Cents ($11,645.83) plus goods and service tax thereon, on or before the 1st day of each and every month of the Term. The Minimum Rent is calculated at a rate of Six Dollars and Fifty ($6.50) per square foot of Rentable Area. (b) ADDITIONAL RENT - The Tenant shall pay additional rent as set forth in Section 1.02 hereof. The Additional Rent is estimated at $7.65 per square foot of Rentable Area plus goods and service tax thereon for the fiscal year 2000. The Tenant shall pay the Additional Rent to the Landlord in equal monthly installments together with the monthly installments of the minimum rent. At the end of the fiscal year, the Tenant shall be advised of the actual amount required to be paid and if necessary, an adjustment shall thereupon be made between the parties within (15) days of the Landlord so advising. 1.02 ADDITIONAL RENT - The Tenant shall pay to the Landlord as Additional Rent: (a) its Proportionate Share of all taxes, rates, charges, local improvements and assessments whatsoever whether municipal, provincial or federal that may be levied during the Term hereof upon the Leased Premises or upon the Landlord on account thereof to the entire exoneration of the said Landlord save and except as for personal or corporate income taxes and capital taxes whether assessed by the Provincial or Federal Government and all Estate and Succession Duties or Taxes whether assessed by the Federal or Provincial Government, and save and except for any separate school taxes which may be levied as a result of any election by the Landlord, without limiting the generality of the foregoing, the taxes, rates, charges and assessments to be paid by the Tenant shall include taxes for local improvements or works assessed upon the Leased Premises, business taxes arising from the use or occupancy of the Leased Premises by the Tenant or any subtenant holding under the Tenant, provided that if any taxes, rates, charges, local improvements and assessments whatsoever as aforesaid are levied separately in respect of the Leased Premises to pay the full amount as Additional Rent; (b) its Proportionate Share of all Operating Costs. Operating Costs means the total amount paid or payable, whether by the Landlord, for public utilities, building services, replacement of the Property and maintenance equipment (excluding additions to the building and provided that capital costs are amortized in accordance with generally accepted accounting principles), maintenance and janitorial services for the Property or any part or parts thereof, such as are in keeping with maintaining the standard of a first-class building having regard for its age, location and use, including all repairs and replacements required for such maintenance, including, without limiting the generality of the foregoing, repairs and non-structural replacements to the roof, structure of the Property and the land adjoining the Property (including the parking area), the cost of providing hot and cold water, the cost of heating, the cost of window cleaning, insurance costs (the types and amounts of insurance being at the Landlord's sole discretion), service contracts with independent contractor's engineers' wages and all wages, salaries, costs and expenses incurred in connection with the maintenance and operation of the Property, and all other wages, salaries, costs and expenses paid or payable by the Landlord in connection with the cleaning, operating, servicing and maintaining the Property and its appurtenances or any part or parts thereof, plus a further sum of fifteen percent (15%) of the above costs (excluding Building depreciation and mortgage interest) as an administration charge. (c) all other sums of money payable by the Tenant to the Landlord hereunder; provided that if and so often as the Tenant neglects or omits to pay taxes, rates, charges and assessments as aforesaid, when the same become due and payable, the Landlord shall be entitled to pay the same and collect the same from the Tenant as rent hereby reserved and in arrears; provided, however, that the Tenant shall have the right at its own expense to take proceedings in the name of the Landlord to contest the legality of any such taxes, rates, charges and assessments, the amount thereof and the time or manner of payment sought to be enforced and in the event that the Tenant takes any such proceedings in the name of the Landlord, the Tenant hereby agrees to indemnify and save harmless the Landlord from all costs and expenses whatsoever with respect to or arising from such proceedings. In this section, "Proportionate Share" means the proportion that the floor space of the Leased Premises bears to the aggregate of the floor space, measured in square feet, of the premises located on the Property (including the Leased Premises). 1.03 MAINTENANCE OF PREMISES - The Tenant shall at all times during the Term of this Lease, at its sole cost and expense, well, properly and sufficiently repair, maintain and keep the Leased Premises with the appurtenances (including, without restricting the generality of the foregoing, signs and inside and outside plate glass windows and doors, including all overhead or exterior doors to be installed) in good and substantial repair and shall repair, maintain and replace all fixtures and things which at any time during the Term of this Lease are located or erected in or upon the Lease Premises, such repair, maintenance and replacement to be made by the Tenant when, where and so often as need shall be, except for: (a) repairs required to be made by the Landlord pursuant to the provisions of Clause 4.01 hereof; and (b) reasonable wear and tear; Unless such excepted repairs are necessitated by the acts or omissions of the Tenant, its agents, employees, invitees or licensees. The cost of any repair or replacement required to be made of the Leased Premises as a result of any act or omission of the Tenant, its employees, servants, agents or licensees shall be paid in full by the Tenant. Provided further, notwithstanding anything to the contrary herein contained, the Tenant shall make all repairs and replacements to the Leased Premises made necessary by reason of burglary or attempted burglary. (c) It is understood that the Tenant will organize maintenance for the grounds and maintenance to keep all sidewalks, roadways and parking areas bordering on the Building free of ice and snow and the grass, if any, fronting the Building, cut and properly cared for. All contracts for this maintenance are to be approved by the Landlord in writing and the Tenant will be charged back their proportionate share of these costs as Operating Costs. Any maintenance costs which are shared with other tenants must have prior written approval from the Landlord. 1.04 LEASEHOLD IMPROVEMENTS - Prior to the commencement of any improvements to the Leased Premises by the Tenant, plans for same shall be submitted by the Tenant to the Landlord, which plans shall be subject to the Landlord's written approval, not to be unreasonably withheld. No other leasehold improvements or alterations shall be made to the Leased Premises by the Tenant, except in accordance with the provisions of section 1.08 hereof. The Landlord shall not be responsible for any costs of leasehold improvements made to the Leased Premises during the Term. The Tenant shall pay or cause to be paid and satisfied promptly, as same shall become due and payable, all costs and claims for work and labour done and material supplied and other work and expenses incurred or suffered in connection with or arising out of any of the leasehold improvements made by the Tenant. The leasehold estate or interest of the Landlord in the Leased Premises shall be free and clear of any and all liens for work done, labour performed or material supplied or other work or services furnished in connection with or arising out of any leasehold improvements or other construction made by the Tenant. The Tenant shall do all things necessary to prevent, to the extent it is able, the filing of any builders' liens against the title to the Leased Premises. 1.05 CONDITION OF LEASED PREMISES - The Tenant shall keep the Leased Premises and every part thereof in a clean and tidy condition and not to permit waste paper, garbage, ashes or water or objectionable material to accumulate thereon. The Tenant covenants that it has satisfied itself prior to the execution of this Lease that its intended use of the Leased Premises complies with all applicable zoning by-laws. The Tenant acknowledges having fully inspected the Leased Premises and agrees to accept the Leased Premises in their present state of condition and repairs. 1.06 INSPECTION AND REPAIR - The Tenant shall permit the Landlord at all reasonable times, upon reasonable prior written notice, unless in the case of an emergency, to enter the Leased Premises to inspect the condition thereof and where such inspection reveals that the repairs are necessary to make such repairs in a good and workmanlike manner within one (1) calendar month from the date of delivery of notice from the Landlord requiring such repair; provided that in the event that the Tenant does not effect the said repairs within one month, or such longer period as may be reasonable in the circumstances and agreed to by the Landlord and Tenant in writing within one week of the delivery of notice requiring such repairs, the Landlord may effect such repairs and charge the cost thereof to the Tenant as additional rent. 1.07 OVERLOADING FLOORS - The Tenant shall not bring upon the Leased Premises or any part thereof any machinery, equipment, article or thing that by reason of its weight, size or use might damage the Leased Premises, and not at any time to overload the floors of the Leased Premises, and if any damage is caused to the Leased Premises by any machinery, equipment, article or thing or by overloading or by any act, neglect or misuse on the part of the Tenant or any of its servants, agents or employees or any person having business with the Tenant, forthwith to repair or pay to the Landlord the cost of making good such damage. 1.08 ALTERATIONS INVOLVING CHANGE - The Tenant shall not make any alterations involving structural changes without securing the Landlord's prior written consent, which consent may be withheld by the Landlord in its sole discretion, it being understood that upon obtaining such consent, plans for such structural changes must be submitted by the Tenant to the Landlord before commencement of the work, which plans shall be subject to the Landlord's written approval. It is understood between the parties that the Tenant shall have the right to make any and all non-structural alterations in and additions to the Leased Premises that may be deemed necessary for the proper carrying on of its business or that of any sub-tenant, provided however: (a) that nothing shall be done to weaken the building; (b) that the Tenant shall be responsible for any damage caused to the Leased Premises thereby. It is further understood and agreed between the parties hereto that the costs of any and all renovations herein referred to shall be borne by the Tenant. (c) that the Tenant shall indemnify and save harmless the Landlord from and against all liens and from and against all damage and injury to the Leased Premises or to the property of others and against all liability of the Landlord to any person or persons which may arise by reason of all such repairs, alterations, improvements, removals or additions; and (d) that prior to making any non-structural alterations or additions to the Leased Premises, the Tenant shall submit detailed plans to the Landlord and obtain the Landlord's written approval, such approval not to be unreasonably withheld. 1.09 HEATING - The Tenant shall use the heating equipment supplied by the Landlord or such other equipment installed by the Tenant, to heat the Leased Premises at all reasonable times and shall maintain such heat at a temperature to prevent damage of any nature or kind whatsoever to the Leased Premises, and if damage does occur to the Leased Premises due to the Tenants failure to heat, the tenant agrees to pay for the repairs arising thereby, other than for damages caused as a result of a failure by the utility to provide gas or electricity, which failure is beyond the control of the Tenant, to the extent not covered by insurance which the Landlord is required to maintain hereunder. 1.10 USE OF THE PREMISES - The Tenant shall: (a) Subject to the right of the Tenant to assign this lease or sublet a portion of premises as herein provided, not use or occupy or suffer or permit the Leased Premises or any part thereof, to be used or occupied for any purpose other than for research, development and pilot scale production of human pharmaceuticals or such other uses which comply with municipal by-laws and are approved in writing by the Landlord, acting reasonably; (b) conduct its business upon the Leased Premises in such a manner as to comply with the statutes, by-laws, rules and regulations as any Federal, Municipal or other competent authority for the time being in force and shall not do anything upon the Leased Premises in contravention of any of them or which will be a nuisance; provided that nothing contained in this paragraph 1.10(b) shall prohibit the Tenant from opening for business on such Sundays and holidays as it sees fit; (c) at all times promptly comply with all rules, orders, regulations and requirements of the Insurance Advisory Organization and any Governmental or Municipal authority from time to time in effect for the prevention of fires or the correction of hazardous conditions, to the extent such hazardous condition was caused by the Tenant or for whom the Tenant is in law responsible. 1.11 (a) ASSIGNMENT - The Tenant will not, and will not permit a subtenant to, assign this Lease in whole or in part, or sublet all or a part of the Leased Premises or any part thereof, without the prior written consent of the Landlord in each case, which consent shall not be unreasonably withheld. The consent by the Landlord to an assignment or subletting will not constitute a waiver of its consent to a subsequent assignment or subletting, or a waiver of the obligation of the Guarantor as set forth in paragraph 1.1 l(b) herein. Any such assignment, transfer or subleasing, or otherwise shall be subject to all the terms and conditions of this lease, and the Tenant will remain jointly and severally liable with any such transferee, whether such joint and several responsibility be mentioned or not in any consent to such transfer, assignment or sub-leasing. An assignment or sub-letting of this lease or the Leased Premises if consented to by the Landlord will be prepared by the Landlord's solicitors together with such additional documents as reasonably required by the said solicitors and all reasonable legal costs of its preparation will be paid by the Tenant. If the Tenant or any sub-tenant or assignee of this Lease is a corporation, then any sale or other disposition resulting in a substantial sale of its assets or change in the shareholders controlling such corporation at any time during the Term or any renewal thereof shall be and be deemed to be an assignment of this Lease and, accordingly, the prior written consent of the Landlord to any such sale or disposition shall be required. A change in control of shareholdings of the Tenant as between the existing shareholders upon execution of the Lease, shall not be deemed an assignment of the lease as aforesaid. (b) GUARANTEE - In the event that the Tenant assigns this Lease or sublets all or part of the Leased Premises during the initial term with the consent of the Landlord, in consideration of the premises and other valuable consideration, the receipt whereof and the sufficiency whereof is hereby acknowledged by the Tenant, the Tenant as Guarantor does hereby unconditionally guarantee all obligations of the then Tenant under this Lease and accordingly covenants with the Tenant that all the covenants, agreements and other obligations of the then Tenant herein shall be fully performed, the guarantee being upon the following terms: (i) The liability of the Guarantor to the Landlord is for all purposes as if the Guarantor was primary obligor herein, and not only sureties for the obligations of the then Tenant, and the Landlord is not obliged to resort to or exhaust any recourse which it has against the then Tenant or any other person before being entitled to claim against the Guarantor; (ii) Any account settled or stated or any other settlement made between the Tenant and the Landlord, and any determination made pursuant to the provisions of this Lease which is expressed to be binding upon the then Tenant is binding upon the Guarantor; (iii) The Guarantor shall make payment to the Landlord of any amount properly payable by the then Tenant to the Landlord but unpaid upon demand, and shall upon demand perform any other obligations under this Lease which the then Tenant has failed to perform, and any demand made by the Landlord upon the Guarantor is deemed to have been effectually made if notice thereof is sent as provided in paragraph 4.07; (iv) No assignment of the Lease, sublease or any other dealings therewith by the then Tenant, whether with or without the consent of the Landlord, affects the guarantee; (v) Nothing except the performance in full of all the obligations of the then Tenant under this Lease throughout the Term shall, except as provided in paragraph 1.11(c), discharge the Guarantor of this guarantee; (vi) If during the Term the then Tenant makes an assignment for the general benefit of its creditors, or an order is made for the winding up of the then Tenant, or a receiving order in bankruptcy is made by or against the Landlord, and the assignee, liquidator or trustee surrenders possession of the Premises or any part of them or disclaims the lease, the Guarantor shall forthwith upon the demand of the Landlord at the Guarantor's expense, accept from the Tenant a lease of the Premises (the "New Lease") for a period equal in duration to the residue of the term remaining unexpired from the date of surrender or disclaimer at the same Minimum Rent and Additional Rent and with the same covenants and provisos as are reserved and contained in the Lease. (c) This guarantee and all the liabilities and obligations of the Guarantor hereunder shall forthwith cease and terminate upon the completion of the Initial or Renewal Term. 1.12 NUISANCE - The Tenant shall not do or omit to do or permit to be done or omitted anything upon or in respect of the Leased Premises the doing or omission or which (as the case may be) shall be or result in a nuisance. 1.13 INDEMNITY - The Tenant shall keep the Landlord indemnified against all claims, demands, costs, counsel fees, expenses and liabilities whatsoever by any person, firm or firms, corporation or corporations and whether in respect of damage to person or property arising out of or occasioned by the maintenance, use or occupancy of the Leased Premises, or the subletting or assignment of the same or any part thereof, except where same is caused by the failure of the Landlord to repair pursuant to paragraph 2.02 hereof or by the willful acts or negligence of the Landlord, and except to the extent covered by insurance which the Landlord is required to maintain under this Lease. 1.14 PROSPECTIVE PURCHASERS - The Tenant shall permit the Landlord to show the Leased Premises to prospective purchasers at reasonable times, upon 24 hours prior notice. 1.15 INTEREST ON OVERDUE AMOUNTS - On all rents, payments and charges which the Tenant herein covenants to pay or which the Landlord shall pay on behalf of the Tenant, the Landlord shall be entitled to receive interest at the rate of prime plus three (3) percentage points per annum from the date all such amounts are due. Such interest charges shall be payable by the Tenant to the Landlord within ten (10) days of receipt of demand from the Landlord and shall be treated as Additional Rent due by the Tenant hereunder; provided however that the payment of interest by the Tenant shall not operate or be deemed to operate to waive or excuse breach of any covenant by the Tenant. 2.00 LANDLORD'S COVENANTS The Landlord hereby covenants with the Tenant as follows: 2.01 QUIET ENJOYMENT - The Tenant, by paying the rent hereby reserved and observing and performing the several covenants and stipulations herein on its part contained, shall peacefully hold and enjoy the Leased Premises during the Term without any interruption by the Landlord or by any person rightfully claiming under or in trust for it. The Tenant shall have uninhibited ingress and egress to the docking facilities of the Leased Premises subject only to any necessary repairs to the roadway and asphalt services as completed from time to time by the Landlord, which repairs, if necessary, shall be completed by the Landlord as expeditiously as possible, and after reasonable prior written notice to the Tenant. 2.02 TRADE FIXTURES OF TENANT - All trade fixtures installed by the Tenant and or its directly related predecessor companies on the Leased Premises shall remain the property of the Tenant at its sole risk during the Term hereof. At the termination of the Term by the effluxion of time, the Tenant shall remove the same; provided however that where such removal is undertaken, the Tenant shall make good any damage occasioned by such removal, thereby returning the Leased Premises to their original state as at the time of the commencement of the original term (January 1993), reasonable wear and tear excepted. 2.03 PARKING - The Tenant shall be entitled to the use of 24 energized parking stalls at no additional cost located in or near the front of the Leased Premises and such additional parking spaces along side the Leased Premises as the Landlord in its sole discretion shall determine. If such additional parking spaces shall be provided, the use thereof shall be such as will not interfere with loading at the rear of the premises. 2.04 LANDLORD'S OBLIGATIONS - The Landlord in the same manner and to the same extent as prudent and reputable owner and operator of a similar property shall: (a) keep or cause the Property to be kept in good repair and in a clean, orderly and safe condition; (b) keep or cause to be kept in good repair the base building equipment installed by the Landlord to heat, ventilate and air-condition the Property and for the distribution of utilities (any additional equipment installed by or on behalf of the Tenant, for the Tenant's sole benefit is the responsibility of the Tenant to maintain); and (c) effect as expeditiously as possible all repairs which it is required to make. 2.05 ACCESS - The Tenant shall be permitted to access the Leased Premises 24 hours per day, 7 days per week throughout the Term, as same may be renewed or extended, and the Landlord shall provide, upon request by the Tenant and at the Tenant's sole cost, after hours lighting, heating, ventilation and air conditioning. 3.00 INSURANCE 3.01 TENANT'S INSURANCE (a) The Tenant shall take out and maintain the following insurance at the Tenant's sole expense, in such form and with such companies as the Landlord may reasonably approve: (i) comprehensive general liability insurance against claims for bodily injury, including death, property damage or loss arising out of the use and/or occupation of the Leased Premises, or the Tenant's business on or about the Leased Premises; such insurance shall identify the Landlord as an additional insured so as to indemnify and protect both the Tenant and the Landlord and shall contain a "cross liability" or "severability of interests" clause so that the Landlord and the Tenant may be insured in the same manner and to the same extent as if individual policies had been issued to each, and shall be for an amount of not less than Two Million ($2,000,000.00) Dollars in respect of any one accident and not less than Two Hundred Thousand ($200,000.00) Dollars in respect of property damage for any one accident; (ii) all risks insurance upon its merchandise, stock-in-trade, furnitures, fixtures and improvements and upon all other property in the Leased Premises owned by the Tenant or for which the Tenant is legally liable, and insurance upon all glass and plate glass in the Leased Premises against breakage and damage from any cause, all in an amount equal to the full replacement value thereof, which amount in the event of a dispute shall be determined by the decision of the Landlord, acting reasonably; (iii) boiler and machinery insurance on such boilers and pressure vessels as may be installed by, or under the exclusive control of, the Tenant in the Leased Premises; and (b) The policies of insurance referred to above shall contain the following: (i) provisions such that the Landlord is protected notwithstanding any act, neglect, or misrepresentation of the Tenant which might otherwise result in the avoidance of a claim under such policies and such that such policies shall not be affected or invalidated by any act, omission or negligence of any third party which is not within the knowledge or control of the insured(s); (ii) provisions that such policies and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by the Landlord and that any coverage carried by the Landlord shall be excess coverage; (iii) all property and boiler insurance referred to above shall provide for waiver of the insurer's rights of subrogation as against the Landlord; (iv) policies of insurance shall not be cancelled without the insurer providing the Landlord thirty (30) days written notice stating when such cancellation shall be effective. 3.02 LANDLORD'S INSURANCE - the Landlord shall take out or cause to be taken out and keep or cause to be kept in full force and effect: (a) standard fire, extended coverage, riot, vandalism, and malicious mischief insurance, on the buildings and improvements located on the Property, on a replacement cost basis, in an amount such as would be carried by a prudent owner, subject to such deductions and exceptions as the Landlord may determine; such insurance shall be in a form or forms normally in use from time to time for buildings and improvements of a similar nature similarly situated, including, should the Landlord so elect, insurance to cover any loss of rental income which may be sustained by the Landlord; (b) boiler and machinery insurance on such boilers and pressure vessels as may be installed by, or under the exclusive control of, the Landlord on the Property (other than such boilers and pressure vessels to be insured by the Tenant hereunder); The Landlord's and Tenant's insurance policies shall contain a waiver by the insurer of any rights of subrogation or indemnity or any other claim over which such insurer might otherwise be entitled against the Landlord/Tenant and for those for whom in law they are responsible. Provided that nothing herein shall prevent the Landlord from providing or maintaining such broader coverage as the Landlord may determine. The Tenant shall pay to the Landlord as Additional Rent the Tenant's Proportionate Share of insurance premiums paid by the Landlord. The Landlord's Proportionate Share shall be calculated on the basis set out under Section 1.02 of this Lease provided that if the Leased Premises are insured separately from any other premises located on the Property the Tenant shall pay to the Landlord as Additional Rent the full insurance premiums paid by the Landlord in respect of the Leased Premises. 3.03 INCREASE IN INSURANCE RATE - the Tenant will not do or permit to be done upon the Leased Premises anything which shall result in a nuisance or which shall cause the rate of insurance upon the Leased Premises to be increased, and if the insurance rate shall be increased as aforesaid, the Tenant shall pay to the Landlord the amount by which the insurance premium shall be so increased. If notice of cancellation shall be given respecting any insurance policy or if any insurance policy upon the Leased Premises or any part thereof shall be cancelled or refused to be renewed by the insurer by reason of the Tenant's use other than the permitted use provided for herein or occupation of the Leased Premises or any part thereof, the Tenant shall remedy or rectify such use or occupation upon being requested to do so in writing by the Landlord, and if the Tenant shall fail to do so within fifteen (15) days of receipt of such writing, the Landlord, at its option, may terminate this lease forthwith by leaving upon the Leased Premises notice in writing of its intention to do so, and thereupon rent and any other payments for which the Tenant is liable under the Lease shall be apportioned and paid in frill to the date of such termination of the Lease and the Tenant shall immediately deliver up possession of the Leased Premises to the Landlord. 4.00 PROVISOES Provided always, and it is hereby agreed between the parties as follows: 4.01 DESTRUCTION OR DAMAGE OF LEASED PREMISES - If and whenever during the Term of this Lease the Leased Premises shall be destroyed or damaged by fire, lightning or tempest or any other perils, then and in every such event: (a) if the damage or destruction is such that the Leased Premises are rendered wholly unfit for occupancy, or it is impossible or unsafe to use and occupy them, and if in either event the damage cannot be repaired with reasonable diligence within 120 days from the happening of such damage, then either party may within thirty (30) days of the happening of such damage or destruction terminate this Lease by giving to the other notice in writing of such termination in which event this Lease shall cease and be at an end as of the date of such damage and the rent and all other payments for which the Tenant is liable under the terms of this Lease shall be apportioned and paid in full to the date of such damage. If neither the Landlord nor the Tenant so terminates this Lease, then the Landlord shall repair the building with all reasonable speed and the rent hereby reserved shall abate from the date of the happening of the damage until the damage shall be made good and the Tenant can again use and occupy the Leased Premises; (b) if the damage be such as the Leased Premises are wholly unfit for occupancy, or if it is impossible or unsafe to use or occupy them, but in either event the damage can be repaired with reasonable diligence within 90 days from the happening of such damage, then the rent hereby reserved shall abate from the date of the happening of such damage until the damage shall be made good and the Tenant can again use and occupy the Leased Premises and the Landlord shall repair the damage with all reasonable speed; (c) if the damage can be made good as aforesaid within 90 days of the happening of such damage and the damage is such that the Leased Premises are capable of being partially used for the purposes for which they are hereby demised, then until such damage has been repaired the rent shall be reduced by the fraction that the part of the Leased Premises which is rendered unfit for occupancy is of the whole of the Leased Premises and the Landlord shall repair the damage with all reasonable speed. (d) In the event that the Landlord and Tenant shall be unable to agree as to the state of fitness of the Leased Premises and its condition, the question in dispute shall be referred to arbitration in accordance with Section 4.23 hereof but the certificate of an Architect selected by the Landlord, duly qualified to practice as such in the Province of Manitoba, shall bind the parties as to the length of time reasonably required to make any necessary repairs. 4.02 EXPROPRIATION - If the whole or any part of the Lease Premises shall be taken by any public authority under the power of eminent domain, the Term hereby granted shall cease from the day possession shall be taken for such public purposes insofar as the premises so taken comprise part of the Leased Premises; and the Tenant shall be liable only for rent in respect of the Leased Premises or part thereof so taken to the day of the taking, and if less than the whole be so taken, the Landlord or Tenant may at its option cancel and terminate this agreement with respect to the remainder of the Leased Premises, but notice of such cancellation must be given to the other within thirty (30) days after notice of such taking has been received by the Landlord; but if the Landlord or Tenant shall not elect to cancel the said Lease, the Tenant shall remain in possession of the remainder of the Leased Premises and the rent thereof shall be reduced in proportion that the space remaining possessed of the Landlord bears to the total ground floor space of the Leased Premises at the date of the commencement of this Lease. All compensation or damages awarded in respect of such taking of the Leased Premises and any diminution in value of the remainder thereof shall be the property of the Landlord but the Tenant shall be entitled to receive such compensation or damages as it may be able to establish against such public authority in respect to loss of its business, depreciation of and cost of removal of stock and fixtures. 4.03 HOLDING OVER - If the Tenant shall remain in possession of the Leased Premises after termination of the Term hereby granted, or any renewal thereof as herein provided, without other special agreement, a tenancy from year to year shall not be created by implication of law, but the Tenant shall be deemed to be a monthly tenant only at a rent payable monthly in advance at a rate of One Hundred and Fifty (150%) percent of the annual rent payable immediately prior to such termination, and otherwise upon and to the same terms and conditions as are herein contained, except provisions for renewal, and nothing, including acceptance of any rent by the Landlord, operates to extend any tenancy except a specific agreement in writing between the Landlord and Tenant. 4.04 RE-ENTRY - If the Tenant shall default in making payment of the rents hereby reserved or any part thereof, when due and fails to pay same within five (5) days after notice to do so is provided by the Landlord or if the Tenant shall default in performance of observance of any of its other covenants herein contained, the Landlord, after ten (10) days written notice to the Tenant of such default and any default not being cured within the said period or such longer period as may reasonably be required in the circumstances (such period to be agreed upon in writing by the Landlord within the 10 days), may at its option at any time thereafter re-enter upon the Leased Premises or any part thereof in the name of the whole, and thereupon this Lease shall absolutely determine but without prejudice to the right of action of the Landlord in respect of any breach of the Tenant's covenants herein contained. 4.05 WAIVER - No condoning, excusing or overlooking by the Landlord of any default, breach or non-observance by the Tenant at any time or times in respect of any covenant, proviso or condition herein contained shall operate as a waiver of the Landlord's rights hereunder in respect of any covenant, proviso or condition hereunder in respect of any continuing or subsequent default, breach or non-observance, or so as to defeat or affect in any way the right of the Landlord herein in respect of any such continuing or subsequent default or breach, and no waiver shall be inferred from or implied by anything done or omitted by the Landlord save only express waiver in writing. All rights and remedies of the Landlord in this Lease contained shall be cumulative and not alternative. 4.06 REMEDIES OF LANDLORD AS IN THE CASE OF DEFAULT OF RENT - The Landlord shall have (in addition to any other right or remedy of the Landlord) the same rights and remedies in the event of default by the Tenant in payment of any amount payable by the Tenant hereunder, as the Landlord would have in the case of default in payment of rent. 4.07 NOTICE - Any notice required or contemplated by this Lease shall be sufficiently given if mailed by prepaid registered mail addressed to the proper party as follows: The Landlord at: 305 Milner Ave., Suite 309 Toronto, Ontario M1B 3V4 The Tenant at: 147 Hamelin Street Winnipeg, Manitoba R3T 3Z1 The date of the giving of any such notice shall be deemed conclusively to be two (2) days following the date upon which it was mailed. The above address may be changed by either party at any time hereafter by giving fifteen (15) days written notice to the other party. 4.08 UNAVOIDABLE DELAYS - In the event that either the Landlord or the Tenant shall be delayed, hindered or prevented from the performance of any act or covenant required hereunder, by reasons of any Unavoidable Delay (as herein defined) not the fault of the party delayed, then performance or such act or covenant shall be excused for the period during which such performance is rendered impossible, and the time for the performance thereof shall be extended accordingly, but this shall not operate to excuse the Tenant from the prompt payment of rent or any other payments required under this Lease. "Unavoidable Delay" means a delay caused by fire, strike or other casualty or contingency beyond the reasonable control of a party who is, by reason thereof, delayed in the performance of such party's covenants and obligations under this Lease in circumstances where it is not within the reasonable control of such party to avoid such delay (but does not include any insolvency, lack of funds or other financial cause of delay). 4.09 EXECUTION BY CREDITOR OF TENANT/BANKRUPTCY OF TENANT - The Tenant covenants and agrees that if at any time during the Term, any of the goods and chattels of the Tenant on the Leased Premises are seized or taken in execution or attachment by any creditor of the Tenant, or if the Tenant shall make any assignment for the benefit or creditors or any bulk sale or becomes bankrupt or insolvent, it shall take the benefit of any Act now or hereafter in force for bankrupt or insolvent debtors, or if any order shall be made for the winding up of the Tenant, or if the Leased Premises shall be used for any other purpose than as permitted under the terms of this Lease, or if the Tenant shall without the written consent of the Landlord abandon the Leased Premises, then and in every such case the then current month's Minimum Rent and Additional Rent and the next ensuring three (3) months Minimum Rent and Additional Rent shall immediately become due and be paid and the Landlord may re-enter and take possession of the Leased Premises as though the Tenant or the servants of the Tenant or any other occupant of the Leased Premises were holding over after the expiration of the said term, and the said term shall, at the option of the Landlord forthwith become forfeited and determined, and in everyone of the cases above such accelerated rent shall be recoverable by the Landlord in the same manner as the rent hereby reserved and as if the rent were in arrears and the said option shall be deemed to have been exercised if the Landlord or its agents shall give notice to such effect to the Tenant. 4.10 NON-LIABILITY OF LANDLORD - Provided the Landlord and those for whom in law the Landlord is liable are not negligent, the Landlord shall not be liable nor responsible in any way for any personal or consequential injury of any nature whatsoever that may be suffered or sustained by the Tenant or any employee, agent or customer of the Tenant or any other person who may be upon the Leased Premises, or for any loss of or damage or injury to any property belonging to the Tenant or its employees or to any person while such property is on the Leased Premises and in particular (but without limiting the generality of the foregoing) the Landlord shall not be liable for any damage or damages of any nature whatsoever to any such property caused by the failure, by reason of breakdown or other cause, to supply adequate drainage, snow or ice removal or by reason of the interruption of any public utility or service or in the event of steam, water, rain or snow which may leak into, issue or flow from any part of the said building, or from the water, steam, gas, sprinkler or drainage pipes of plumbing works of the same or from any other place or quarter or for any damage caused by anything done or omitted by any tenant, but the Tenant shall use all reasonable diligence to remedy such condition, failure or interruption of service when not directly or indirectly attributable to the Tenant, after notice of same, when it is within its power and obligation to do so. Nor shall the Tenant be entitled to any abatement of rent in respect of any such condition, failure or interruption of service as aforesaid. 4.11 INSPECTION OF PREMISES - The Tenant shall examine the Leased Premises before taking possession hereunder and such taking of possession shall be conclusive evidence against the Tenant that at the time thereof the Leased Premises were in good order and satisfactory condition except for defects not apparent on inspection; and that the Tenant shall make no claim for nor hold the Landlord liable for or bound by any promise, representation or undertaking with respect to any alteration, remodelling or redecorating of or installation of equipment or fixtures in the Leased Premises, except such, if any, as is expressly set forth in this Lease; and that in case of any such express provision, unless same provides for completion of alteration, remodelling or decorating, or such installation after the Tenant's taking of possession hereunder, such taking of possession shall constitute conclusive evidence as against the Tenant that said alteration, remodelling, or decorating, or installation of equipment or fixtures has been satisfactorily completed. 4.12 SIGNS - The Tenant may, at its sole cost and expense, manufacture, maintain and install an exterior facia sign on the Leased Premises, subject to the Landlord's approval as to size, location and suspension of said sign, which said approval shall not be unreasonably or arbitrarily withheld, provided that the said sign complies with all of the regulations and/or by-laws of the City of Winnipeg or any other governing authority in force at the time of this demise, or which may come into force, and the Tenant hereby agrees, firstly: to indemnify and save harmless the Landlord from any and all causes of action which might arise from the erection and maintenance of such sign, and secondly: to pay to the Landlord upon written demand for same any Encroachment License fee that may be assessed against the Landlord by the City of Winnipeg or any other governing authority in force at the same time of this demise, in connection with the erection and maintenance of said sign. The Tenant shall, with respect to any signs painted on the Leased Premises, repaint or remove any such signage upon the termination of the Lease at its own expense. The Landlord will co-operate with the Tenant in obtaining any necessary consents from the said City. The Tenant shall repair any and all damage to the Leased Premises resulting from removal of the signage. 4.13 PLACE FOR PAYMENTS - All payments required to be made by the Tenant herein shall be made to the Landlord at the Landlord's office at 305 Milner Ave., Suite 309 Toronto, ON, M1B 3V4 or to such agent or agents of the Landlord or at such other place as the Landlord shall hereafter from time to time direct in writing. 4.14 "FOR SALE" SIGN - The Landlord may place upon the Leased Premises, a notice of reasonable dimensions and reasonably placed so as to not interfere with the Tenant's business, stating that the Leased Premises are for sale or, during the last six (6) months of the Term, to let, which notice the Tenant shall not remove or permit to be removed. 4.15 SUBORDINATION OF LEASE - Subject to the provisoes hereinafter contained, upon the request of the Landlord, the Tenant shall subordinate its rights hereunder to the charge of any mortgage or mortgages or the charges resulting from any other method of financing or refinancing, declaration of trust, debenture issue or any such method of financing or refinancing, now or hereafter in force against the land and building, and to all advances made or hereafter to be made upon the security thereof. Notwithstanding the foregoing, the Landlord shall not at any time encumber the title to the Leased Premises and the Tenant shall not be required to subordinate its rights hereunder as aforesaid without the Landlord first obtaining a non-disturbance agreement from the encumbrancer, mortgagee, chargee or trustee, as the case may be, in favour of the Tenant whereby the encumbrancer, mortgagee, chargee or trustee agrees that so long as the Tenant is not in default under the terms of this Lease, the Tenant shall be entitled to remain undisturbed in its possession of the Leased Premises and to enjoy peaceful possession thereof pursuant to the terms of this Lease notwithstanding the exercise of any or all rights of any such encumbrancer, mortgagee, chargee or trustee, as the case may be, under their security documents. 4.16 ACKNOWLEDGMENT BY TENANT - The Tenant or the Landlord shall promptly, whenever requested by the other from time to time, execute and deliver to the Landlord (and if required by the other, to any mortgagee, including any trustee under Deed of Trust and mortgage designated by the Landlord) a certificate in writing as to the then status of this Lease, including as to whether it is in full force and effect, is modified or unmodified, confirming the rental payable hereunder and the state of the accounts between the Landlord and the Tenant, the existence or nonexistence of default or any other reasonable matters pertaining to this Lease as to which the other shall request a certificate. 4.17 MODIFICATION OF LEASE - This Lease may not be modified or amended excepting only by an instrument in writing signed by the parties hereto. 4.18 RENEWAL - Provided that the Tenant has not been and is not currently in default of any of its obligations herein contained for which it has received notice and failed to remedy within the applicable cure period and provided this Lease shall not have terminated for any cause whatsoever, the Tenant shall have the right to renew this Lease for a further period of one (1) year as and from the expiration of the Term, on the same terms and conditions as herein contained subject, however, to the following: (a) The Tenant shall notify the Landlord in writing at least 180 days prior to the expiration of the Term that it elects to renew the Lease for a further one year period. (b) The Minimum Rent payable for the Renewal Term shall be determined by mutual agreement by no later than 90 days prior to the expiration of the current Term, but in any event shall not be less than the minimum rental payable during the current Term. (c) In the event that the parties are unable to agree as to the Minimum Rent payable for the Renewal Term at least 90 days prior to the expiration of the current Term, the Minimum Rent payable shall be determined by arbitration pursuant to clause 4.23 hereof. 4.19 "GST" - The Tenant will pay to the Landlord (acting as agent for the taxing authority if applicable) or directly to the taxing authority (if required by the applicable legislation) the full amount of all goods and services taxes, sales taxes, value added taxes, multi-stage taxes, business transfer taxes, and other taxes imposed on the Tenant in respect of the Rent and any other consideration payable by the Tenant under this Lease, or in respect of the rental of premises by the Tenant under this Lease (collectively and individually "GST"). GST is payable by the Tenant whether it is characterized as a good and services tax, sales tax, value-added tax, multi-stage tax, business transfer tax or otherwise. GST so payable by the Tenant will be: (i) calculated and paid in accordance with the applicable legislation; (ii) paid by the Tenant at the same time as the amounts to which the GST apply is payable to the Landlord under the terms of this Lease (or upon demand at such other time or times as the Landlord from time to time determines); and (iii) considered not to be Rent, despite anything else in this Lease, but the Landlord will have all of the same remedies for and rights of recovery with respect to such amounts as it has for non-payment of Rent under this Lease or at law and any other consideration of any nature or kind. 4.20 CAVEATS - Subject to the provisions of clause 4.15 herein, the Tenant agrees with the Landlord not to file a caveat under The Real Property Act (Manitoba) against the land in respect of this lease unless it be in such form as the Landlord shall have approved in writing, which approval shall not be unreasonably withheld. 4.21 PARTIAL INVALIDITY - If a term, covenant or condition of this Lease or the application thereof to any person or circumstances is held to any extent to be invalid or unenforceable, the remainder of this Lease or the application of the said term, covenant or condition to persons or circumstances other than those to which or to whom it is held invalid or unenforceable will not be effected. 4.22 NET LEASE - The Lease shall be deemed and construed to be a "net lease" and, except as herein otherwise expressly provided, the Landlord shall receive all Minimum Rent and Additional Rent and all other payments hereunder to be made by the Tenant free from any charges, assessments, impositions, expenses or deductions of any and every kind or nature whatsoever except as otherwise herein expressly provided. 4.23 ARBITRATION - If at any time a dispute, difference of question shall arise among the parties hereby concerning any question relating to this Lease, the right or liabilities of any of the parties hereof, or any other dispute involving either the interpretation of this Lease or anything contained herein, then any such dispute, difference or question shall be decided by arbitration, such arbitration to be initiated by one (1) party serving written notice to the other party of his desire to have the matter arbitrated. The matter requiring arbitration shall be referred to a single arbitrator if one can be mutually agreed upon by the parties within seven (7) days of the notice of desire for arbitration being served. In the event that the parties cannot agree upon a single arbitrator, then each party shall name one arbitrator within a further period of seven (7) days therefrom and the arbitrators so named shall appoint one more arbitrator. If one of the parties refuses or neglects to appoint an arbitrator within the period herein set out, then the arbitrator appointed by the other party together with the additional arbitrator appointed by the arbitrator so named as above provided, shall sit and hear the arbitration. In the event that the arbitrators named by the parties to the arbitration cannot agree upon the additional arbitrator as above provided within seven (7) days of the date of appointment of the last of them, then after the expiry of such seven (7) day period, any one of the parties may apply to a Judge of the Court of Queen's Bench of Manitoba or its successor to appoint the additional arbitrator to sit and hear the arbitration. The decision arrived at by a single arbitrator or a majority of the arbitrators, as the case may be, shall be binding upon all the parties and no appeal shall lie therefrom. The provisions of this section shall be deemed to be a submission to arbitration within the provisions of The Arbitration Act (Manitoba) and any statutory modification or re-enactment thereof. 4.24 HEADINGS AND CAPTIONS - The headings herein are inserted for the convenience of reference only and are not to be considered when interpreting this Lease. 4.25 TIME - Time shall be of the essence hereof. 4.26 LEASE CONTAINS ENTIRE AGREEMENT - This Lease contains the entire agreement between the parties and it is admitted, so that they shall be forever estopped from asserting to the contrary, that there is no condition precedent or warranty of any nature whatsoever and no collateral condition or covenant whatsoever to the within Lease. 4.27 ENUREMENT - It is further agreed and declared that this lease shall extend to, be binding upon and enure to the benefit of the parties hereto, and their respective successors and assigns. 4.28 GOVERNING LAW - This Lease will be interpreted under and is governed by the laws of the Province of Manitoba. IN WITNESS WHEREOF the parties hereto executed this Agreement as of the day and year first above written. ALMAD INVESTMENTS LIMITED ) ) ) Per: /s/ ) ---------------------------------- ) ) ) ) ) Per: ) ---------------------------------- I/We have the authority to bind the corporation. VIVENTIA BIOTECH INC. ) ) ) Per: /s/ Michael A. Byrne ) ---------------------------------- ) MICHAEL A. BYRNE ) CHIEF FINANCIAL OFFICER ) ) ) ) Per: /s/ ) ---------------------------------- I/We have the authority to bind the corporation. LEASE AMENDING AGREEMENT THIS AGREEMENT made as of the 26th day of June, 2003 BETWEEN: 131-149 HAMELIN STREET LEASEHOLDS LIMITED (the "Landlord") OF THE FIRST PART, AND: VIVENTIA BIOTECH INC. (the "Tenant") OF THE SECOND PART, WHEREAS: A. By a Lease dated the 31st day of March, 2000 between Almad Investments Limited, the Landlord and Viventia Biotech Inc., the Tenant, the Landlord leased to the Tenant the premises at 131-147 Hamelin Street, Winnipeg, Manitoba, namely 136-147 Hamelin Street comprising of Twenty One Thousand Five Hundred (21,500) square feet of Rentable Area, and more particularly described in the Lease (the "LEASED PREMISES"); B. And whereas Almad Investments Limited transferred legal title to the property to 131-149 Hamelin Holdings Limited; C. And whereas 131-149 Hamelin Holdings Limited entered into a building lease with 131-149 Hamelin Street Leaseholds Limited pursuant to which all existing leases were assigned to 131-149 Hamelin Street Leaseholds Limited, as Landlord; D. And Whereas 131-149 Hamelin Street Leaseholds Limited has agreed to enter into this Lease Amending Agreement on the terms and conditions set forth herein. E. And Whereas the Tenant has been in overhold from April 1, 2003 through to June 30, 2003 on the same terms and conditions as contained in the Lease dated the 31st day of March, 2000. NOW THEREFORE in consideration of the mutual covenants contained herein and in the Lease, the parties hereby agree as follows: 1. The execution of this Agreement shall constitute an extension of the Lease between the parties hereto and extend the termination date of the Lease to June 30, 2008. The term July 1, 2003 through June 30, 2008 shall be referred to as the renewal Term (the "Renewal Term"). This Renewal Term shall be governed on all the terms and conditions contained in the Lease, except as follows: (a) Premises shall consist of approximately Twenty Seven Thousand Five Hundred (27,500) square feet of Rentable Area, as shown on the attached floor plan. Schedule "A". For further clarification the Premises will consist of approximately 21,500 square feet of Rentable Area known as 147 Hamelin Street and approximately 6,000 square feet of Rentable Area known as 133 Hamelin Street. (b) The annual Minimum Rent for the Renewal Term shall be based as follows: On the Premises known as 147 Hamelin Street: Years 1-3: $ 6.50 per square foot of Rentable Area per annum Years 4-5: $ 7.00 per square foot of Rentable Area per annum On the Premises known as 133 Hamelin Street: Years 1-2: $ 4.50 per square foot of Rentable Area per annum Year 3: $ 5.00 per square foot of Rentable Area per annum Years 4-5: $ 5.50 per square foot of Rentable Area per annum Payable in equal monthly installments plus any additional charges, without deductions, in advance on the first day of each month during the Renewal Term. (c) There shall be no tenant inducements or special conditions under the Renewal Term, including but not limited to free rent and tenant improvements, unless otherwise stated herein. (d) The Landlord shall grant the Tenant the months of July 2003 and August 2003 Minimum Rent free on 133 Hamelin Street. (e) The following is added to Article 1.01 (b) of the Lease. "It is understood and agreed by the Tenant and the Landlord that the Tenant is currently paying gas and water directly to the utilities and that the Landlord is billing the Tenant for the entire Hydro usage for the Building. The Landlord will issue quarterly credits to the Tenant for any Hydro usage consumed by 131 Hamelin Street. The usage for 131 Hamelin Street is determined by the reading of two electrical panels and an electricians estimate of a third electrical panel. All three panels provide electrical power to 131 Hamelin Street." (f) The following is added to Article 1.02 (b) of the Lease. "It is agreed that the consumption of utilities by the Tenant is in excess of normal usage and therefore the Tenant will pay for utilities based on consumption and not on Proportionate Share." (g) The Premises known as 133 Hamelin Street are to be taken in "as is" condition. It is acknowledge that the Tenant in 131 Hamelin Street has use of 100 amps of the 200 amps currently available in 133 Hamelin Street. 2. This Agreement shall be attached to the Lease and shall become a part thereof as if originally included therein. 3. The Landlord and the Tenant covenant and agree with each other that, save and except as specifically provided herein, this Lease Amending Agreement shall be on the same terms, conditions, covenants, agreements, obligations and provisos contained in the Lease insofar as the same shall be deemed to be incorporated herein and shall be binding upon the Landlord and the Tenant as though the "Landlord" and "Tenant" referred to in the Lease were the Landlord and the Tenant respectively herein, and that the Landlord and the Tenant will respectively duly observe and perform the same. If there shall be any conflict between the terms of the Lease and the terms hereof, the terms hereof shall apply. 4. The parties hereto covenant and agree that they have good right, full power and authority to enter into this Agreement in the manner as aforesaid. IN WITNESS WHEREOF the parties hereto executed this Agreement as of the day and year first above written. SIGNED, SEALED AND DELIVERED ) 131-149 HAMELIN STREET ) LEASEHOLDS LIMITED in the presence of: ) Landlord ) /s/ B. McCarthy ) )Per: /s/ Aubrey Dan ) ------------------------------- ) AUBREY DAN, PRESIDENT ) I/We have the authority to bind the corporation. SIGNED, SEALED AND DELIVERED ) VIVENTIA BIOTECH INC. ) in the presence of: ) Tenant ) ) )Per: /s/ Michael A. Byrne ) ------------------------------- ) MICHAEL A. BYRNE ) CHIEF FINANCIAL OFFICER ) I/We have the authority to bind the corporation. SCHEDULE "A" 131-149 HAMELIN STREET BUILDING PLAN (FLOOR PLAN) LEASE AMENDING AGREEMENT THIS AGREEMENT made as of the 26th day of January, 2004 BETWEEN: 131-149 HAMELIN STREET LEASEHOLDS LIMITED (the "Landlord") OF THE FIRST PART, AND: VIVENTIA BIOTECH INC. (the "Tenant") OF THE SECOND PART, WHEREAS: A. By a Lease dated the 31st day of March, 2000 between Almad Investments Limited, the Landlord and Viventia Biotech Inc., the Tenant, the Landlord leased to the Tenant the premises at 131-147 Hamelin Street, Winnipeg, Manitoba, namely 136-147 Hamelin Street comprising of Twenty One Thousand Five Hundred (21,500) square feet of Rentable Area, and more particularly described in the Lease (the "LEASED PREMISES"); B. And whereas Almad Investments Limited transferred legal title to the property to 131-149 Hamelin Holdings Limited; C. And whereas 131-149 Hamelin Holdings Limited entered into a building lease with 131-149 Hamelin Street Leaseholds Limited pursuant to which all existing leases were assigned to 131-149 Hamelin Street Leaseholds Limited, as Landlord; D. And Whereas 131-149 Hamelin Street Leaseholds Limited has agreed to enter into this Lease Amending Agreement on the terms and conditions set forth herein. E. And Whereas the Tenant has been in overhold from April 1, 2003 through to June 30, 2003 on the same terms and conditions as contained in the Lease dated the 31st day of March, 2000. F. And Whereas by a Lease Amending Agreement dated the 26th of June, 2003 the Landlord leased to the Tenant an additional Six Thousand (6,000) square feet and the Landlord and Tenant agreed to extend the termination date of the Lease to June 30, 2008. NOW THEREFORE in consideration of the mutual covenants contained herein and in the Lease, the parties hereby agree as follows: 1. The execution of this Agreement shall constitute an expansion of leased space. The Landlord agrees to lease to the Tenant and the Tenant agrees to lease from the Landlord an additional Three Thousand Six Hundred (3,600) square feet, commonly known as 131 Hamelin Street, in the City of Winnipeg (the "Expansion Premises") The Expansion Premises shall be governed on all the terms and conditions contained in the Lease, except as follows: (a) The Expansion Premises shall consist of approximately Three Thousand Six Hundred (3,600) square feet of Rentable Area. (b) The annual Minimum Rent for the Expansion Premises shall be based as follows: February 1, 2004 through June 30, 2005: $ 4.50 per square foot of Rentable Area per annum July 1, 2005 through June 30, 2006: $ 5.00 per square foot of Rentable Area per annum July 1, 2006 through June 30, 2008: $ 5.50 per square foot of Rentable Area per annum Payable in equal monthly installments plus any additional charges, without deductions, in advance on the first day of each month during the Renewal Term. (c) There shall be no tenant inducements or special conditions for the Expansion Premises, including but not limited to free rent and tenant improvements, unless otherwise stated herein. (d) The following is deleted from Article 1.01 (b) of the Lease. "The Landlord will issue quarterly credits to the Tenant for any Hydro usage consumed by 131 Hamelin Street. The usage for 131 Hamelin Street is determined by the reading of two electrical panels and an electricians estimate of a third electrical panel. All three panels provide electrical power to 131 Hamelin Street" (e) The Premises known as 131 Hamelin Street are to be taken in "as is" condition. 2. This Agreement shall be attached to the Lease and shall become a part thereof as if originally included therein. 3. The Landlord and the Tenant covenant and agree with each other that, save and except as specifically provided herein, this Lease Amending Agreement shall be on the same terms, conditions, covenants, agreements, obligations and provisos contained in the Lease insofar as the same shall be deemed to be incorporated herein and shall be binding upon the Landlord and the Tenant as though the "Landlord" and "Tenant" referred to in the Lease were the Landlord and the Tenant respectively herein, and that the Landlord and the Tenant will respectively duly observe and perform the same. If there shall be any conflict between the terms of the Lease and the terms hereof, the terms hereof shall apply. 4. The parties hereto covenant and agree that they have good right, full power and authority to enter into this Agreement in the manner as aforesaid. IN WITNESS WHEREOF the parties hereto executed this Agreement as of the day and year first above written. SIGNED, SEALED AND DELIVERED ) 131-149 HAMELIN STREET ) LEASEHOLDS LIMITED in the presence of: ) Landlord ) ) /s/ B. McCarthy )Per: /s/ Aubrey Dan ) ------------------------------- ) AUBREY DAN, PRESIDENT ) I/We have the authority to bind the corporation. SIGNED, SEALED AND DELIVERED ) VIVENTIA BIOTECH INC. ) in the presence of: ) Tenant ) ) March 5, 2004 )Per: /s/ Michael A. Byrne ) ------------------------------- ) MICHAEL A. BYRNE ) CHIEF FINANCIAL OFFICER /s/ Nick Glover ------------------------------- NICK GLOVER PRESIDENT AND CEO I/We have the authority to bind the corporation. EX-3.20 27 t17062exv3w20.txt EXHIBIT 3.20 NET OFFICE LEASE INDEX Net Office Lease between: FANA BURNHAMTHORPE CORP. ("LANDLORD") - and - VIVENTIA BIOTECH INC. ("TENANT") Property: SUITE 501, 10 FOUR SEASONS PLACE, TORONTO (FORMERLY ETOBICOKE)
Section Heading - -------- --------- 1. DEFINITIONS 2. THE LEASED PREMISES 3. TERM OF LEASE 4. RENT 5. COMMENCEMENT AND CONDUCT OF BUSINESS 6. G.S.T. AND OTHER TAXES OF THE TENANT 7. TAX ON TENANT'S LEASEHOLD IMPROVEMENTS 8. TAXES 9. OPERATING COSTS 10. PAYMENT OF ADDITIONAL RENT AND OTHER AMOUNTS 11. ELECTRICITY 12. CARE OF PREMISES 13. ASSIGNMENT OR SUBLETTING 14. RULES AND REGULATIONS 15. USE OF PREMISES 16. TENANT'S INSURANCE 17. CANCELLATION OF INSURANCE 18. OBSERVANCE OF LAW 19. WASTE AND NUISANCE 20. ENTRY BY LANDLORD 21. INDEMNITY 22. EXHIBITING PREMISES 23. ALTERATIONS 24. GLASS AND OVERLOADING 25. SIGNS AND ADVERTISING MEDIA 26. NAME OF BUILDING AND DEVELOPMENT 27. SUBORDINATION AND ATTORNMENT 28. ACCEPTANCE OF PREMISES 29. CERTIFICATES 30. REFUSE OR DEBRIS 31. QUIET ENJOYMENT 32. LANDLORD'S ADDITIONAL COVENANTS 33. FIXTURES 34. REPAIR OF SERVICES TO BUILDING 35. LANDLORD'S INSURANCE 36. DAMAGE AND DESTRUCTION 37. LIMITATION OF LANDLORD'S LIABILITY 38. DELAYS 39. DEFAULTS AND REMEDIES 40. ACCEPTANCE OF RENT OR ADDITIONAL RENT 41. DISTRESS 42. RIGHT OF ENTRY 43. RIGHT OF TERMINATION 44. TENANT TO PAY RENT AND PERFORM COVENANTS 45. NON-WAIVER 46. OVERHOLDING 47. TENANT PARTNERSHIP OR GROUP
48. DEMOLITION 49. ACCRUAL OF RENT 50. NOTICES 51. LAWS OF ONTARIO APPLY 52. PAYMENT IN CANADIAN FUNDS 53. NET LEASE 54. ENTIRE LEASE 55. INTERPRETATION 56. NOTICE OF LEASE 57. CAPTIONS 58. SEVERANCE 59. TIME OF THE ESSENCE 60. LANDLORD AND TENANT RELATIONSHIP 61. NEGOTIATION OF LEASE 62. CONFIDENTIALITY 63. TENANT'S INSOLVENCY 64. OTHER AGREEMENTS 65. SURVIVAL OF OBLIGATIONS 66. PARKING 67. CAPACITY OF AGENT 68. SCHEDULES
Schedule "A" Legal Description Schedule "B" Floor Plan Schedule "C" Rules and Regulations Schedule "D" Method of Floor Measurement Schedule "E" Addition Provisions
- 2 - THIS INDENTURE made this 20th day of November, 2000. IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT BETWEEN: FANA BURNHAMTHORPE CORP. (hereinafter called the "Landlord") OF THE FIRST PART - and - VIVENTIA BIOTECH INC. (hereinafter called the "Tenant") OF THE SECOND PART WHEREAS Fana Burnhamthorpe Corp. is the registered owner of certain lands (the "Lands") more fully described in Schedule "A" attached hereto, upon which an office building municipally known as 10 Four Seasons Place, in the City of Toronto (formerly Etobicoke) has been constructed and which is part of the Development; AND WHEREAS the Landlord has agreed to lease to the Tenant that part of the Building on the 5th floor, Suite 501 which is hereinafter described as the Leased Premises. The Gross Leasable Area of the Leased Premises is approximately eight thousand two hundred and eighty-six (8,286) square feet. The approximate location of the Leased Premises is shown on the floor plan attached hereto as Schedule "B" and the Tenant has agreed to lease the Leased Premises (as hereinafter defined) on the terms and conditions as hereinafter set forth. The measurements of any area of the Building shall be undertaken by the Landlord's Architect, who shall measure such area in accordance with the requirements of ANSI/BOMA Standard Z65.1-1996 (the "BOMA Standard") and subject to Section 2.2 below. NOW THEREFORE THIS INDENTURE WITNESSETH: 1. DEFINITIONS 1.1 For the purposes of this Lease the following terms and words shall have the meanings ascribed to them hereunder: 1.1.1 "ACCESSORY AREAS" shall mean the area of corridors, elevator lobbies, service elevator lobbies, washrooms, air cooling rooms, fan rooms, janitors' closets, telephone and electrical closets and other closets serving the Building and/or the Leased Premises in common with other premises on the same floor. 1.1.2 "ADDITIONAL RENT" shall mean all or any monies or amounts owing by the Tenant to the Landlord pursuant to this Lease, excluding Rent. 1.1.3 "BUILDING" shall mean the building constructed on the Lands described in Schedule "A" and municipally known as 10 Four Seasons Place, in the City of Toronto (formerly Etobicoke), including, without limitation, the Leased Premises, the Common Areas, the Accessory Areas and the Building Service Areas therein. 1.1.4 "BUILDING SERVICE AREAS" shall mean the elevator shafts, stairwells, stairs (but excluding stairways serving a tenant on an exclusive basis), flues, stacks, pipe shafts, vertical ducts and mechanical rooms with their enclosing walls. 1.1.5 "CAPITAL TAX" means any lax or taxes imposed upon the Landlord and/or the owners of the Development from time to time based upon or computed by reference to the actual or deemed capital, taxable capital, taxable capital employed in Canada, paid-up capital, taxable paid-up capital, taxable paid-up capital employed in Canada, capital stock, members' contributions, retained earnings, contributed capital or other surplus, reserves, indebtedness or other - 3 - similar amounts, including, without limitation, tax or taxes imposed pursuant to the Corporations Tax Act (Ontario) or under Part 1,3 of the Income Tax Act (Canada) (Tax on Large Corporations), as such amounts may be determined by the Landlord from time to time for purposes thereof, or any tax or levy imposed by any federal, provincial, municipal or local authority that is similar to, in lieu of, in substitution for or in addition to any such tax or taxes. 1.1.6 "COMMENCEMENT DATE" shall mean the first day of the Term as set out in Paragraph 3.1 of this Lease. 1.1.7 "COMMON AREAS" shall mean the entrances, foyers and lobbies of the Building and the corridors on each of the floors of the Building together with all public entrance doors, halls, stairways (but excluding stairways serving a tenant on an exclusive basis), passages, elevators, shipping and receiving areas and office lavatories for use by the public in the Building as designated by the Landlord from time to time. 1.1.8 "COMPLEX" shall mean the buildings constructed on the Lands described in Schedule "A" and municipally known as 10, 16, 17, 18, 19 and 21 Four Seasons Place respectively, in the City of Toronto (formerly Etobicoke). 1.1.9 "DEVELOPMENT" means the Lands and the Complex, as they may be altered, expanded or reduced from time to time at the sole discretion of the Landlord, and all buildings, improvements, equipment and facilities thereon and thereunder from time to time, as they may be altered, expanded or reduced from time to time at the sole discretion of the Landlord, including without limitation all above and below ground parking structures, the whole being known as "Burnhamthorpe Square Business Centre" or such other name as may be designated by the Landlord from time to time. 1.1.10 "GROSS LEASABLE AREA OF THE LEASED PREMISES" shall have the same meaning as the definition of "Rentable Area" as said term is defined in accordance with the BOMA Standard (as expressed in square feet as calculated for the Leased Premises by the Landlord's Architect plus an additional percentum representing the Tenant's share of the Accessory Areas, the Building Service Areas and the Common Areas from time to time). 1.1.11 "LANDLORD'S ARCHITECT" shall mean a duly qualified architect or surveyor licensed to practise in the Province of Ontario and selected by the Landlord from time to time. 1.1.12 "LEASE" shall mean this lease and all schedules referred to in the body of the document itself. 1.1.13 "LEASED PREMISES" shall mean these premises located on a portion of the 5th floor of the Building, whose approximate location is set out on the floor plan attached hereto as Schedule "B". In the event of a tenant leasing an entire floor, the Leased Premises shall include all of the Accessory Areas serving the floor leased by the Tenant. 1.1.14 "NET LEASABLE AREA OF THE LEASED PREMISES" shall have the same meaning as the definition of "Useable Area" as said term is defined in accordance with the BOMA Standard as expressed in square feet as calculated for the Leased Premises by the Landlord's Architect from time to time. 1.1.15 "OPERATING COSTS" has the meaning attributed to it in paragraph 9.1.1 of this Lease. 1.1.16 "PROPORTIONATE SHARE" shall mean the fraction which has as its numerator the Gross Leasable Area of the Leased Premises and which has as its denominator the Total Leasable Area of the Building. "PROPORTIONATE SHARE OF DEVELOPMENT OPERATING COSTS" means the fraction which has as its numerator the Gross Leasable Area of the Leased Premises and as its denominator the Total Leasable Area of the Development. - 4 - 1.1.17 "RENT" shall mean the annual rent payable by (he Tenant to the Landlord pursuant to Paragraph 4.1 of this Lease. 1.1.18 "TAXES" has the meaning attributed to it in paragraph 8.1 of this Lease. 1.1.19 "TERM" shall mean the period as set out in Paragraph 3.1 of this Lease. 1.1.20 "TOTAL LEASABLE AREA OF THE BUILDING" shall have the same meaning as the definition "Building Rentable Area" in accordance with the BOMA Standard as expressed in square feet and calculated for the Building by the Landlord's Architect from time to time. 1.1.21 "TOTAL LEASABLE AREA OF THE DEVELOPMENT" means the Total Leasable Area of the Building of each of the buildings in the Development as expressed in square feet and calculated by the Landlord's Architect from time to time. 2. THE LEASED PREMISES 2.1 The Landlord hereby demises and leases and by these presents docs demise and lease the Leased Premises to the Tenant, together with the right of the Tenant, the Tenant's employees, agents, suppliers (subject to Paragraph 14.1 hereof), and persons having business with the Tenant, in common with the Landlord, its other tenants, subtenants and all others entitled to the use of the Common Areas. 2.2 The Landlord may in its sole discretion from time to time remeasure the Gross Leasable Area of the Leased Premises or recalculate the Gross Leasable Area of the Leased Premises and readjust the Rent and Additional Rent accordingly. The effective date of any such readjustment shall: (a) in the case of an adjustment to the Total Leasable Area of the Building, be the date on which the change occurs; and (b) in the case of a correction to any measurement or calculation error, be the dale as of which such error was introduced in the calculation of the Rent and Additional Rent. 3. TERM OF LEASE 3.1 To have and to hold the Leased Premises for and during a term of five (5) years (the "Term") to be computed from the first (1st) day of January 2001, subject to Paragraph 5.2 hereof (the "Commencement Date") and from thenceforth next ensuing and fully to be completed and ended on the thirty-first (31st) day of December 2005, unless sooner terminated by the Landlord in accordance with this Lease. 4. RENT 4.1 The Tenant shall pay to the Landlord at die address set forth in Paragraph 50.1, in lawful money of Canada and without any deduction, set off or abatement, throughout the Term an annual minimum rent (the "RENT"), in advance, on the first day of each month throughout the Term as follows: $103,575.00 per annum, payable in equal consecutive monthly instalments of $8,631.25 in advance, on the first day of each month during each year of the 5 years of the Term. The aforesaid Rent is calculated on the basis of a net rent of: $12.50 per square fool of Gross Leasable Area of the Leased Premises per annum for each of the 5 years of the Term. Rent and Additional Rent may be adjusted from time to time by the Landlord, if necessary, to conform with changes in the Gross Leasable Area of the Leased Premises. Subject to Section 2.2, a certificate of the Landlord's Architect to that effect shall be conclusive, SAVE FOR MANIFEST ERROR, SHALL BE ADDRESSED TO BOTH LANDLORD AND TENANT. 4.2 The Tenant covenants with the Landlord to pay Rent and Additional Rent and such oilier amounts for which the Landlord may be entitled to demand payment - 5 - from the Tenant pursuant to the provisions of this Lease without any deduction, setoff or abatement. Rent and Additional Rent arc reserved by the Landlord and payable by the Tenant in consideration for the demise and lease of the Leased Premises hereunder. The Landlord shall, in addition to any other right or remedy available to the Landlord, have the same rights and remedies in the event of default by the Tenant in the payment of Additional Rent as the Landlord would have in the event of default by the Tenant in the payment of Rent. All Additional Rent payable by the Tenant to the Landlord pursuant to this Lease shall, unless otherwise provided herein, become due and payable with the next monthly instalment of Rent. Where the calculation of any Additional Rent is not made until after the expiration or earlier termination of this Lease, the obligation of the Tenant to pay such Additional Rent shall survive such expiration or earlier termination and such amount shall be payable by the Tenant after final determination and upon demand by the Landlord. 4.3 Landlord acknowledges that the TENANT has provided to Royal LePage Commercial Inc. (the "LEASING AGENT"), in trust for the Landlord a deposit equal to the sum of thirty-eight thousand two hundred and seventy one dollars and sixty-five cents ($38,271.65) (the "DEPOSIT") to be applied to the first and last months' Rent and Additional Rent payable by the Tenant hereunder. Provided that if, at any time during the term, Rent is overdue and unpaid, or if the Tenant fails to keep or perform any of the terms, covenants and conditions of this Lease to be kept, observed and performed by the Tenant, then, the Landlord, at its option, may, in addition to any and all other rights and remedies provided for in this Lease or by law, appropriate and apply the balance of the Deposit (the "BALANCE") or so much thereof as if necessary to compensate the Landlord for loss or damage sustained or suffered by the Landlord due to such breach on the part of the Tenant. If the Balance or any portion thereof is appropriated and applied by the Landlord for the payment of overdue Rent or Additional Rent, then the Tenant shall, forthwith after demand by the Landlord, remit to the Landlord a sufficient amount in cash to restore the Balance to the original sum deposited and the Tenant's failure to do so forthwith after receipt of such demand constitutes a breach of this Lease. 4.4 The Landlord shall deliver the Balance to any purchaser of the Landlord's interest in the Leased Premises and the Development if such interest is sold and thereafter the Landlord shall be discharged from any further liability with respect to the Deposit so long as the purchaser has assumed the Landlord's obligations hereunder. 5. COMMENCEMENT AND CONDUCT OF BUSINESS 5.1 The Tenant SHALL OPERATE its business in the whole of the Leased Premises in a reputable manner and in compliance with the provisions of this Lease and the requirements of all applicable governmental and municipal laws, by-laws and regulations during the Term. 5.2 SUBJECT TO SCHEDULE "E", if the Landlord is unable to deliver vacant possession of the Leased Premises on the Commencement Date by reason of the Landlord's failure to complete construction or to make available the services which the Landlord is hereby obligated to furnish or by reason of any previous tenant or occupant overholding or for any other reason whatsoever, then, until such time as the Landlord is able to deliver vacant possession of the Leased Premises WITH THE TURNKEY WORK COMPLETED, Rent and such other amounts for which the Landlord may be entitled to demand payment from the Tenant under the provisions of this Lease, shall abate in that proportion which the area of the Leased Premises which TENANT IS WILLING TO COMMENCE OPERATING ITS BUSINESS FROM bears to the Net Leasable Area of the Leased Premises. PROVIDED LANDLORD IS USING ALL COMMERCIALLY REASONABLE STEPS TO DELIVER VACANT POSSESSION OF THE PREMISES WITH THE TURNKEY WORK COMPLETED, Tenant hereby agrees to accept such abatement of Rent and Additional Rent in full settlement of and any and all claims which the Tenant may otherwise have against the Landlord by reason of the Leased Premises not being ready for occupancy on the Commencement Date. - 6 - The Tenant shall not be entitled to any further abatement of Rent or Additional Rent and there shall be no abatement of Rent or Additional Rent for any delay in occupancy due to the Tenant's failure to complete all or any installations or other work required to be completed by the Tenant in accordance with the provisions of this LEASE. The Tenant shall not be entitled to any abatement of Rent or Additional Rent where the Landlord's failure to obtain completion of the Leased Premises or to deliver vacant possession of the Leased Premises on the Commencement Date is due to any act or omission on the part of the Tenant. The decision of the Landlord's Architect shall be final and binding upon the parties hereto as to whether or not the Leased Premises are ready for occupancy by the Tenant, as to the proportion of the Leased Premises that is available for occupancy and as to the extent to which any delay in completion of the Leased Premises or in the delivery of vacant possession is due to any act or omission of the Tenant or its agents, servants or contractors. The Tenant shall, promptly upon the request by the Landlord, execute an acknowledgement of the date upon which complete and vacant possession of the Leased Premises is delivered to the Tenant. Notwithstanding the Landlord's failure to obtain completion of the Leased Premises or to deliver vacant possession of the Leased Premises on the Commencement Date, this Lease shall continue in full force and effect subject only to the abatement of Rent and Additional Rent as aforesaid and this Lease shall expire on the date specified in Paragraph 3.1 hereof notwithstanding such delay, UNLESS VACANT POSSESSION AND COMPLETION OF THE TURNKEY WORK IS NOT DELIVERED WITHIN 6 MONTHS OF THE DATE HEREOF IN WHICH EVENT TENANT MAY, IN ADDITION TO ANY OTHER REMEDIES AVAILABLE TO IT, TERMINATE THIS LEASE. 6. G.S.T. AND OTHER TAXES OF THE TENANT 6.1 The Tenant covenants with the Landlord to pay business and other taxes, charges, rates, duties and assessments levied, rated, charged or assessed against and in respect of the Tenant's occupancy of the Leased Premises, or in respect of the personal property, trade fixtures, furniture and facilities of the Tenant or business of the Tenant on the Leased Premises, and including any Goods and Services Tax ("GST" or "G.S.T.") with respect to Rent and Additional Rent payable by the Tenant, if, as and when the same becomes due, and will indemnify and keep indemnified the Landlord from and against all payments of all loss, costs, charges and expenses occasioned by or arising from any and all such taxes, rates, duties, assessments, license fees and any and all taxes which may in future be levied in lieu of such taxes. 6.2 If the method of taxation has or shall be altered, so that the whole or any part of the business or other taxes, charges, rates and/or duties ordinarily or formerly payable in respect of any use or occupancy of the Leased Premises is merged into a comprehensive realty or other type of tax, the Landlord shall have the right to allocate and collect such component of the comprehensive tax from the Tenant, it being the intention of the parties hereto that the Tenant shall remain solely responsible for said business or other taxes, charges, rates and/or duties ordinarily or formerly payable in respect of any use or occupancy of the Leased Premises. 7. TAX ON TENANTS LEASEHOLD IMPROVEMENTS 7.1 The Tenant covenants with the Landlord to pay all taxes, charges, rates, duties and assessments levied, rated, charged or assessed against and in respect of all fixtures, improvements, installations, alterations and additions from time to time made, erected or installed by the Tenant or on behalf of the Tenant, in the Leased Premises as and when the same become due, and the Tenant will indemnify and keep indemnified the Landlord from and against all payments of all loss, costs, charges and expenses occasioned by or arising from any and all such taxes, rates, duties, assessments, which may be levied now or in the future or in lieu of such taxes. - 7 - 8. TAXES 8.1 For the purpose of Paragraphs 8.2 and 8.2, "TAXES" means all taxes, rates, duties, levies, charges and assessments whatsoever, whether municipal, parliamentary or otherwise, levied, imposed or assessed against the Lands, the Development and the Building or upon the Landlord in respect thereof or from time to time levied, imposed or assessed in the future in lieu thereof, including those levied, imposed or assessed for education, schools and local improvements and including any commercial concentration type of tax, and including all costs and expenses (including legal and other professional fees reasonably incurred by the Landlord in good faith in contesting, resisting or appealing any taxes, rates, duties, levies, charges or assessments) but excluding taxes on the income of the Landlord to the extent that such taxes are not levied in lieu of taxes, rates, duties, levies, charges or assessments against the Building, the Development or upon the Landlord in respect thereof and shall also include any and all taxes which may in future be levied in lieu of taxes as hereinbefore defined, AND EXCLUDING CAPITAL TAX. 8.2 If the Tenant or any person occupying the Leased Premises or any part thereof shall elect to have the Leased Premises or any part thereof assessed for Separate School taxes, the Tenant shall pay to the Landlord as soon as the amount of the Separate School taxes is ascertainable, any amount by which the Separate School taxes exceed the amount which would have been payable for school taxes had such election not been made as aforesaid. 8.3 The Tenant covenants to pay, as Additional Rent, the Proportionate Share of Taxes, all in accordance with the provisions of Paragraph 10.1 hereof and all in accordance with the following: 8.3.1 If there is no separate assessment for Taxes with respect to the Leased Premises, or if there is such a separate assessment, but such separate assessment, together with all other separate assessments relating to Total Leasable Area of the Building do not aggregate the total assessment for Taxes of the Lands and Building then until such time as there is a separate assessment for Taxes with respect to the Leased Premises and until such time as such separate assessment, if any, together with all other such separate assessments, aggregate the total assessment for Taxes of the Lands and Building, the Tenant shall pay as Additional Rent its Proportionate Share of the Taxes on the Lands and the Building. 8.3.2 If there is a separate assessment for Taxes with respect to the Leased Premises and if such separate assessment, together with all other separate assessments, relating to the Total Leasable Area of the Building, aggregate the total assessment for the Taxes of Lands and the Building, the Tenant shall pay as Additional Rent the amount of such separate assessment. 8.3.3 Should the Lands and the Building not be fully assessed as a commercial property for the determination of Taxes in any calendar year, then the Landlord shall adjust (on the basis of the net nature of this Lease) the Taxes to an amount that would have been determined if the Lands and Building had been fully assessed as a commercial property. 9. OPERATING COSTS 9.1 For the purposes of Paragraph 9.2 hereof: 9.1.1 "Operating Costs" means the total amounts WITHOUT DUPLICATION incurred by the Landlord, acting reasonably, paid or payable whether by the Landlord or by others on behalf of the Landlord for climate control and for the maintenance, operation, repair, replacements to and administration of the Lands, the Development and the Building from time to time including, without limitation, the aggregate of: - 8 - 9.1.1.1 the total annual costs and expenses of insuring the Building and the improvements and equipment and other property in the Building from time to time, owned or operated by the Landlord or for which the Landlord is liable, or may become liable pursuant to Paragraph 35.1 hereof; 9.1.1.2 cleaning (including window cleaning), janitorial services, maintenance, repair and replacement to the Building, including snow and ice removal, gardening, landscaping, garbage and waste collection and disposal including, without limitation, those costs referred to in Section 32 herein, exterior lighting and repairs and maintenance to all parking areas, driveways, sidewalks, lanes, streets and walkways in or adjacent to the Building and underground services and facilities in the Building, if any; 9.1.1.3 the aggregate of the costs and amounts paid for: (i) all fuel used in heating or other purposes; (ii) all electricity furnished by the Landlord to the Building other than electricity furnished directly to and paid for by tenants; (iii) all hot and cold water other than that chargeable to tenants by reason of their extraordinary consumption of water; (iv) climate control; and (v) telephone and any other utility costs used in the maintenance and operation of the Lands and Building; 9.1.1.4 the costs of policing, security and supervision; 9.1.1.5 salaries, wages and other amounts paid or payable for all personnel including engineers, janitors, caretakers and other employees of the Landlord WORKING AT THE DEVELOPMENT, OR A REASONABLE PORTION THEREOF WITH RESPECT TO PERSONNEL EMPLOYED PART TIME AT THE DEVELOPMENT, and for all supervisory personnel and the building manager involved in the maintenance and operation of the Lands, the Development, and Building, including contributions and premiums towards fringe benefits, unemployment and Workers' Compensation insurance, pension plan contributions and similar premiums and contributions and the total charges of any independent contractors employed in the repair, care, maintenance and cleaning of the Development and the Building; 9.1.1.6 the cost of the rental of any equipment and signs, and the cost of supplies, used by the Landlord in the maintenance and operation of the Lands, the Development and Building; 9.1.1.7 the cost of heating, ventilating and air conditioning the Building; 9.1.1.8 audit fees and the cost of accounting services incurred in the preparation of statements and in the computation of the rents and charges payable by tenants of the Development; 9.1.1.9 all replacements, repairs and maintenance (including gardening and landscaping maintenance, repair and replacement) and operation of the Lands, the Development and the Building and the systems, facilities and equipment serving the Lands, Development and Building (including, without limitation, all elevators and other transportation equipment and systems, the heating, ventilating and air conditioning and climate control systems serving the Building and environmental and energy conservation systems) provided the foregoing shall not include the cost of repairs or replacements due to inherent structural defects or weaknesses in the original construction of the Building and the initial cost of construction of new buildings OR IMPROVEMENTS in the Complex; - 9 - 9.1.1.10 amortization on the costs, including repair and replacement, of all maintenance and cleaning equipment and master utility meters and amortization on the costs incurred for repairing, replacing or installing all other fixtures, equipment and facilities serving or comprising the Lands, the Development and Building from time to time (including the heating, ventilating and air conditioning and climate control systems serving the Building and environmental and energy conservation systems serving the Building) which by their nature, require periodic or substantial repair or replacement, and which are, in accordance with sound accounting principles of a capital nature and which are not charged fully in the accounting year in which they are incurred, in either case, at rates on the various items determined from time to time by the Landlord, acting reasonably in accordance with sound accounting principles; 9.1.1.11 interest calculated at two (2) percentage points above the average prime bank commercial lending rate charged during such accounting year by any Canadian chartered bank designated from time to time by the Landlord, UPON the unamortized portion of the costs referred to in Paragraph 9.1.1.10; 9.1.1.12 a fee for the administration and management of the Building applied against the total rentals receivable by the Landlord from the tenants of the Building including additional rentals WHICH IN ANY EVENT SHALL NOT EXCEED 15% OF OPERATING COSTS LESS CAPITAL TAX AND INTEREST; and 9.1.1.13 Capital Tax. Operating Costs shall reflect the fact that, if less than one hundred percent (100%) of the Building is occupied during any period for which a computation must be made, the amount of Operating Costs will be increased to reflect the additional costs that would have been incurred had one hundred percent (100%) of the Building been occupied during that period. RIDER 9.1 NOTWITHSTANDING ANYTHING TO THE CONTRARY, OPERATING COSTS SHALL NOT INCLUDE THE FOLLOWING: .1 ADDITIONS AND MAJOR STRUCTURAL IMPROVEMENTS TO THE BUILDING OR DEVELOPMENT, .2 REPAIR AND REPLACEMENT RESULTING FROM INFERIOR OR DEFICIENT WORKMANSHIP, MATERIALS OR EQUIPMENT IN THE INITIAL CONSTRUCTION OF THE BUILDING OR DEVELOPMENT, .3 GROUND RENT (IF ANY), AND INTEREST ON AND PRINCIPAL RETIREMENT OF MORTGAGES AND CAPITAL COST ALLOWANCE ON THE BUILDING STRUCTURE COMPRISED IN THE BUILDING OR DEVELOPMENT, .4 REPAIR AND REPLACEMENT FOR WHICH LANDLORD IS REIMBURSED BY INSURERS, TENANTS OR UNDER WARRANTIES OR GUARANTEES, .5 TENANT IMPROVEMENTS AND LEASING COMMISSIONS, LEGAL FEES, ADVERTISING COSTS AND OTHER RELATED EXPENSES INCURRED IN CONNECTION WITH THE LEASING OR SALE OF THE BUILDING, .6 THE COST OF PAINTING, DECORATING, OR OF PROVIDING SPECIAL CLEANING OR ADDITIONAL SERVICES FOR ANY OCCUPANT OF ANY SPACE IN THE BUILDING, OTHER THAN THE PREMISES, .7 LEGAL FEES, ACCOUNTANT'S FEES AND OTHER EXPENSES INCURRED IN CONNECTION WITH DISPUTES WITH TENANTS OR OTHER OCCUPANTS OF THE BUILDING OR ASSOCIATED WITH THE ENFORCEMENT OF ANY LEASES OR DEFENCE OF LANDLORD'S TITLE TO OR INTEREST IN THE BUILDING OR ANY PART THEREOF. - 10 - .8 LANDLORD'S INCOME TAXES, .9 REPLACEMENT OR REPAIR OF THE STRUCTURAL COMPONENTS OF THE BUILDING, .10 THE AMOUNT OF ANY SALES TAX, GOODS AND SERVICES TAX, VALUE ADDED TAX OR ANY SIMILAR TAX ("SALES TAX") PAID OR PAYABLE BY LANDLORD ON THE PURCHASE OF GOODS AND SERVICES INCLUDED IN OPERATING COSTS, WHERE THE AMOUNT OF THE SALES TAX IS AVAILABLE TO LANDLORD AS A CREDIT OR OFFSET DETERMINING LANDLORD'S NET TAX LIABILITY OR REFUND ON ACCOUNT OF SUCH SALES TAX. .11 REVENUES RECEIVED BY LANDLORD ON ACCOUNT OF ANY PAID PARKING FACILITY AT THE BUILDING BUT ONLY TO THE EXTENT OF THE TOTAL COSTS INCLUDED IN OPERATING COSTS IN RESPECT OF SUCH PAID PARKING FACILITY. .12 ALL WORK TO THE BUILDING MADE NECESSARY BY LANDLORD'S NON-COMPLIANCE OR THE NON-COMPLIANCE OF LANDLORD'S CONTRACTORS, SUB-CONTRACTORS, SUPPLIERS OR THOSE FOR WHOM LANDLORD IS RESPONSIBLE AT LAW, WITH GOVERNING CODES, BY-LAWS AND REGULATIONS, AND .13 INTEREST, COSTS OR PENALTIES INCURRED AS A RESULT OF LATE PAYMENT OF AMOUNTS DUE BY LANDLORD UNLESS LANDLORD IS OR WAS BONA FIDE DISPUTING SUCH AMOUNTS DUE. NOTWITHSTANDING ANYTHING TO THE CONTRARY, ANY PERMITTED OPERATING COSTS OF CAPITAL NATURE SHALL BE AMORTIZED OVER THE USEFUL LIFE THEREOF IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 9.2 "DEVELOPMENT OPERATING COSTS" means, in respect of any financial period designated by the Landlord, the total costs of outdoor repair, operation, maintenance and replacement of the Development from time to time, including, but not limited to, snow, ice and garbage removal, gardening and landscaping, exterior lighting and repairs to and maintenance of all parking areas, driveways, sidewalks, lanes, streets, and walkways in or adjacent to the Development and underground services and facilities in the Development and the total costs of installation, repair and operation of environmental and energy conservation systems serving the Development. To the extent an element of Operating Costs relates to the entire Development and not the Building, the Landlord shall calculate the Tenant's Proportionate Share thereof on the basis of the Tenant's Proportionate Share of Development Operating Costs. 9.3 The Tenant covenants that it shall pay, during the Term, as Additional Rent, its Proportionate Share of Operating Costs and its Proportionate Share of Development Operating Costs, in accordance with paragraph 10.1 hereof. 10. PAYMENT OF ADDITIONAL RENT AND OTHER AMOUNTS 10.1 Any Additional Rent or other amounts payable by the Tenant, to the Landlord pursuant to this Lease shall be paid as follows: 10.1.1 The Landlord may estimate the amount or amounts of such Additional Rent at the commencement of each calendar year and the Tenant shall pay to the Landlord monthly as Additional Rent, one-twelfth (1/12th) of such estimated amounts. LANDLORD'S ESTIMATE OF THE ADDITIONAL RENT FOR THE CALENDAR YEAR 2000 IS $14.40 PER SQUARE FOOT. If the amount of additional payments made by the Tenant should be less than the actual amount due for such year taken as a whole, then in that event the Tenant shall pay to the Landlord forthwith upon demand the amount of such deficiency. 10.1.2 If the aggregate amount of additional payments made by the Tenant should be greater than the actual amount due for such year taken as a whole, then, in that event, should the Tenant not be otherwise in default hereunder, the amount of such excess will be applied by the Landlord to the next succeeding instalments of - 11 - Additional Rent due hereunder; and if there be any such excess for the last calendar year of the term, the amount thereof will be refunded by the Landlord to the Tenant within thirty (30) days after the expiration of the Term provided the Tenant is not otherwise in default under the terms of this Lease. 10.1.3 If this Lease commences on a date other than the first day of a calendar year or expires on a date other than the last day of a calendar year, the estimated additional rentals for such periods of this Lease less than a full calendar year shall be adjusted on a pro rata basis. 10.2 Within a reasonable period after the end of the Landlord's financial year, the Landlord will provide the Tenant with a statement of Operating Costs and a statement of Taxes with reasonably detailed back-up supporting such statement, certified to be correct by the LANDLORD, together with details of the Tenant's Proportionate Share thereof. 11. ELECTRICITY 11.1 The Tenant covenants and agrees to pay the cost of all electricity supplied to the Leased Premises, provided that if there is not a separate meter for the Leased Premises, the Landlord acting reasonably shall estimate the cost of electricity supplied to the Leased Premises. 11.2 In addition to but without duplication of the amounts payable by the Tenant hereunder, if the Landlord requires, the Tenant shall pay; 11.2.1 an additional charge for the supply to and usage of any excess electricity in the Leased Premises or of any electricity supplied to the Leased Premises on Saturdays, Sundays and statutory holidays and after normal business hours on weekdays, all as equitably allocated by the Landlord; 11.2.2 all costs incurred by the Landlord in determining or allocating the additional charge including, without limitation, professional engineering and consulting fees; and 11.2.3 an administration fee of fifteen percent (15%) of the costs and charges referred to in subparagraphs 11.2.1 and 11.2.2 above. The Tenant shall pay for the cost of any metering which the Tenant requests the Landlord to install in the Leased Premises, FOR THE purpose of assisting in determining the consumption of any Utility in the Leased Premises. 12. CARE OF PREMISES 12.1 The Tenant covenants with the Landlord to maintain and repair the Leased Premises in as good a state of repair throughout the Term as the Leased Premises are in as at the Commencement Date, SUBJECT TO REASONABLE WEAR AND TEAR AND DAMAGE RESULTING FROM STRUCTURAL DEFECTS OR LANDLORD'S NEGLIGENCE and the Landlord may enter and view the state of repair UPON AT LEAST 48 HOURS PRIOR WRITTEN NOTICE EXCEPT IN EMERGENCY and the Tenant will repair according to notice in writing. The Tenant agrees that it will leave the Leased Premises in good repair SUBJECT TO REASONABLE WEAR AND TEAR AND DAMAGE RESULTING FROM STRUCTURAL DEFECTS OR LANDLORD'S NEGLIGENCE, PROVIDED TENANT SHALL HAVE NO OBLIGATION TO RESTORE THE LEASED PREMISES TO BASE BUILDING STANDARD OR REMOVE ANY LEASEHOLD IMPROVEMENT. The Tenant will not allow or cause the Leased Premises or any part of it to be used for any business which, either directly or indirectly, involves the preparation, production or storage of any toxic or hazardous substances or materials (collectively, the "CONTAMINANTS") including, without limitation, any products of waste, asbestos, urea formaldehyde foam insulation, radon gas, PCBs or any other contaminant as defined in the ENVIRONMENTAL PROTECTION ACT, R.S.O. l990, is amended, excluding THOSE materials and substances common to business offices AND used in compliance with all applicable legislation (e.g. paint). If the Tenant fails to maintain the Leased Premises in good repair, the Landlord may, after giving reasonable - 12 - WRITTEN notice (it being agreed that forty-eight (48) hours is reasonable notice), or, without notice in the case of an emergency, perform or cause to be performed all or part of what the Tenant failed to perform and may enter upon the Leased Premises and do those things that the Landlord considers necessary for that purpose. The Tenant will pay to the Landlord on demand, the Landlord's expenses incurred under this Section plus an amount equal to fifteen percent (15%) of those expenses for the Landlord's overhead and administrative costs. PROVIDED THE LANDLORD ACTS IN A COMMERCIALLY REASONABLE MANNER, the Landlord will have no liability to the Tenant for loss or damages resulting from its action or entry upon the Leased Premises. 13. ASSIGNMENT OR SUBLETTING 13.1 The Tenant shall not assign or in any way encumber the whole or any part of this Lease or sublet or part with the possession of or in any way encumber all or part of the Leased Premises (each of the foregoing being a "TRANSFER") without the prior written consent of the Landlord, which consent shall not be unreasonably withheld OR DELAYED; provided however, such consent to any Transfer shall not relieve the Tenant from its obligations for the payment of Rent, Additional Rent and for the full and faithful observance and performance of the covenants, terms and conditions herein contained and any default by any recipient of the Transfer (a "TRANSFEREE") shall be regarded as breach of this Lease by the Tenant. 13.2 Notwithstanding the contents of Paragraph 13.1 hereof or anything hereinbefore or hereinafter set forth: 13.2.1 Prior to any Transfer, from time to time, the Tenant shall send to the Landlord a notice setting forth the name and address of the proposed Transferee and all the terms and conditions of the proposed Transfer. Notwithstanding the provisions of this Section 13 or anything else contained herein, the Landlord may, in its sole discretion, elect to cancel this Lease in preference to giving its consent. If the request for consent relates to only a part of the Leased Premises, the Landlord's rights to cancel this Lease will relate only to such part and in this event the Tenant will, at its expense, arrange for the partitioning of the Leased Premises so as to separate the part being Transferred from the remainder of the Leased Premises. If the Landlord elects to cancel all or part of this Lease, the Tenant will notify the Landlord in writing within ten (10) days thereafter of the Tenant's intention to refrain from such Transfer. If the Tenant fails to deliver notice within the ten (10) day period, the Tenant will be deemed to accept the foregoing and this Lease will be terminated or amended to reflect the surrender of the Transferred portion of the Leased Premises upon the expiration of the ten (10) day period and the Tenant shall, in either case, execute and deliver to the Landlord the Landlord's form of acknowledgement to this effect and vacate the Leased Premises (or relevant portion thereof) in the manner required in Section 33 herein. If the Tenant advises the Landlord that the Tenant has cancelled such Transfer in the manner set out above, each of the proposed Transfer, the Landlord's election to cancel this Lease or reduce the Leased Premises will become null and void in such instance but the Tenant shall remain liable for the Landlord's REASONABLE costs and expenses in connection therewith. If the Landlord shall have declined to elect to terminate this Lease, pursuant to the foregoing, the Tenant may Transfer such space to the Transferee in accordance with the terms and conditions of the Transfer previously presented to the Landlord subject to Paragraph 13.1 and the provisions of this Section 13 (including the requirement for obtaining the Landlord's prior written consent) shall continue to apply to such Transfer. 13.2.2 In all cases: (a) the Tenant shall not be released from any obligations under this Lease, as amended, supplemented, assigned, renewed and/or extended from time to time; (b) each of the Tenant and the Transferee shall execute and deliver to the Landlord, the Landlord's FORM OF AGREement pursuant to which the Tenant confirms the foregoing and the Transferee shall assume the Tenant's obligation for the payment of rent and for the full and faithful observance and performance of the covenants, terms and conditions herein contained; and (c) the Tenant shall pay all of the Landlord's costs and expenses in connection therewith. - 13 - 13.2.3 No Transfer shall be valid unless, prior to the execution thereof, the Tenant shall deliver to the Landlord duplicate originals of such agreement duly executed by the Tenant and Transferee along with the Landlord's form of agreement wherein such Transferee shall assume the Tenant's obligation for the payment of rent and for the full and faithful observance and performance of the covenants, terms and conditions herein contained as if it was the original tenant hereunder including those items referred to in Paragraph 13.2.2 above, PROVIDED THAT IN THE CASE OF A SUBLEASE SUCH OBLIGATIONS SHALL BE LIMITED TO THE SUBPREMISES FOR SUBTERM. 13.2.4 The Landlord's consent to any Transfer shall be further subject to the condition that all REASONABLE legal fees and expenses incurred by the Landlord in connection with the review by the Landlord and/or its solicitors of the Tenant's request to Transfer together with any legal fees and disbursements incurred in the preparation and review of any documentation therewith shall be the responsibility of the Tenant and shall be paid forthwith on demand. Failure to pay such fees and expenses shall be treated by the Landlord in the same manner as rent in arrears. 13.2.5 In the event that the rent or any other payment or consideration in connection with any Transfer by the Tenant is greater on a per square foot basis than that payable under this Lease, the excess shall be paid by the Tenant to the Landlord as Additional Rent. 13.3 NOTWITHSTANDING ANYTHING TO THE CONTRARY, TENANT SHALL NOT REQUIRE LANDLORD'S CONSENT (AND LANDLORD SHALL HAVE NO CANCELLATION RIGHT), but the Tenant shall provide prior notice to the Landlord, of an assignment or sublease to an affiliate (AS SUCH TERM IS DEFINED IN THE ONTARIO BUSINESS CORPORATIONS ACT), to the acquirer of the Tenant's business operations, or as a result of a merger or amalgamation. 13.4 The Landlord shall be liable for the performance of its covenants and obligations pursuant to this Lease so long as it owns or is in possession and control of the Development. In the event of any sale or other transfer of the Development, the Landlord shall UPON THE ASSUMPTION OF SUCH COVENANTS AND OBLIGATIONS BY THE PURCHASER OF THE BUILDING and without further agreement be relieved and released of all liability with respect to such covenants and obligations. 14. RULES AND REGULATIONS 14.1 The Tenant and the Tenant's employees and all persons visiting and doing business with it on the Leased Premises shall be bound by and shall observe the Rules and Regulations attached to this Lease as Schedule "C" and such further and other reasonable rules and regulations made hereafter by the Landlord (provided same do not conflict with the terms of this Lease) relating to the Lands and the Building, the Leased Premises or the Common Areas of which prior notice in writing shall be given to the Tenant and all such rules and regulations shall be deemed to be incorporated into and form part of this Lease. 15. USE OF PREMISES 15.1 The Leased Premises shall be used solely for the purpose of general business office use and for no other purpose; provided that such purposes, as aforesaid, shall comply with the terms of this Lease and all applicable laws, by-laws, regulations or other governmental ordinances from time to time in existence and the Tenant shall not carry on or permit to be carried on therein any other trade or business and the Tenant shall not do or omit or permit to be done or omitted upon the Leased Premises anything which shall cause the rate of insurance upon the Building to be increased and if the rate of insurance on the Building shall be increased by reason of the use made of the Leased Premises or by reason of anything done or omitted or permitted to be done or omitted by the Tenant or anyone permitted by the Tenant to be upon the Leased Premises, the Tenant shall on demand pay to the Landlord the amount of such increase. The Landlord - 14 - confirms that the use of the Leased Premises for general office purposes is not prohibited by the applicable municipal by-law at this time. 15.2 Without diminishing the restrictions in Paragraph 15.1 above, the Leased Premises shall not be used for the carrying on of any barter, trade or exchange of goods, or sale through promotional give-away gimmicks or any business involving the sale of second-hand goods, insurance salvage stock or fire sale stock, and shall not be used for any auction or pawnshop business, any fire sale, liquidation sale, bankruptcy sale, going-out-of-business sale, moving sale, bulk sale or any other business which, because of merchandising methods or otherwise, would tend to lower the first-class character of the Building. 15.3 Any use of the Leased Premises not in accordance with the design standards of the Building or any arrangement of partitions which interferes with the normal operation of the climate control system for the Building may require changes or alterations in the system or the ducts. Any changes or alterations so required after the Commencement Date, if such changes can be accommodated by the Landlord's equipment, shall be made by the Landlord, at the Tenant's expense, and only after such changes or alterations have received the Landlord's prior written consent. If installation of partitions, equipment or fixtures by or on behalf of the Tenant after the Commencement Date necessitates the rebalancing of any climate control equipment serving the Leased Premises, such work will be performed by the Landlord at the Tenant's expense. To the cost of any work performed by the Landlord on the Tenant's behalf shall be added an amount equal to fifteen percent (15%) of the total expense thereof, representing the Landlord's overhead and administrative costs, and all amounts owing shall be payable by the Tenant upon demand. 16. TENANT'S INSURANCE 16.1 The Tenant shall provide at its own expense and keep in force, during any rent-free period and continuously throughout the Term of this Lease and any renewal thereof, in the name of the Tenant, the Landlord and the Landlord's mortgagee, the following: 16.1.1 Comprehensive general public liability insurance on an occurrence basis with respect to the business carried on, in or from the Leased Premises and the Tenant's use and occupancy of the Leased Premises and of any other part of the Building or Lands with coverage for any one occurrence or claim of not less than TWO MILLION DOLLARS ($2,000,000.00), which insurance shall include the Landlord as an additional insured, and shall contain cross liability and severability of interest clauses and shall protect the Landlord in respect of claims by the Tenant as if the Landlord were separately insured; 16.1.2 Insurance with respect to fire and such other perils as are from time to time included in the usual extended coverage endorsement covering the leasehold improvements, trade fixtures and the furniture and the equipment in the Leased Premises for not less than the full replacement cost thereof, which insurance shall include the Landlord and any mortgagee of the Building as ADDITIONAL insureds as their respective interests may appear; 16.1.3 Business interruption insurance in such amount as will reimburse the Tenant for direct or indirect loss of earnings attributable to any peril commonly insured against by prudent tenants or attributable to the prevention of access to the Leased Premises as a result of any such peril; and 16.1.4 Insurance against any such other peril and in such reasonable amounts as the Landlord, acting reasonably, may from time to time reasonably require upon not less than thirty (30) days notice, such requirement to be made on the basis that the required insurance is customary at the time for reasonably prudent tenants occupying premises similar to the Leased Premises. - 15 - 16.2 Where the Tenant may desire to receive indemnity by way of insurance for any property, work or thing whatever, the Tenant shall insure same for its own account and shall not look to the Landlord for reimbursement or recovery in the event of loss or damage from any cause, whether or not the Landlord has insured same and recovered therefor. 16.3 To the extent only of insurance proceeds actually received by the Landlord under the policy or policies of insurance maintained OR REQUIRED HEREUNDER TO BE MAINTAINED BY LANDLORD, THE LANDLORD AGREES TO RELEASE THE TENANT FOR ANY LOSS SUSTAINED. 16.4 The Tenant agrees to release and hold harmless the Landlord for loss or damage to the property of the Tenant and in addition all policies of insurance required to be written on behalf of the Tenant pursuant to Paragraph 16.1.2 shall contain a waiver of any subrogation rights which the Tenant's insurers may have against the Landlord and against those for whom the Landlord is in law responsible. 16.5 Each policy of insurance referred to in Paragraph 16.1 hereof shall be taken out with insurers qualified to carry on business in the Province of Ontario, who are reasonably acceptable to the Landlord and shall be in a form satisfactory, from time to time, to the Landlord and shall further be non-contributing with, and shall apply only as primary and not excess to, any other insurance available to the Landlord or to the Landlord's mortgagee and shall not be invalidated as respects the interest of the Landlord and the mortgagee by reason of any breach or violation of any warranties, representations, declarations or conditions contained in the policy, and finally, shall contain an undertaking by the insurers to notify the Landlord in writing by registered mail, not less than thirty (30) days prior to any material change, cancellation or termination thereof. The Tenant shall furnish to the Landlord certificates (in form satisfactory to the Landlord) of the insurance companies evidencing the maintenance of all insurance policies required to be maintained by the Tenant pursuant to Paragraph 16.1 provided, however, that the Tenant shall provide photocopies of such insurance policies if requested, in writing, by the Landlord or the Landlord's mortgagee. 17. CANCELLATION OF INSURANCE 17.1 If any policy of fire and extended coverage insurance upon the Building shall be cancelled by the insurer by reason of the use or occupation of the Leased Premises or any part thereof by the Tenant or by any assignee or subtenant of the Tenant or by anyone permitted by the Tenant to be upon the Leased Premises, and if such policy coverage is not replaced by the Tenant, the Landlord may at its option terminate this Lease forthwith by leaving upon the Leased Premises notice in writing of its intention so to do and thereupon Rent, Additional Rent and any other payment for which the Tenant is liable under this Lease shall be apportioned and paid in full to the date of such termination and the Tenant shall immediately deliver up possession of the Leased Premises to the Landlord and the Landlord may re-enter and take possession of the same. 18. OBSERVANCE OF LAW 18.1 The Tenant covenants with the Landlord to comply with all provisions of law including without limitation, all federal and provincial legislative enactments, building health and fire by-laws, and any other governmental or municipal regulations which relate to the Tenant's equipment, operation and use of the Leased Premises, and to the making of any repairs, replacements, alterations, additions, changes, substitutions or improvements of or to the Leased Premises. The Tenant covenants to comply with all police, fire and sanitary regulations imposed by any federal, provincial or municipal authority, and with their regulations and other requirements governing the conduct of any business conducted in the Leased Premises. The Tenant shall not be and the Landlord shall be responsible for any non-compliance of the LEASED Premises with any applicable laws, by-laws, orders and directives, including without limitation with - 16 - respect to environmental and hazardous waste, existing prior to the Tenant taking occupancy of the LEASED Premises. 19. WASTE AND NUISANCE 19.1 The Tenant shall not do or suffer any waste or damage or disfiguration or injury to the Leased Premises or the fixtures and equipment thereof or permit or suffer any overloading of the floors thereof and shall not place therein any excessively heavy safe, heavy business machinery, heavy computers, data processing machines, or other heavy things without first obtaining the consent in writing of the Landlord and, if requested, by its superintending Architect, and shall not use or permit to be used any part of the Leased Premises for any dangerous, noxious or offensive trade or business, and shall not cause or permit any nuisance in, at or on the Leased Premises. 20. ENTRY BY LANDLORD 20.1 The Tenant agrees that it will permit the Landlord, its servants or agents to enter upon the Leased Premises at any time and from time to time on reasonable WRITTEN NOTICE to Tenant (except in the case of an actual or apprehended emergency when no such notice shall be required) for the purpose of inspecting and of making repairs, alterations or improvements to the Leased Premises or to the Building, and the Tenant shall not be entitled to compensation for any inconvenience, nuisance or discomfort occasioned thereby it being understood and agreed that the Landlord, its servants, agents or employees, shall make such entry after business hours whenever possible and at all times so as not to unduly interfere with the business being carried on by the Tenant. The Landlord, its servants or agents may at any time and from time to time UPON REASONABLE PRIOR NOTICE enter upon the Leased Premises to remove any article or remedy any condition which in the opinion of the Landlord, reasonably arrived at, would be likely to lead to cancellation of any policy of insurance as referred to in Paragraph 17.1 hereof, and such entry by the Landlord shall not be deemed to be a re-entry. 21. INDEMNITY 21.1 TO THE EXTENT NOT COVERED BY INSURANCE MAINTAINED OR REQUIRED TO BE MAINTAINED BY LANDLORD, the Tenant covenants and agrees to reimburse, indemnify and save harmless the Landlord against and from any and all claims by the Landlord and by other parties, including without limiting the generality of the foregoing, from any breaches of this Lease and all claims for personal injury or property damage or damage to the Development arising from the conduct of any work or by or through any act or omission of the Tenant; or any assignee, subtenant, agent, contractor, servant, employee, invitee or licensee of the Tenant, or any person whose presence in or about the Development arises because of the Tenant's occupation of the Leased Premises, and from all costs, counsel fees, expenses and liabilities incurred in or about any such claim or any action or proceeding brought thereon. This indemnity shall survive the expiry or sooner determination of this Lease. 22. EXHIBITING PREMISES 22.1 The Tenant shall, upon prior notice from the Landlord and provided the Landlord does not unduly interfere with the Tenant's business, permit the Landlord or its agents to exhibit the Leased Premises to prospective tenants during normal business hours during the last six (6) months of the Term and to prospective or actual investors, lenders or purchasers throughout the Term. 23. ALTERATIONS 23.1 The Tenant covenants that it will not make, install or erect in or to the Leased Premises any installations, alterations, additions or partitions without first submitting the drawings and specifications to the Landlord and obtaining the Landlord's prior written consent in each instance, which consent shall not be - 17 - unreasonably withheld. Furthermore, the Tenant must obtain the Landlord's prior written consent to any change or changes, in such drawings or specifications submitted as aforesaid, subject to the payment of the cost to the Landlord of having its architects approve of such changes, prior to proceeding with any work based on such drawings or specifications. Such work may be performed by contractors engaged by the Tenant for the initial installation of leasehold improvements only but, in each case, under written contract, approved in writing by the Landlord and subject to all reasonable conditions which the Landlord may impose. The Landlord may nevertheless, at its option, thereafter require that the Landlord's contractors be engaged for any mechanical, electrical work or other leasehold improvement at the Tenant's sole cost, together with a sum equal to fifteen percent (15%) of such costs representing the Landlord's overhead and administrative costs. Without limiting the generality of the foregoing, any work performed by or for the Tenant shall be performed by competent workmen whose labour union affiliations are not incompatible with those of any workmen who may be employed in the Building by the Landlord, its contractors or sub-contractors. All such installations, alterations, additions, changes and work performed by or for the Tenant shall conform to all building by-laws and shall conform to all federal, provincial and municipal rules and regulations, if any, then in force affecting the Leased Premises, the Building and the Lands and such installations, alterations, additions, changes and work performed by or for the Tenant shall be completed in a good and workmanlike manner. The Tenant covenants that the Tenant will not suffer or permit during the term hereof any construction or other liens for work, labour services or materials ordered for or by the Tenant or for the cost of which the Tenant may be in any way obligated to attach to the Leased Premises or to the Building and that whenever and so often as any such liens shall attach or claims therefor shall be filed, the Tenant shall forthwith procure the discharge thereof by payment or by giving security or in such other manner as is or may be required or permitted by law, failing which the Landlord may do so (BY PAYING INTO COURT ONLY) at the Tenant's sole risk and expense and the Tenant shall forthwith pay all of the Landlord's costs and expenses in connection therewith along with an administration fee equal to fifteen percent (15%) of the Landlord's costs and expenses in connection therewith. 23.2 The Landlord hereby reserves the right at any time and from time to time to make changes in, additions to, subtractions from or rearrangements of the Building (EXCLUDING THE LEASED PREMISES) including, without limitation, all improvements at any time thereon to the Common Areas and all entrances and exits thereto; to grant, modify and terminate easements or other agreements pertaining to the use and maintenance of all or parts of the Common Areas; to close all or any portion of the Common Areas to such extent as may in the opinion of the Landlord be necessary to prevent accrual of any rights to any persons therein and/or to make changes or additions to the pipes, conduits, utilities and other necessary building services in the Leased Premises which serve other premises and/or the Building. In addition to its other rights to relocate herein at any time or times, the Landlord shall have the right to make any changes in, additions to, deletions from or relocations of any part of the Development (EXCLUDING THE LEASED PREMISES) including prior to the commencement of the Term, the Landlord may alter or relocate any part or parts of the Common Areas. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE LANDLORD SHALL NOT PREVENT ACCESS TO OR THE USE OF THE LEASED PREMISES BY TENANT AND TENANT'S EMPLOYEES AND INVITEES. 23.3 The Tenant acknowledges that portions of the Building, the Common Areas and/or the Development may be under construction during the Term, and that after the Commencement Date, the Landlord will minimize interference with the Tenant's use of AND ACCESS TO the Leased Premises. PROVIDED LANDLORD MINIMIZES INTERFERENCE WITH THE TENANT'S USE OF AND ACCESS TO THE LEASED PREMISES, the Tenant shall not have any right to object to or to make any claim on account of the exercise by the Landlord of any of its rights under this Section 23, notwithstanding any change in the size of the Common Areas, the Building and/or the Development any nuisance, inconvenience or loss to, interference with or - 18 - obstructions, interruption, dislocation or suspension of any utilities or the use of the Common Areas, the Building and/or the Development. 23.4 RENT AND ADDITIONAL RENT SHALL ABATE FOR THE PERIOD DURING WHICH TENANT, ACTING REASONABLY, IS UNABLE TO CARRY ON BUSINESS IN ALL OR PART (IN WHICH CASE THE ABATEMENT WILL HE ON A PRORATA BASIS) OF THE LEASED PREMISES AS A RESULT OF LANDLORD'S ALTERATIONS OR CONSTRUCTION 24. GLASS AND OVERLOADING 24.1 GLASS. Any glass and trimmings in, upon or about the doors and windows of the Leased Premises shall be kept whole, and whenever any part thereof shall become broken, the same shall immediately be replaced or repaired under the direction of and to the satisfaction of the Landlord ACTING REASONABLY. The Tenant shall pay the cost of replacement with as good quality and size of any glass broken on the Leased Premises including outside windows and doors of the perimeter of the Leased Premises (including perimeter windows in the exterior walls) during the continuance of this Lease, together with a sum equal to fifteen percent (15%) of costs relating to such repairs or replacement representing the Landlord's overhead and administrative costs unless the glass shall NOT be broken by the TENANT, its servants, employees or agents on its behalf. 24.2 OVERLOADING OF FACILITIES. The Tenant will not install any equipment which will exceed or overload the capacity of any utility, electrical or mechanical facilities in or serving the Leased Premises and the Tenant will not bring into the Leased Premises or install any utility, electrical or mechanical facility or service of which the Landlord does not approve. The Tenant agrees that if any equipment installed by the Tenant requires additional utility, electrical or mechanical facilities, the Landlord may, in its sole discretion, if they arc available, elect to install them in accordance with plans and specifications to be approved in advance in writing by the Landlord. The Tenant will pay to the Landlord, upon demand, the total cost incurred by the Landlord in connection with any such installation plus a sum equal to fifteen percent (15%) of such cost, representing the Landlord's administrative and overhead costs. 24.3 OVERLOADING OF FLOORS. The Tenant will not bring upon the Building or the Leased Premises any machinery, equipment, article or thing that by reason of its weight, size or use, might in the opinion of the Landlord damage the Building or the Leased Premises and will not at any lime overload the floors of the Leased Premises. If any damage is caused to the Building or the Leased Premises by any machinery, equipment, object or thing or by overloading, the Tenant will forthwith repair such damage, or, at the option of the Landlord, pay to the Landlord, upon demand, the cost of repairing such damage plus a sum equal to fifteen percent (15%) of such cost, representing the Landlord's administrative and overhead costs. 25. SIGNS AND ADVERTISING MEDIA 25.1 The Tenant shall not paint, display, inscribe, place or affix any sign, picture, advertisement, notice, loitering or direction on any part of the outside of the Building or in the interior of the Leased Premises which would be visible from the outside of the Building. The Landlord will prescribe a uniform pattern of identification signs for tenants and will install AT LANDLORD'S SOLE COST, such signage FOR TENANT on the outside of the doors leading into the Leased Premises and the lobbies, main floor and fifth (5th) floor of the Building and, other than such identification signs, the Tenant shall not paint, display, inscribe, place or affix any sign, picture, advertisement, notice, lettering or direction on the outside of the Leased Premises or in the interior of the Leased Premises for exterior view without the written consent of the Landlord. - 19 - 26. NAME OF BUILDING AND DEVELOPMENT 26.1 The Tenant agrees not to refer to the Development or Building by any name other than that designated from time to time by the Landlord, nor to use such name for any purpose other than that of the business address of the Tenant, provided that the Tenant may use the municipal number of the Building assigned to it by the Landlord, instead of the name of the Building. 27. SUBORDINATION AND ATTORNMENT 27.1 This Lease is subject and subordinate to all mortgages and deeds of trust and all renewals, modifications, consolidations, replacements and extensions thereof which may now or at any time hereafter affect the Leased Premises in whole or in part (a "MORTGAGE") and whether or not such Mortgage shall affect only the Leased Premises or shall be blanket mortgages and deeds of trust affecting other properly as well provided that the holder of said Mortgage may in its sole discretion subordinate and/or postpone such Mortgage in favour of this Lease at any time from time to time by a written instrument to such effect without any further consent or agreement by the Tenant or notice to the Tenant. The Tenant shall at any time and from time to time on PRIOR WRITTEN notice from the Landlord and/or its mortgagee or trustee attorn to and/or become a tenant of a mortgagee or trustee under any Mortgage upon the same terms and conditions as set forth in this Lease and/or will promptly at any time and from time to time as required IN WRITING by the Landlord and/or its mortgagee or trustee under any Mortgage during the Term hereof execute all documents and give all further assurances to -- this proviso as may be reasonably required to effectuate the postponement of its rights and privileges hereunder and/or adornment of rents to the holder or holders of any mortgage from time to time. NOTWITHSTANDING THE FOREGOING, NO SUCH POSTPONEMENT, SUBORDINATION OR ATTORNMENT SHALL BE EFFECTIVE UNTIL ANY SUCH MORTGAGEE OR TRUSTEE PROVIDES TENANT WITH A REASONABLE FORM OF NON-DISTURBANCE AGREEMENT CONFIRMING THAT ANY SUCH POSTPONEMENT, SUBORDINATION OR ADORNMENT SHALL IN NO EVENT DEPRIVE TENANT OF ITS USE AND ENJOYMENT OF THE PREMISES PURSUANT TO AND SUBJECT TO THE TERMS AND CONDITIONS OF THIS LEASE. 28. ACCEPTANCE OF PREMISES Other than the Landlord's one lime obligation to perform the Landlord's TURNKEY Work, the Tenant accepts the Leased Premises in an "as is where is" condition. The Tenant agrees that there is no promise, representation or undertaking by or binding upon the Landlord with respect to any alteration, remodelling or redecorating of or installation of equipment or fixtures in the Leased Premises, EXCEPT AS PROVIDED FOR IN SCHEDULE "E". 29. CERTIFICATES The Tenant AND LANDLORD EACH agrees that it will at any time and from time to time upon not less than ten (10) days' prior notice execute and deliver to the OTHER a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the modifications and that the same is in full force and effect as modified), the amount of the annual rental then being paid hereunder, the dates to which the same, by instalments or otherwise, and other charges hereunder have been paid, and whether or not there is any existing default on the part of the Landlord OR TENANT of which the OTHER has notice. 30. REFUSE OR DEBRIS 30.1 The Tenant shall not place or leave or permit to be placed or left in or upon any part of die Building outside of the Leased Premises, or in or upon any part of the Building of which the Leased Premises form a pan, any debris or refuse, unless such debris or refuse is left in containers in locations approved by the Landlord. - 20 - 31. QUIET ENJOYMENT 31.1 Subject to the Tenant complying with each of its obligations herein, the Landlord covenants with the Tenant for quiet enjoyment. 32. LANDLORD'S ADDITIONAL COVENANTS 32.1 LANDLORD'S PAYMENT OF TAXES AND UTILITIES. The Landlord covenants to pay all taxes and rates, municipal, parliamentary or otherwise, including without limiting the generality of the foregoing, water rates with respect to the Leased Premises or assessed against the Landlord in respect thereof, except such as the Tenant has herein covenanted to pay and payments thereof by the Landlord shall not operate so as to prevent or preclude the Landlord from recovering from the Tenant, the Tenant's Proportionate Share thereof pursuant to Paragraph 10.1 hereof. 32.2 HEATING. Except during the making of repairs subject to Section 38 herein the Tenant shall have the right to AND LANDLORD SHALL PROVIDE HVAC heating, ventilation, air-conditioning, hydro and elevatoring as Tenant may require; INCLUDING AFTER NORMAL BUSINESS HOURS (WHICH FOR THE PURPOSE OF THIS LEASE SHALL BE 8:00 A.M. TO 6:00 P.M. MONDAY THROUGH FRIDAY) upon reasonable request and at building standard charge rates (which shall include 15% administrative fee) provided the Landlord shall not profit from such after hour charges. Subject to any limits imposed by any federal, provincial or municipal law relating to the conservation of energy, the Landlord shall heat the Leased Premises to a reasonable temperature at such times AS REQUIRED as determined by the Landlord acting reasonably, and the Landlord, will maintain a temperature necessary for comfortable occupancy, but should the Landlord make default in so doing it shall not be liable for any INDIRECT OR CONSEQUENTIAL damages or injury. 32.3 ELEVATOR SERVICE Subject to the Rules and Regulations referred to in Paragraph 14.1, the Landlord agrees to furnish INCLUDING AFTER NORMAL BUSINESS HOURS, except when repairs are being made, elevator service in common with others, provided that the Tenant and such employees and all other persons using the same shall do so at their own risk and under no circumstances shall the Landlord be responsible for any damage or injury happening to any person while using the same or occasioned to any person by an elevator or any of its appurtenances, except where such damage or injury is caused by the negligence of the Landlord, its agents, servants or employees. For all purposes herein "Elevator Service" shall mean operatorless, automatic elevator service. 32.4 JANITORIAL SERVICE. The Landlord shall to supply janitorial services for the Leased Premises and for the Common Areas including, but not limited to, the inside and outside window washing for windows on the perimeter of the Building, and with the exception of the obligation to cause such work to be done the Landlord shall not be responsible for any act or omission or commission on the part of the person or persons employed to perform such work. Said janitorial services shall be supplied five days per week, Monday through Friday, excluding statutory holidays. 32.5 ACCESS. Subject to the Rules and Regulations as provided for in Paragraph 14.1 hereof, the Landlord shall permit the Tenant and the Tenant's employees and all persons lawfully requiring communication with them lo have the use during normal business hours (as defined in Paragraph 32.2 hereof) in common with others entitled thereto of the main entrance and the stairways, corridors, elevators or - 21 - other mechanical means of access leading to the Leased Premises. At times other than during normal business hours as aforesaid the Tenant and the employees of the Tenant and persons lawfully requiring communication with the Tenant shall have access to the Building and to the Leased Premises only in accordance with the Rules and Regulations attached to this Lease oral Landlord's sole option, by means of a security system imposed by the Landlord. NOTWITHSTANDING ANYTHING TO THE CONTRARY, TENANT SHALL HAVE ACCESS TO THE PREMISES 24 HOURS PER DAY EACH AND EVERY DAY OF THE YEAR THROUGHOUT THE TERM, AS SAME MAY BE EXTENDED, EXCEPT FOR UNFORESEEN BUILDING EMERGENCIES. 32.6 WASHROOMS The Landlord shall permit the Tenant and the employees of the Tenant in common with others entitled thereto, to use the washrooms on the same floor of the Building in which the Leased Premises are situate or, in lieu thereof, those washrooms designated by the Landlord save and except when the general water supply may be turned off from the public main, or at any such other times when repair and maintenance undertaken by the Landlord shall necessitate the non-use of the facilities. 32.7 ELECTRIC POWER. The Landlord shall provide and install, at its cost, an electrical entry of 110 volts to an electrical distribution point on each floor of each section. 32.8 AIR CONDITIONING. The Landlord shall except during the making of repairs and subject to Section 38 herein during normal business hours as referred to in Paragraph 32.2 hereof AND AFTER NORMAL BUSINESS HOURS UPON REQUEST BY TENANT IN WRITING, to air condition the Leased Premises to a reasonable temperature necessary for comfortable occupancy, but should the Landlord default in so doing, it shall not be liable for any indirect or consequential damage. LANDLORD SHALL NOT PROFIT (BUT MAY APPLY ITS 15% ADMIN. FEE) FROM ANY CHARGES RELATING TO THE PROVISION OF VENTILATION OR AIR CONDITIONING AFTER NORMAL BUSINESS HOURS. 32.9 REPAIR AND MAINTENANCE. Subject to the other provisions of this Lease imposing obligations upon the Tenant to repair, replace or maintain the Landlord agrees to repair, replace and maintain the Common Areas, the external and structural parts of the Building, the janitor and equipment closets and shafts within the Leased Premises designated by the Landlord for use by it in connection with the operation and maintenance of the Building, the systems, facilities and equipment serving the Lands and the Building and agrees to perform such repairs, replacements and maintenance with reasonable dispatch, in a good and workmanlike manner and all such costs may be included in Operating Costs, TO THE EXTENT PERMITTED IN SECTION 9.1 hereof. However, if the Landlord is required, due to the business carried on by the Tenant, to make repairs or replacements to the structure or any other part of the Building by reason of the application of laws, ordinances or other regulations of any governmental body, or by reason of any act, omission or default of the Tenant or those for whom the Tenant is in law responsible, then the Tenant will pay to the Landlord, upon demand, the total cost of those repairs or replacements plus fifteen percent (15%) of such cost, representing the Landlord's overhead and administrative costs. The Landlord shall not, however be liable for any damages, direct, indirect, or consequential, or for damages for personal discomfort, illness or inconvenience of the Tenant, or the Tenant's servants, clerks, employees, invitees or any other persons by reason of failures of such equipment, facilities or systems or because of reasonable delays in the performance of such repairs, replacements and maintenance, PROVIDED LANDLORD SHALL MINIMIZE INTERFERENCE WITH TENANT'S USE AND ENJOYMENT OF THE PREMISES. - 22 - 32.10 ADDITIONAL SERVICES. "ADDITIONAL SERVICES" means those services and supervision supplied by the Landlord which are additional to janitorial and cleaning services which the Landlord has agreed to provide pursuant to the terms of the Lease, as well as the provision of labour, supervision in connection with deliveries, supervision in connection with the moving of any furniture or equipment of any tenant or the making of any repairs or alterations by any tenant, and maintenance or other services not normally furnished to tenants generally. The Tenant shall pay to the Landlord the Landlord's total cost of providing Additional Services REQUESTED IN WRITING BY THE TENANT, to the Tenant including the cost of all labour (including salaries, wages and fringe benefits) and material and other direct expenses incurred, together with fifteen percent (15%) of such costs representing the Landlord's overhead and administrative costs. 33. FIXTURES 33.1 The Tenant may install its usual trade fixtures in compliance with the balance of this Lease, provided such installation does not damage the structure of the Leased Premises or the Building and provided further that the Tenant shall have submitted detailed plans and specifications TO THE EXTENT REQUIRED, for such trade fixtures to the Landlord and obtained the Landlord's prior written consent thereto which consent shall not be unreasonably withheld. 33.2 All installations, improvements, alterations, additions, partitions and fixtures (other than the Tenant's trade fixtures), in or upon the Leased Premises, whether placed there by the Tenant or the Landlord, shall immediately upon installation, affixation or attachment become the property of the Landlord free and clear of all encumbrances, liens or claims, without compensation therefor to the Tenant. Notwithstanding anything herein contained, the Landlord shall be under no obligation to repair or maintain the installations, improvements, alterations, additions, partitions or fixtures or anything in the nature of a leasehold improvement made or installed in the Leased Premises. 33.3 All trade fixtures installed by the Tenant in the Leased Premises shall remain the property of the Tenant and shall not be removed from the Leased Premises during the Term unless replaced by fixtures and apparatus of like kind and quality, but shall be removed at the expiration of the Term, or other termination thereof, provided the Tenant shall promptly repair, at its expense, any damage to the Leased Premises caused by any such removal, and provided further, that the Tenant shall not at such time be in default under any covenant or agreement contained herein OF WHICH IT HAS RECEIVED WRITTEN NOTICE FROM LANDLORD, and if in default, the Landlord shall have a lien on said fixtures and apparatus as security against loss or damage resulting from any such default by the Tenant and said fixtures and apparatus shall not be removed by the Tenant until such default is cured, unless otherwise directed by the Landlord. Only new OR USED trade fixtures of a first class nature HAVING REGARD TO THE BUILDING shall be installed by the Tenant. 34. REPAIR OF SERVICES TO BUILDING 34.1 If any elevator of the Building or any of the boilers, engines, pipes, heating equipment or air-conditioning equipment or other apparatus or any of them used for the purpose of heating or air conditioning the Leased Premises or operating any elevator, or if the water pipes, drainage pipes, electric lighting or other equipment of the Building get out of repair or become damaged or destroyed the Landlord shall have a reasonable time in which to make such repairs or replacements as may be reasonably required for the resumption of those services to the Leased Premises which it has by this Lease expressly agreed to provide. The Tenant shall not be entitled to any compensation or damages therefor, but should any of such equipment of the Building or elevators have become impaired, damaged or destroyed through the deliberate act or omission, or, TO THE EXTENT NOT COVERED BY THE INSURANCE MAINTAINED OR REQUIRED TO BE MAINTAINED BY - 23 - LANDLORD, the negligence of the Tenant or its employees or through it or them making use or permitting others to make use of improper paper in the water closets or in any other manner or way stopping up or injuring such heating apparatus, air-conditioning equipment, elevators, water pipes, drainage pipes, electric lighting or other equipment, the expense of the necessary repair shall be borne by the Tenant who shall pay the same to the Landlord within thirty (30) days after demand. Nothing in this paragraph shall, however, obligate the Landlord to provide any services to the Leased Premises or to make any repairs not herein or otherwise specifically to be provided or made by the Landlord. 35. LANDLORD'S INSURANCE 35.1 The Landlord shall carry such insurance, for the account and benefit of the Landlord as the Landlord may from time to time deem useful, expedient or beneficial including without limitation, the following: 35.1.1 Insurance on the Building for an amount equal to the full replacement value (exclusive of foundations) or for not less than the amount required by any institution, person or corporation then holding a mortgage on the real property including the Building; 35.1.2 Insurance on property of every description contained in or on the Building and Lands belonging to the Landlord or for which the Landlord is responsible for an amount up to full replacement value; 35.1.3 INSURANCE AGAINST LOSS OF RENTAL INCOME or the earnings derived from the Building to the full amount of such rental income or earnings, real or anticipated; 35.1.4 Insurance on boilers, machinery, unfired pressure vessels, heating and air-conditioning equipment, electrical apparatus and other like objects, including insurance against loss or damage caused by the explosion, rupture or failure thereof; 35.1.5 Public Liability insurance, by whatever name known, including any and all extensions of such protection; and 35.1.6 Workers' Compensation, health, accident and medical insurance covering the Landlord's personnel WORKING ON SITE. 35.2 No insurable interest is conferred upon the Tenant under policies carried by the Landlord. The Landlord shall in no way be accountable to the Tenant regarding the use of any insurance proceeds arising from any claim and the Landlord shall not be obliged to apply such proceeds to the repair or restoration of that which was insured, except for such repair or restoration which is the obligation of the Landlord pursuant to this LEASE. THE LANDLORD undertakes to use reasonable endeavours to obtain, if available and at the Tenant's cost, from the Landlord's insurers a waiver of its insurers' rights of subrogation against the Tenant and against those for whom the Tenant is in law responsible. Should the cost of Landlord's insurance increase as a result of the obtaining of such waiver of subrogation, the Tenant agrees to bear the cost of such additional cost of premium and the Tenant undertakes to pay such additional costs on demand and as rent in arrears. 36. DAMAGE AND DESTRUCTION 36.1 The Landlord and Tenant hereby agree that if and whenever during the Term the Building shall be destroyed or damaged by fire, lightning or such other PERILS THEN and in every such event: 36.1.1 If the damage or destruction to the Building renders fifty percent (50%) or more of the Building wholly unfit for occupancy or it is impossible or unsafe to use and occupy it, or if in the opinion of the Landlord's Architect, to be given within thirty (30) days of such damage or destruction, the Building is damaged or destroyed to such a material extent or the damage or destruction is of such a - 24 - nature that the Building must be or should be totally or partially demolished, whether to he reconstructed in whole or in part or not, the Landlord may at its option, terminate this Lease by giving to the Tenant notice in writing of such termination, in which event this Lease and the Term hereby demised shall cease and be at an end as of the date of such destruction or damage, and all Rent and Additional Rent payable pursuant hereto shall be apportioned and paid in full to the date of such destruction or damage. 36.1.2 If the damage or destruction is such that the Leased Premises is rendered wholly unfit for occupancy or it is impossible or unsafe to use and occupy it OR ACCESS IT, and if in either event, the damage, in the opinion of the Landlord's Architect, to be given to the Tenant within ten (10) days of the happening of such damage or destruction, cannot be repaired with reasonable diligence within one hundred and eighty (180) days from the happening of such damage or destruction, then the Landlord OR TENANT may within five (5) days next succeeding the giving of the Landlord's Architect's opinion as aforesaid, terminate this Lease by giving to the OTHER notice in writing of such termination, in which event this Lease and the Term hereby demised shall cease and be at an end as at the date of such destruction or damage and the Rent and Additional Rent payable pursuant hereto shall be apportioned and paid in full to the date of such destruction or damage. If the Landlord OR TENANT does not terminate this Lease, then to the extent the Landlord receives insurance proceeds from the Landlord's insurance pursuant to Paragraph 35.1.1 (less the Landlord's costs and expenses in connection therewith), the Landlord shall repair the Building with all reasonable speed and the Rent and Additional Rent payable pursuant hereto shall abate. 36.1.3 If the damage be such that the Leased Premises is wholly unfit for occupancy or if it is impossible or unsafe to use or occupy it, but if in either event the damage, in the opinion of the Landlord's Architect, to be given to the Tenant within ten (10) days from the happening of such damage, can be repaired with reasonable diligence within one hundred and eighty (180) days from the happening of such damage, then the Rent payable pursuant to Paragraph 4.1 hereof shall abate and the Landlord shall repair the damage with all reasonable speed. 36.1.4 If, in the opinion of the Landlord's Architect, the damage to the Leased Premises can be made good, as aforesaid, within one hundred and eighty (180) days of the happening of such destruction or damage and the damage is such that the Leased Premises is capable of being partially used for the purposes for which it is hereby demised, then until such damage has been repaired, the Rent payable pursuant to Paragraph 4.1 hereof shall abate in the proportion that the part of the Leased Premises rendered unfit for occupancy bears to the whole of the Leased Premises, and the Landlord to the extent the Landlord receives insurance proceeds from the Landlord's insurance (less its costs and expenses) pursuant to Paragraph 35.1.1, shall repair the damage with all reasonable speed. 36.1.5 In the event the Landlord shall elect to repair, reconstruct or rebuild the Building of which the Leased Premises forms a part in accordance with the provisions of this Paragraph 36.1, it is acknowledged and agreed by the Tenant that the Landlord shall be entitled to use plans and specifications and working drawings in connection therewith other than those used in the original construction of the Building. 36.1.6 The decision of the Landlord's Architect as to the time within which the Building and/or the Leased Premises can or cannot be repaired, the state of tenantability of the Leased Premises and/or the Building and as to the date on which the Landlord's work of repair is completed, shall be final and binding on the parties hereto. 37. LIMITATION OF LANDLORD'S LIABILITY 37.1 The Landlord shall not be liable or responsible in any way for any loss of or damage or injury to any property belonging to the Tenant or to employees of the Tenant, or to any other person while such property is in or on the Leased Premises - 25 - or in the Building or in or on the surrounding lands and buildings owned by the Landlord unless and only to the extent caused by the negligence of the Landlord, its servants or agents on its behalf but only to the extent of insurance proceeds actually received by the Landlord. Notwithstanding the foregoing or anything else contained herein, the Landlord shall not be liable, TO THE EXTENT OF INSURANCE PROCEEDS ACTUALLY RECEIVED BY TENANT, for any damage to any such property caused by steam, water, rain or snow which may leak into, issue or flow from any part of the Building or from the water, steam or drainage pipes or plumbing works of the Building, or from any other place or quarter or for any damage caused by or attributable to the condition or arrangement of any electric or other wiring or for any damage caused by anything done or omitted by any other tenant, including theft, malfeasance or negligence on the part of any agent, contractor or person from time to time employed by the Landlord to perform janitor services or security services in or about the Leased Premises or the Building. 38. DELAYS 38.1 That whenever and to the extent that the Landlord OR TENANT shall be unable to fulfil, or shall be delayed or restricted in the fulfilment of any obligation hereunder in respect of the supply or provision of any service or utility or the doing of any work or the making of any repairs by reason of being unable to obtain the material, goods, equipment, service, utility or labour required to enable it to fulfil such obligation or by reason of any statute, law or Order-in-Council or any regulation or order passed or made pursuant thereto or by reason of the order or direction of any administrator, controller or board, or any governmental department or officer or other authority, or by reason of not being able to obtain any permission or authority required thereby, or by reason of any other cause beyond its control whether of the foregoing character or not, the Landlord OR TENANT, AS THE CASE BE, SHALL BE entitled to extend the time for fulfilment of such obligation by a time equal to the durations of such delay or restriction, and the OTHER shall not be entitled to any compensation or abatement for any inconvenience, nuisance or discomfort thereby occasioned. 39. DEFAULTS AND REMEDIES 39.1 The Tenant covenants and agrees that if any of the following shall occur: 39.1.1 if the Tenant shall fail, for any reason, to make any payment of Rent or Additional Rent, in its entirety as and when the same is due to be paid hereunder, AND SUCH DEFAULT SHALL CONTINUE FOR FIVE (5) DAYS AFTER WRITTEN NOTICE THEREOF; 39.1.2 if the Tenant shall fail, for any reason, to perform any covenant, condition, agreement or other obligation on the part of the Tenant to be observed or performed pursuant to this Lease (other than the payment of any Rent and Additional Rent) and such default shall continue for ten (10) days after written notice thereof or such LONGER period as may be REASONABLE IN THE CIRCUMSTANCES; 39.1.3 if the Tenant shall Transfer or purport to Transfer this Lease or the whole or a part of the Leased Premises or if the Leased Premises shall be used by any person or for any purpose other than in compliance with and as expressly authorized by this Lease; 39.1.4 if the Tenant, the Transferee or any other person occupying any portion of the Leased Premises shall make an assignment for the benefit of creditors or become bankrupt or insolvent or take the benefit of any statute for bankrupt or insolvent debtors or make any proposal, assignment, arrangement or compromise with its creditors or, if any steps are taken or action or proceeding commenced by any person for the dissolution, winding up or other termination of the Tenant's, the Transferee's or any other person occupying any portion of the Leased Premises existence or liquidation of its assets; - 26 - 39.1.5 if a trustee, receiver, receiver- manager, manager, agent or other like person shall be appointed in respect of the assets or business of the Tenant, the Transferee or any other occupant of the Leased Premises; 39.1.6 if the Tenant, the Transferee or any other occupant of the Leased Premises attempts to or does abandon the Leased Premises; 39.1.7 if the Tenant, the Transferee or any other occupant of the Leased Premises makes any sale in bulk affecting any property on the Leased Premises (other than in conjunction with an approved assignment or subletting by the Landlord and made pursuant to all applicable legislation OR TO THE ACQUIRER OF THE TENANT'S BUSINESS OPERATIONS OR TO AN AFFILIATE OF TENANT); 39.1.8 if this Lease or any goods or other properly of the Tenant, the Transferee or any other occupant of the Leased Premises shall at any time be seized or taken in execution or attachment which remains unsatisfied for a period of five (5) days or more after such seizure, attachment or execution has come to the notice of the Tenant, the Transferee or any other occupant of the Leased Premises; and/or 39.1.9 if termination or re-entry (FOR A DEFAULT) by the Landlord is permitted under any provision of this Lease or at law, then, and in such event, without prejudice and in addition to any other rights and remedies to which the Landlord is entitled pursuant to this Lease or at law, the current and the next three (3) months Rent and Additional Rent shall be forthwith due and payable and in addition the Landlord shall also have the following rights and remedies as set out hereunder in Paragraph 39.2. 39.2 In the event of any default by the Tenant pursuant to Paragraph 39.1 above, the Landlord and Tenant agree that the Landlord shall also have the undermentioned rights and remedies, all of which are cumulative and not mutually exclusive or alternative, to: 39.2.1 terminate this Lease in respect of the whole or any part of the Leased Premises by written notice to the Tenant. If this Lease is terminated in respect of only part of the Leased Premises, this Lease shall be deemed to be amended by the appropriate amendments and proportionate adjustments in respect of the Rent and the Additional Rent and any other appropriate adjustments shall be made; 39.2.2 enter the Leased Premises as agent of the Tenant and as such agent, to re-let the Leased Premises or part of the Leased Premises for whatever term (which may be for a term extending beyond the Term) and whatever terms and conditions as the Landlord, in its sole discretion, may determine and to receive the rent therefor and, as agent of the Tenant, to take possession of any furniture, fixtures, equipment, stock, machinery or other property thereon and, upon giving written notice to the Tenant, to store the same at the expense and risk of the Tenant or to sell or otherwise dispose of the same at public or private sale without further notice, and to make such alteration to the Leased Premises in order to facilitate their re-letting, as the Landlord shall determine, and to apply the net proceeds of the sales of any furniture, fixtures, equipment, stock, machinery or other property or from the re-letting of the Leased Premises, less all expenses incurred by the Landlord in making the Leased Premises ready for re-letting and in re-letting these premises on account of the Rent and Additional Rent due and to become due under this Lease and the Tenant shall be liable to the Landlord for any deficiency and for all expenses inclined by the Landlord as aforesaid. No such entry or taking possession of or performing alterations to or re-letting of the Leased Premises by the Landlord shall be construed as an election on the Landlord's part to terminate this Lease unless a written notice of such intention or termination is invert by the Landlord to the Tenant; 39.2.3 remedy or attempt to remedy any default of the Tenant in performing any repairs, work or other covenants of the Tenant hereunder and, in so doing, to make any payments due or claimed to be clue by the Tenant to third parties and to enter upon the Leased Premises and do such acts and things upon or in respect of the Leased - 27 - Premises or any part thereof as the Landlord may reasonably consider requisite or necessary, without any liability to the Tenant therefor, or for any damage resulting thereby, and without constituting a re-entry of the Leased Premises or termination of this Lease and without being in breach of the Landlord's covenants hereunder and without thereby being deemed to infringe upon any of the Tenant's rights pursuant hereto and, in such case, the Tenant shall pay to the Landlord forth-with upon demand all amounts paid by the Landlord to third parties in respect of such default and all reasonable costs of the Landlord in remedying or attempting to remedy any such default plus an additional fifteen percent (15%) of the amount of such cost for the Landlord's inspection, Supervision, overhead and profit. The Landlord shall have no liability to the Tenant for any loss or damage resulting from any such action by the Landlord, and entry by the Landlord under the provisions of this Paragraph 39.2.3 shall not constitute a breach of the covenant for quiet enjoyment or an eviction; and/or 39.2.4 obtain damages from the Tenant, including, without limitation, if this Lease is terminated by the Landlord, all deficiencies between all amounts which would have been payable by the Tenant for what would have been the balance of the Term for such termination, and all amounts actually received by the Landlord for such period of time. 39.3 In case suit shall be brought for recovery of possession of the Leased Premises, or for the recovery of Rent or Additional Rent, or because of the breach of any other covenants herein contained on the part of the Tenant to be kept or performed, the Tenant shall pay to the Landlord all expenses incurred therefor (including all solicitors' fees). 39.4 In case of removal by the Tenant of the goods and chattels of the Tenant from the Leased Premises, the Landlord may follow same for thirty (30) days in the same manner as is provided for in the Commercial Tenancies Act R.S.O. 1990 as amended, renamed and/or repromulgated from time to time. 39.5 The Tenant covenants and agrees that the Landlord may (at its option) apply any sums received from the Tenant or due to the Tenant from the Landlord against any amounts due and payable hereunder in such manner as the Landlord in its sole discretion sees fit. 39.6 It shall not be unreasonable for the Landlord to withhold its consent at any time when the Tenant is in default hereunder or has been in default hereunder on a consistent basis FOR WHICH TENANT HAS RECEIVED WRITTEN NOTICE OF DEFAULT. 40. ACCEPTANCE OF RENT OR ADDITIONAL RENT 40.1 The subsequent acceptance of Rent or Additional Rent by the Tenant or the subsequent acceptance of Rent or Additional Rent hereunder by the Landlord shall not be deemed to be a waiver of any preceding breach by the Tenant of any term, covenant or condition of this Lease, regardless of the Landlord's knowledge of such preceding breach at the time of payment or acceptance of Rent or Additional Rent. No covenant, term or condition of this Lease shall be deemed to have been waived by either party unless such waiver is in writing and signed by the party. 41. DISTRESS 41.1 The Tenant waives and renounces the benefit of any present or future statute taking away or limiting the Landlord's right of distress, and covenants and agrees that notwithstanding any such statute none of the goods, chattels and/or trade fixtures of the Tenant on the Leased Premises at any time during the Term shall be exempt from levy distress for rent in arrears. 42. RIGHT OF ENTRY 42.1 The Tenant further covenants and agrees that on the Landlord's becoming entitled to re-enter upon the Leased Premises under any of the default provisions of this - 28 - Lease, the Landlord, in addition to all other rights, shall have the right to enter the Leased Premises as the agent of the Tenant either by force or otherwise, without being liable for any prosecution therefor and to re-let the Leased Premises as the agent of the Tenant, and to receive the Rent therefor and any Additional Rent and as agent of the Tenant to take possession of any furniture or other property on the Leased Premises and to sell the same at public or private sale without notice and to apply the proceeds of such sale and any rent derived from re-letting the Leased Premises on account of the Rent and Additional Rent under this Lease, and the Tenant shall be liable to the Landlord for the deficiency, if any. 43. RIGHT OF TERMINATION 43.1 The Tenant Anther covenants and agrees that if the Landlord becomes entitled to re-enter upon the Leased Premises under any of the default provisions of this Lease, the Landlord in addition to all other rights, shall have the right to terminate this Lease and the Term forthwith by giving notice in writing addressed to the Tenant of its intention so to do, and thereupon Rent and Additional Rent shall be computed, apportioned and paid in full to the date of such determination of this Lease, and any other payments for which the Tenant is liable under this Lease shall be paid and the Tenant shall forthwith deliver up possession of the Leased Premises to the Landlord and the Landlord may re-enter and take possession of the same. 44. TENANT TO PAY RENT AND PERFORM COVENANTS 44.1 The Tenant shall pay to the Landlord in the manner specified herein, without any deduction, set-off or abatement, all Rent hereby reserved and all Additional Rent and if the Tenant should fail to pay any such amount when due and payable pursuant to this Lease, such amount shall bear interest at the rate of THREE percent (3%) per annum in excess of the prime lending rate charged by the Landlord's bankers in Toronto to prime commercial borrowers from time to time (the "DEFAULT RATE") from the date upon which same was due until actual payment thereof. The Tenant covenants to observe and perform all the terms and provisions of this Lease on its part to be performed and observed and shall not do or suffer to be done anything contrary to any term or provision hereof. 44.2 All costs and expenses, including, without limitation, appraiser's, storage, leasing, insurance, sheriff's, bailiff's and/or solicitor's fees and disbursements, incurred by the Landlord in connection with any default by the Tenant hereunder (including, without limitation, communications demanding compliance, notices of default and/or legal correspondences), the exercise of any remedy for an event of default, or the enforcement of the provisions of this Lease, together with interest thereon at the Default Rate from the date incurred and an administrative fee of 15% of such costs and expenses thereon, shall be, borne by the Tenant and shall be paid by the Tenant to the Landlord upon demand. 45. NON-WAIVER 45.1 No condoning, excusing or overlooking by the Landlord of any default, breach or non-observance by the Tenant at any time or times in respect of any covenants, provisos or conditions herein contained shall operate as a waiver of the other party's rights hereunder in respect of any continuing or subsequent default, breach or non-observance, or so as to defeat or affect such continuing or subsequent default or breach, and no waiver shall be inferred from or implied by anything done or omitted by the Landlord save only an express waiver in writing. All rights and remedies of the Landlord in this Lease contained shall be cumulative and not alternative. The Tenant's obligations under this Lease shall survive the expiry or earlier termination of this Lease and shall remain in full force and effect until fully complied with. - 29 - 46. OVERHOLDING 46.1 If the Tenant remains in possession of the Leased Premises after the Term with the prior written consent of the Landlord but without executing a new lease, there is no tacit renewal or extension of this Lease despite any statutory provision or legal presumption to the contrary and the Tenant will occupy the Leased Premises as a Tenant from month to month at a monthly Rent payable in advance on the first day of each month equal to the total of: (a) 150% of the monthly amount of Rent for the last month of the Term; and (b) the amount of Additional Rent payable by the Tenant in the last full month prior to the expiration of the Term, and the Tenant will comply with the same terms, covenants and conditions as are in this Lease as far as they apply to a monthly tenancy including the payment of Rent and Additional Rent unless the Landlord has previously advised the Tenant to vacate the Leased Premises in which case no notice will be required. Provided further that the Landlord may at any time and in its sole discretion terminate said overholding on five (5) days prior notice to the Tenant. Notwithstanding the foregoing, nothing contained herein shall be construed to give Tenant the right to hold over at any time, and Landlord may exercise any and all remedies at law or in equity to recover possession of the Leased Premises, as well as any damages incurred by Landlord due to Tenant's failure to vacate the Leased Premises and deliver possession to Landlord as provided herein. Nothing herein shall limit the liability of Tenant in damages or otherwise. In that regard, the Tenant acknowledges and agrees that the Landlord will incur substantial damages in the event that it is unable to provide vacant possession of all or part of the Leased Premises to future tenants in a timely manner. 47. TENANT PARTNERSHIP OR GROUP 47.1 If the Tenant is a partnership, other than a limited partnership, each entity who is or subsequently becomes a member of the partnership or any successor thereof will be and shall continue to be subject to and jointly and severally liable for the performance and observance of the terms, covenants and conditions of this Lease by the Tenant, even if said entity ceases to be a member of such partnership or successor thereof. 48. DEMOLITION 48.1 INTENTIONALLY DELETED. 49. ACCRUAL OF RENT 49.1 Rent and Additional Rent shall be considered as accruing from day to day, and where it becomes necessary for any reason to calculate such Rent or Additional Rent for an irregular period of less than one year an appropriate apportionment and adjustment shall be made. Where the calculation of any Additional Rent is not made until after the termination of this Lease, the obligation of the Tenant to pay such Additional Rent shall survive the termination of this Lease and such amounts shall be payable by the Tenant upon demand by the Landlord. 50. NOTICES 50.1 Notices, demands, requests or other instruments under this Lease will be delivered in person or sent by registered mail postage prepaid and addressed: 50.1.1 if to the Landlord, at: Sutter Hill Management Corporation 201 Consumers Road, Suite 106, Toronto, Ontario M2J 4G8 Attention: Vice President - Property Management Group Fax: 416-490-7734 - 30 - or to such other Person at any other address that the Landlord designates by written notice, and 50.1.2 if to the Tenant, at the Leased Premises: Attention: President Telecopy: Tenant to advise in writing A notice, demand, request or consent will be considered to have been given or made on the business day that it is delivered or telecopied on or before 4:00 p.m. of said business day or on the next business day if given or made on a day which is not a business day or after 4:00 p.m. on a business day, or, if mailed, four (4) business days after the date of mailing. Either party may notify the other in writing of a change of address or telecopy and the address or telecopy specified in the notice will be considered the address or telecopy of the party for the giving of notices under this Lease. If the postal service is interrupted or substantially delayed, or such an interruption or delay is anticipated, any notice, demand, or request or other instrument will only be delivered in person. A notice given by or to one Tenant is a notice by or to all of the persons who are the Tenant under this Lease. 51. LAWS OF ONTARIO APPLY 51.1 This Lease shall be deemed to have been made in and shall be construed in accordance with the laws of the Province of Ontario. This Lease is entered into subject to the express condition that it is to be effective only on obtaining such consents, if any, as may be required under Section 50 of the Planning Act R.S.O. 1990, ch. P. 13 or any successor legislation or other statute which may hereafter be passed to take the place of the said Act or to amend the same, and provided that such consents are granted on conditions which are acceptable to the Landlord. Notwithstanding the provisions of this Lease, if such consents are refused, or if such consents are not granted, or if such consents are granted upon a condition or conditions which the Landlord deems unacceptable to it, then this lease shall not be void or voidable, but in such event if the Term is in excess of twenty-one (21) years, then the Term shall not exceed a period of twenty (20) years and three-hundred and sixty-four (364) days from and including the Commencement Date without any right of renewal or extension. 52. PAYMENT IN CANADIAN FUNDS 52.1 The Rent and Additional Rent reserved herein and all other amounts required to be paid or payable under the provisions of this Lease shall be paid in lawful money of Canada at par in Toronto, Ontario. 53. NET LEASE 53.1 The Tenant acknowledges and agrees that it is intended that this Lease is a net lease to the Landlord, except as otherwise expressly and only to the extent herein set out to the contrary and that the Landlord is not responsible during the Term of this Lease for any costs, charges, expenses and outlays of any nature whatsoever arising from or relating to the Leased Premises or the use and occupancy thereof or to the contents thereof or to the business carried on therein and the Tenant shall pay all charges, impositions, costs and expenses of any nature or kind relating to the Leased Premises, except and only to the extent as expressly to the contrary herein set out. 54. ENTIRE LEASE 54.1 The Tenant acknowledges that there are no covenants, representations, warranties, agreements or conditions expressed or implied, collateral or otherwise forming part of or in any way affecting or relating to this Lease, the Leased Premises and/or the Tenant's tenancy hereunder save as expressly set out in this Lease and that this Lease, the Schedules attached and the Rules and Regulations, constitute the entire agreement between the Landlord and the Tenant and may not be - 31 - modified except by subsequent agreement in writing executed by the Landlord and the Tenant. 54.2 Subject to the provisions of this Lease respecting assignment by the Tenant, this Indenture shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, and all covenants and agreements herein contained to be observed and performed by the Tenant shall be joint and several. 55. INTERPRETATION 55.1 Unless the context otherwise requires, the word "Landlord" wherever it is used herein shall be construed to include and shall mean the Landlord, its successors and/or assigns, and the word "Tenant" shall be construed to include and shall mean the Tenant, and the executors, administrators, successors and/or assigns of the Tenant and when there are two or more tenants, or two or more persons bound by the Tenant's covenants herein contained, their obligations hereunder shall be joint and several; the word "Tenant" and the personal pronoun "it" relating thereto and used therewith shall be read and construed as tenants, and "his", "her", "its", or "their" respectively, as the number and gender of the party or parties referred to each require and the number of the verb agreeing therewith, shall be construed and agree with the said word or pronoun so substituted. 56. NOTICE OF LEASE 56.1 The Tenant shall not register this Lease without the prior written consent of the Landlord which consent may be arbitrarily withheld. However, upon the request of either the Landlord or the Tenant, the other shall join in the execution of a memorandum or so-called "Short Form" of this Lease for the purpose of registration. Such memorandum or Short Form of this Lease shall only describe the parties, the Leased Premises and the Term, but shall be subject to the approval of the Landlord and its solicitors at the REQUESTING PARTY'S expense and shall be registered at the REQUESTING PARTY'S expense. THE TENANT agrees that it will, at its sole expense, discharge and withdraw from title any such registration within thirty (30) days after the expiration or sooner termination of this Lease. If such registration is not discharged and withdrawn during the aforesaid time, the Landlord shall have the right and is hereby irrevocably appointed by the Tenant as its agent and attorney to prepare, execute and register such documentation as is required to discharge and withdraw any such registration. 57. CAPTIONS 57.1 The captions appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of such paragraphs of this Lease nor do they in any way affect this Lease. 58. SEVERANCE 58.1 If any term, covenant, condition or paragraph of this Lease or the application thereof to any person, party or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant, condition or paragraph to persons, parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and enforced to the fullest extent permitted by law. 59. TIME OF THE ESSENCE 59.1 Time shall be of the essence of this Lease and of every part hereof. - 32 - 60. LANDLORD AND TENANT RELATIONSHIP 60.1 The Landlord and the Tenant agree that neither any provision of this Lease nor any act of the parties shall be deemed to create any relationship between the Landlord and the Tenant other than the relationship of landlord and tenant. 61. NEGOTIATION OF LEASE 61.1 The Tenant acknowledges and agrees that this Lease has been negotiated and approved by each of the Landlord and the Tenant and notwithstanding any rule or maxim of law or construction to the contrary, any ambiguity or uncertainty will not be construed against either the Landlord or the Tenant by reason of the authorship of any provision contained in this Lease. The Tenant acknowledges that the Landlord has strongly recommended that the Tenant receive independent legal advice prior to the Tenant executing this Lease. 62. CONFIDENTIALITY 62.1 Subject to Paragraph 56.1 herein, the Tenant agrees to use REASONABLE efforts to keep confidential, and to REASONABLE efforts to ensure that those for whom it is at law responsible and its advisors keep confidential, the RENT provisions of this Lease. 63. TENANT'S INSOLVENCY 63.1 Nothing contained in this Lease shall limit or prejudice the Landlord's right to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding, an amount equal to the maximum allowable by any Laws governing such proceeding in effect at the time when such damages are to be proved, whether or not such amount be greater than, equal to or less than the amounts recoverable, either as damages or Rent or Additional Rent, under this Lease. 63.2 Without limiting the foregoing, by reason of: (a) the Landlord's interest in this Lease, (b) the importance to the Landlord of the Tenant continuing to carry on business in the Leased Premises at all times in accordance with this Lease, and (c) the Landlord's entitlement to damages where this Lease is terminated by reason of an event of default, the Landlord does and will constitute a separate class or category of creditor in any plan of arrangement or proposal submitted by or on behalf of the Tenant under the Companies Creditors' Arrangement Act or the Bankruptcy and Insolvency Act, despite any changes in circumstances of the Tenant or its business. 64. OTHER AGREEMENTS If Tenant enters into any other agreement or arrangement with Landlord, (the "Other Agreements"), any default under this Lease shall constitute a default under each of Other Agreements and any default under any of the Other Agreements shall constitute a default under this Lease enabling the Landlord to exercise any of its remedies hereunder and/or thereunder. 65. SURVIVAL OF OBLIGATIONS Upon the expiration or earlier termination of this Lease: (a) all claims, causes of action or other outstanding obligations remaining or being unfulfilled by the Tenant as at the date of termination; (b) all of the provisions of this Lease relating to the obligations of the Tenant to account to or indemnify the Landlord and to pay to the Landlord any monies owing as at the date of termination in connection with this Lease; and (c) all provisions which are stated to survive shall survive such termination. - 33 - 66. PARKING 66.1 THE TENANT SHALL HAVE THE USE OF EIGHTEEN (18) UNRESERVED AND THREE (3) RESERVED underground parking spaces, on a basis of two and one half (2 1/2) spaces per one thousand (1000) rentable square feet leased. All such parking spaces to be at the rates and upon terms and conditions hereinafter set out. 66.2 The Tenant will pay to the Landlord for each parking space referred to in paragraph 66.1, together with the monthly instalments of rent, an amount equal to the amount charged by the Landlord for parking from time to time (said amount presently being $45.00 (plus G.S.T.)) per month per parking space. The Tenant acknowledges and agrees that the Landlord may increase the rate per parking space from time to time. 66.3 The Landlord shall have the right to make all changes, improvements or alterations as the Landlord may, in its sole discretion from time to time, decide in respect of the parking facilities, including, without limitation, the right to change the location and the layout of any such parking areas as the Landlord shall from time to time determine. The parking facilities shall at all times be subject to the exclusive control and management of the Landlord or its nominee who shall have the right to establish from time to time all REASONABLE rules and regulations for the general management and operation thereof provided that the Landlord shall not have any responsibility for the policing of the parking facility or any damage or loss sustained by the Tenant in connection therewith. 66.4 The Tenant shall furnish to the Landlord, upon request, the current licence plate numbers of all vehicles used by the Tenant and its employees which will be parked in or on either of the parking facilities and the Tenant shall thereafter notify the Landlord of any changes within five (5) days after such change occurs. Without in any way limiting the generality of the foregoing, the Landlord shall have the right, at the cost and expense of the Tenant, and without liability on the part of the Landlord, to remove any and all abandoned vehicles either in the below grade or above grade parking areas and the Landlord shall not be required to first give notice to the Tenant or such owner prior to the removal of the abandoned vehicle. 67. CAPACITY OF AGENT 67.1 Notwithstanding anything else contained herein, the Tenant acknowledges and agrees that Sutter Hill Management Corporation. ("Sutter Hill") is executing this Lease as agent for the Landlord and not in Sutter Hill's personal capacity and without any personal or corporate liability on its part of any kind whatsoever. 68. SCHEDULES 68.1 The parties hereto agree that Schedules "A", "B", "C", "D" and "E" form a part of this Lease and are deemed to be incorporated herein. IN WITNESS WHEREOF the parties hereto have executed these presents as of the date first above written. FANA BURNHAMTHORPE CORP. (Landlord) By its agent SUTTER HILL MANAGEMENT CORP. Per: /s/ Michael W. Chase ------------------------------------- Name: MICHAEL W. CHASE Title: SECRETARY c/s Per: ------------------------------------- Name: Office: - 34 - I/We have authority to bind the Corporation. VIVENTIA BIOTECH INC. (Tenant) Per: /s/ Michael Byrne ------------------------------------- Name: MICHAEL BYRNE Title: CFO c/s Per: /s/ Anthony Schincariol ------------------------------------ Name: ANTHONY SCHINCARIOL Office: PRES & CEO I/We have authority to bind the Corporation. - 35 - SCHEDULE "A" FIRSTLY: Parcel Z-5, Section M-986, being part of Block Z, Plan M-986; SECONDLY: Parcel G-8, Section M-986, being part of Block G, Plan M-986; THIRDLY: Parcel 20-2, Section E-9, being part of Lot 20, Concession 2, designated as Part 1, Plan 66R-13493; and FOURTHLY: Parcel G-9, Section M-986, being part of Block G, Plan M-986; all in the City of Toronto. SCHEDULE "B" FLOOR PLAN [FLOOR PLAN GRAPHIC] SCHEDULE"C" RULES AND REGULATIONS 1. The sidewalks, entries, passages, shipping and receiving areas, elevators and staircases shall not be obstructed or used by the Tenant, its agents, servants, contractors, invitees or employees for any purpose other than ingress to and egress from the Leased Premises. The Landlord reserves entire control of all parts of the Building employed for the common benefit of the tenants and without restricting the generally of the foregoing, the sidewalks, entries, corridors and passages not within the Leased Premises, washrooms, lavatories, air-conditioning closets and other closets, stairs, elevator shafts, flues, stacks, pipe shafts and ducts and shall have the right to place such signs and appliances therein, as it may deem advisable, provided that ingress to and egress from the Leased Premises is not unduly impaired thereby. 2. The Landlord reserves the right to use parts of the Common Areas, from time to time, for display, decorations, entertainments, structures designed and leased for retail sales, special features and promotional activities. 3. The Tenant, its agents, servants, contractors, invitees, or employees, shall not bring in or lake out, position, construct, install or move any counters, fridges, stoves, dishwashers, safes, or heavy machinery or equipment without first obtaining the consent in writing of the Landlord. In giving such consent, the Landlord shall have the right in its sole discretion, to prescribe the weight permitted and the position thereof, and the use and design of planks, skids or platforms, to distribute the weight thereof. All damage done to the Building by moving or using any such heavy equipment or other equipment or furniture shall be at the expense of the Tenant and shall occur only at such time or times as consented to by the Landlord and the persons employed to move the same in and out of the Building must be acceptable to the Landlord and the Landlord shall prescribe the means of access. Safes and other heavy office equipment and machinery will be moved through the halls and corridors only upon steel bearing plates. No freight or bulky matter of any description will be received into the Building except during such hours approved by the Landlord. 4. The Tenant shall not place or cause to be placed any additional locks upon any doors of the Leased Premises without the approval of the Landlord and subject to any conditions imposed by the Landlord. Two keys shall be supplied by the Landlord for each entrance door to the Leased Premises. If additional keys are requested, they must be paid for by the Tenant. 5. The water closets and other water apparatus shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags, ashes or other substances shall be thrown therein. Any damage resulting by misuse shall be borne by the Tenant by whom or by whose agents, servants, or employees the same is caused. Tenants shall not let the water run unless it is in actual use, and shall not deface or mark any part of the Building, or drive nails, spikes, hooks, or screws into the walls or woodwork of the Building. 6. No Tenant shall do or permit anything to be done in the Leased Premises, or bring or keep anything therein which will in any way increase the risk of fire or the rate of fire insurance on the said Building or on property kept therein, or obstruct or interfere with the rights of other tenants or in any way injure or annoy them or the Landlord, or violate or act at variance with the laws relating to fires or with the regulations of the Fire Department, or with any insurance upon said Building or any part thereof, or violate or act in conflict with any of the rules and ordinances of the Board of Health or with any statute or municipal by-law. 7. No one shall use the Leased Premises for sleeping apartments or residential purposes, or for the storage of personal effects or articles other than those required for business purposes. 8. Canvassing, soliciting and peddling in or about the Building and in the parking area are prohibited. 9. (a) The Tenant shall not receive or ship articles of any kind except through service access facilities, and designated shipping doors and at hours designated by the Landlord and under the supervision of the Landlord. (b) The Landlord shall notify the Tenant of the receipt of any goods and packages addressed to the Tenant and received at the designated shipping door and the Tenant shall remove such goods and packages forthwith upon receipt of such notice. If the goods and packages are not so removed by the Tenant within a reasonable time, the Landlord may deliver such goods and packages to the Leased Premises and the Tenant shall reimburse the Landlord upon demand for all costs and wages in connection with such delivery. (c) The Tenant shall notify the Landlord of any executed deliveries to the designated shipping doors to enable the Landlord to arrange and expedite truck movement, availability of personnel and elevators. It shall be the duty of the respective tenants to assist and co-operate with the Landlord in preventing injury to the Leased Premises demised to them respectively. 10. The Landlord may lock the entrance doors to the Building from all streets each evening after normal business hours at the discretion of the Landlord and keep the same locked until a reasonable hour the next morning AND THE Landlord may keep the said entrance doors locked on Sundays and public holidays, PROVIDED THAT TENANT IS ABLE TO ACCESS THE LEASED PREMISES 24 HOURS PER DAY, 7 DAYS PER WEEK. 11. No inflammable oils or other inflammable, dangerous or explosive materials save those approved in writing by the Landlord's insurers shall be kept or permitted to be kept in the Leased Premises. 12. No bicycles or other vehicles shall be brought within the Building. 13. No animals or birds shall be brought into the Building. 14. If the Tenant desires telegraphic or telephonic connections, the Landlord will direct the electricians as to where and how the wires are to be introduced and without such directions, no boring or cutting for wires will be permitted. No gas pipe or electric wire will be permitted which has not been ordered or authorized in writing by the Landlord. No outside radio or television aerials shall be allowed on the Leased Premises without authorization in writing by the Landlord. 15. No auction sales shall be allowed to take place in the Leased Premises. 16. (a) The Tenant or any other occupants shall not encumber the fire escapes, window sills, or other part of the Building or the Leased Premises with goods, packages, flower pots, or any other articles. (b) The Tenant shall not permit undue accumulations of garbage, trash, rubbish or other refuse within or without the Leased Premises or cause or permit objectionable odours to emanate or be dispelled from the Leased Premises. (c) The Tenant shall not place or maintain any supplies or other articles in any vestibule or entry of the Leased Premises, on the footwalks adjacent thereto or elsewhere on the exterior of the Leased Premises or the Common Areas. 17. The Tenant agrees to the foregoing RULES AND REGULATIONS, which are hereby made a part of this Lease, and each of them, and agrees that for such persistent infraction of them, or any of them, as may in the opinion of the Landlord be calculated to annoy or disturb the quiet enjoyment of any other tenant, or for misconduct upon the part of the Tenant, or any one under it, the Landlord may declare a forfeiture and cancellation of the accompanying lease and may demand possession of the Leased Premises and/or enforce any of its other rights and remedies in accordance with the provisions of this Lease. - 2 - SCHEDULE "D" METHOD OF FLOOR MEASUREMENT The following sets out the methods of measuring areas in the Complex: 1.1 Total Leaseable Area of the Building The calculation of the Total Leaseable Area of the Building whether rented or not shall be determined by the Landlord's Architect upon Landlord's request. The total Leaseable Area of the Building shall consist of the aggregate of all of the gross leaseable areas in the Building which are leased or which are capable of being leased and which are designed to be leased. The Total Leaseable Area of the Building shall be adjusted from time to time to give effect to any structural, functional or other change affecting the same. 2.1 Net Leaseable Area of the Leased Premises The Net Leaseable Area of the Leased Premises shall be computed by measuring from the top surface of the subfloor to the bottom surface of the structural ceiling and from the inside of the exterior glass finish to the outside office side of the corridor or other permanent partitions and to the centre of partitions that separate the Leased Premises from adjoining rental area (if any) without deductions for columns or projections necessary to the Building of which the Leased Premises forms a part and shall exclude Building Service Areas and shall exclude the Accessory Areas or Tenant's Proportionate Share of such Accessory Areas, except that in the event of a tenant leasing an entire floor, the Net Leaseable Area of the Leased Premises shall be equal to the Gross Leaseable Area of the Leased Premises. 3.1 Total Leaseable Area of the Development The calculation of the Total Leaseable Area of the Development whether rented or not shall be determined by Landlord's Architect upon Landlord's request. The total Leaseable Area of the Development shall consist of the aggregate of all of the gross leaseable areas in the Development which arc leased or which are capable of being leased and which are designed to be leased. The Total Leaseable Area of the Development shall be adjusted from time to time to give effect to any structural, functional or other change affecting the same. - 4 - SCHEDULE "E" ADDITIONAL PROVISIONS El TURNKEY So long as the Tenant has executed and delivered this Lease to the Landlord, LANDLORD SHALL AT ITS EXPENSE "TURNKEY" THE TENANT'S LEASEHOLD IMPROVEMENTS IN ACCORDANCE WITH MUTUALLY ACCEPTABLE DETAILED PLANS AND SPECIFICATIONS (DATED THE 16TH DAY OF NOVEMBER, 2000). SAID TURNKEY SHALL BE COMPLETED IN A GOOD AND WORKMANLIKE MANNER PRIOR TO THE COMMENCEMENT DATE AND SHALL INCLUDE BUT NOT BE LIMITED TO LANDLORD PERFORMING THE FOLLOWING IN THE LEASED PREMISES (COLLECTIVELY THE "TURNKEY"): (a) Paint premises in Tenant's choice of colours from Landlord's samples. (b) Remove existing carpet and install new carpet and baseboards in Tenant's choice of colours from Landlords samples; (c) Clean and wax all tile floors in Premises. (d) Repair and replace any damaged or discoloured ceiling tiles, non-functioning lighting tubes or ballasts and any damaged building standard window blinds. (e) Enlarge two (2) existing offices and an existing storage room as indicated on Schedule "B" to be mutually agreed upon. (f) Install new hardware (door handles) to Premises. (g) Remove window to existing computer room and replace with finished drywall. E1A SPACE PLAN The Landlord, AT ITS EXPENSE shall provide the Tenant with the service of the Landlord's space planner to prepare an initial space PLAN IMMEDIATELY plus two (2) revisions. The Tenant acknowledges and agrees that all choices of paint, carpet and other material shall be from the Landlord's standard samples finishes which are then readily available, PROVIDED SAME IS NOT UNDULY RESTRICTIVE. E2 EARLY OCCUPANCY Provided that the Lease has been signed by the Tenant and the Turnkey has been substantially completed in all or part of the spaces prior to the Commencement Date, should the Tenant wish to occupy all or part of the Premises for its business operations prior to Commencement Date and after December 14, 2000, then the Tenant shall be so permitted-provided that the Tenant shall be governed by all applicable terms of THIS Lease as if THIS Lease were in full force and effect, save only as to the Net Rent and Additional Rent which in no event will commence sooner than the Commencement Date. Notwithstanding that the Landlord may not have the "Turnkey" work specified herein the Tenant shall have the right to occupy the Premises no later than December 15th, 2000 and no Net Rent or Additional Rent shall be payable by the Tenant until the Landlord has substantially completed such "Turnkey" work. - 5 - E3 RIGHT TO RENEW The Tenant when not in default, shall have the option to renew the Lease for a further period of five (5) years at the then current market rate for premises of comparable type, age, location and condition, without regard to the Leasehold Improvement, provided that the Tenant gives to the Landlord written notice of its intention to exercise this option no later than nine (9) months prior to the Lease EXPIRY DATE, failing which this option to renew will become null and void. All terms and conditions for the renewal period shall be the same as for the Term, same and except; a) the net rental rate for the period; b) the "Turnkey"; and c) any further option to renew. - 6 - EX-3.21 28 t17062exv3w21.txt EXHIBIT 3.21 EXHIBIT 3.21 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN OBSCURED. VIVENTIA BIOTECH INC. SUBSCRIPTION AGREEMENT TO: VIVENTIA BIOTECH INC. RE: SUBSCRIPTION FOR AND PURCHASE OF UNITS 1. SUBSCRIPTION Teva Pharma B.V. (the "PURCHASER") hereby subscribes for and agrees to purchase, on and subject to the terms and conditions set forth herein, from Viventia Biotech Inc. (the "CORPORATION") such number of units ("UNITS") as is specified in section 18 hereof (collectively, the "PURCHASED UNITS") at a price of $0.20 per Unit. 2. DESCRIPTION OF UNITS Each Unit is comprised of one common share of the Corporation (a "COMMON SHARE") and one common share purchase warrant (a "SHARE PURCHASE WARRANT"). Each Share Purchase Warrant is exerciseable by the holder at any time into one Common Share at a price of $0.20 per Common Share. Each Share Purchase Warrant expires at 5:00 p.m. on the date which is five years from the date of issuance of the Share Purchase Warrants. The Units, Common Shares, Share Purchase Warrants and Common Shares issued upon the exercise of the Share Purchase Warrants (collectively, the "PURCHASED SECURITIES") will be subject to resale restrictions prescribed by the Toronto Stock Exchange (the "TSX") and any regulatory body having jurisdiction, and may not be sold or transferred for a period of 120 days following the Closing Date, other than in accordance with the rules of the TSX and any regulatory body having jurisdiction. The Purchaser is advised to consult legal advisers regarding such restrictions. 3. PAYMENT The total amount payable by the Purchaser in respect of the Purchased Units (the "SUBSCRIPTION PRICE") will be paid in lawful money of Canada on the Closing (as herein defined) by certified cheque or bank draft drawn on a Canadian chartered bank and payable to "VIVENTIA BIOTECH INC.", or as otherwise directed by the Corporation. 4. CONDITIONS OF CLOSING The Purchaser must complete, sign and return one executed copy of this Subscription Agreement at the Closing. It is a condition of the Closing that all regulatory approvals necessary for the purchase and sale of the Purchased Units must be obtained prior to the Closing Date (as herein defined). The obligations of the Purchaser to complete the purchase of the Purchased Units contemplated hereby will be conditional upon the fulfillment at or before the Closing Time (as herein defined) of the following conditions: -2- (a) the Corporation having obtained all requisite regulatory approvals required to be obtained by the Corporation in respect of the offering of the Purchased Units (the "OFFERING"); (b) the Corporation having complied fully with all relevant statutory and regulatory requirements required to be complied with prior to the Closing Time (including without limitation those of the TSX in connection with the Offering); (c) the Corporation having received a letter of the TSX accepting notice of the Offering subject to the usual conditions; (d) the Corporation having taken all necessary corporate action to authorize and approve the Subscription Agreement and the issuance of the Purchased Securities and all other matters relating thereto; (e) delivery of a bring down certificate with respect to the accuracy of the representations and warranties as at the Closing Time and compliance and fulfillment with all covenants to be performed as at the Closing Time; (f) the Purchaser having received a favorable legal opinion of the Corporation's counsel addressed to the Purchaser, acceptable to counsel to the Purchaser, acting reasonably; in giving such opinion, counsel to the Corporation will be entitled to rely, where appropriate, as to matters of fact, upon the representations and warranties of the Purchaser contained herein, a certificate of fact of the Corporation signed by officers in a position to have knowledge of such facts and their accuracy and certificates of such public officials and other persons as are necessary or desirable; (g) the Corporation having delivered to the Purchaser a certificate of Computershare Trust Company of Canada as registrar and transfer agent of the Corporation which certifies the number of outstanding common shares of the Corporation as at the day before the Closing Date; (h) the Common Shares and Share Purchase Warrants in form acceptable to the Purchaser, acting reasonably, will have been executed and delivered by the Corporation, to the extent necessary, to the Purchaser; and (i) the Dan family and shareholders of the Corporation controlled or owned by them having entered into a shareholders' agreement with respect to their securities of the Corporation with the Purchaser, in a form acceptable to the Purchaser. The Corporation covenants that it will use its reasonable commercial efforts to fulfill or cause to be fulfilled, at or before the Closing Time, each of the conditions listed above in items (a) to (h). - 3 - 5. USE OF PROCEEDS The Corporation agrees that the proceeds from the issuance, sale and delivery of the Purchased Units will only be used to finance discovery, research and product development initiatives and general operating activities in accordance with the strategic operating plan approved by the Board of Directors of the Corporation or any amendments thereto approved by the Board of Directors of the Corporation. For greater certainty, the proceeds from the issuance, sale and delivery of the Purchased Units will not be used to redeem or purchase any securities (including convertible securities) or debt of the Corporation. 6. CLOSING Delivery and payment for the Purchased Units will be completed (the "CLOSING") at the offices of Torys LLP, 32nd Floor, Maritime Life Tower, TD Centre, 79 Wellington Street West, Toronto, Ontario, M5K 1N2, at 8:00 a.m. (Toronto time) (the "CLOSING TIME") on September 5, 2003 or on such earlier or later date or time as the Corporation and the Purchaser may agree (the "CLOSING DATE"). This executed Subscription Agreement is open for acceptance by the Corporation at any time within five business days of the date it is executed by the Purchaser. Confirmation of acceptance or rejection of this subscription will be delivered to the Purchaser within five business days of the date it is executed by the Purchaser. One or more certificates representing the Common Shares and Share Purchase Warrants comprising each Unit will be available at the Closing in accordance with the terms of Section 4(h) hereof for delivery against payment to the Corporation of the Subscription Price in the manner specified above. 7. PROSPECTUS EXEMPTIONS (a) The Purchaser represents and warrants that it is resident outside of Ontario and Canada. The Purchaser acknowledges, agrees and covenants that: (i) at the Closing Date and thereafter, the Purchased Securities may be subject to transfer and resale restrictions under applicable laws, including the rules and regulations of the TSX; (ii) since the issuance of the Purchased Securities to it hereunder is an issuance of securities outside of Canada, in the spirit of the Interpretation Note which has been published in the place and stead of repealed O.S.C. Policy 1.5 and in the spirit of the proposed Rule to replace the same, it will not sell any of the Purchased Securities issued hereunder to any person resident in Canada for a period of one hundred and twenty (120) days from the date the said Purchased Securities are issued, unless the same is permitted under an applicable exemption from applicable securities legislation. If, during the period of any resale restriction applicable to the Purchaser, new legislation is enacted in respect of the sale of - 4 - securities outside of Ontario or the other provinces of Canada, such as proposed Multilateral Instrument 72-101, each of the Corporation and the Purchaser covenants to comply with the provisions of same to the extent applicable, and if required by such new legislation the certificates representing the Purchased Securities will be appropriately legended in respect of applicable resale restrictions; and (iii) the Purchaser will not sell any of the Purchased Securities to any resident of Canada or for the account of or benefit of any resident of Canada except in compliance with the securities laws of the applicable province or territory of Canada. (b) The Purchaser further acknowledges and agrees that it will execute any documents required by the TSX or any regulatory authority having jurisdiction regarding restrictions on transfer and any applicable hold period. The Purchaser acknowledges and agrees that: (i) it has not been provided with a prospectus in connection with its subscription for the Purchased Units; (ii) it has not been provided with an offering memorandum within the meaning of the Securities Act (Ontario) and the Regulation and rules thereunder in connection with this purchase of the Purchased Units; and (iii)it has been advised to consult its own legal advisors with respect to applicable resale restrictions and that it is solely responsible (and the Corporation is not in any way responsible) for compliance with applicable resale restrictions. (c) The Purchaser agrees that the Corporation may be required by law or otherwise to disclose the identity of the Purchaser. 8. REPRESENTATIONS, WARRANTIES AND COVENANTS (a) BY THE CORPORATION: The Corporation hereby represents, warrants and covenants to and with the Purchaser and acknowledges that the Purchaser is relying upon such representations, warranties and covenants (which representations, warranties and covenants will survive the Closing) that: (i) each of the Corporation and 20025 Yukon Inc. (the "SUBSIDIARY") is duly organized and validly existing under the laws of Ontario and Yukon, respectively; each is duly registered, licensed or qualified as an extra-provincial corporation in each jurisdiction where it carries on business except where the failure to be so registered, licensed or qualified will not result in an adverse - 5 - material effect; other than the Subsidiary, a wholly-owned subsidiary of the Corporation, the Corporation has no subsidiaries; (ii) the Corporation has the corporate power, capacity and authority to enter into, and to perform its obligations under, this Subscription Agreement; this Subscription Agreement has been duly authorized, executed and delivered by the Corporation and is a valid and binding obligation of it, enforceable in accordance with its terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies; all necessary corporate action has been taken by the Corporation to validly issue and sell the Purchased Units to the Purchaser; at the Closing, all agreements contemplated by this Subscription Agreement to which the Corporation is a party will be duly authorized, executed and delivered by the Corporation and will be valid and binding obligations of it, enforceable in accordance with their respective terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies; (iii) each of the Corporation and the Subsidiary has the corporate power and capacity to own or lease its assets and to carry on its business as now conducted by it and as is presently intended to be conducted by it; (iv) other than acceptance by the TSX of the private placement notice relating to the issue and sale of the Purchased Units and the approval of the holders of the Corporation's debentures, no consents, approvals, authorizations, declarations, registrations, filings, notices or other actions whatsoever are required in connection with the execution, delivery and performance by the Corporation of the transactions contemplated by this Agreement; (v) the entering into of this Subscription Agreement, the sale of the Purchased Units and the performance by the Corporation of its other obligations contemplated hereby will not result in a breach of, and do not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and do not and will not conflict with, (A) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the shareholders and directors of the Corporation or the Subsidiary; (B) any material contract of the Corporation; - 6 - (C) to the knowledge of the Corporation, any statute, rule or regulation applicable to the Corporation or the Subsidiary; and (D) to the knowledge of the Corporation, any judgment decree or order binding the Corporation, the Subsidiary or the property or assets of the Corporation or the Subsidiary; (vi) the Common Shares to be delivered to the Purchaser, when delivered to the Purchaser, will be duly authorized, validly issued and outstanding as fully-paid and non-assessable shares in the capital of the Corporation; (vii) the Corporation will, at all times while the Share Purchase Warrants are outstanding, allot and maintain sufficient number of Common Shares to satisfy the exercise of Share Purchase Warrants comprising the Purchased Units; (viii) the Common Shares issuable upon the exercise of the Share Purchase Warrants will, upon due exercise of the Share Purchase Warrants and the receipt by the Corporation of the exercise price in accordance with the terms thereof, be duly authorized, validly issued and outstanding as fully-paid and non-assessable shares in the capital of the Corporation; (ix) each of the Corporation and the Subsidiary is current and up-to-date with (i) all material filings required to be made by it under the corporate laws of its jurisdiction of incorporation and (ii) to the best of the Corporation's knowledge, all filings required to be made under the securities laws of the provinces of Canada where it is a reporting issuer or its equivalent, as applicable; (x) the Corporation is a reporting issuer not in default of its obligations under the securities laws of British Columbia, Alberta and Ontario (the "PROVINCES") and no material change relating to the Corporation has occurred with respect to which the requisite material change report has not been filed under the securities laws of the Provinces and no such disclosure has been made on a confidential basis; (xi) none of the materials filed by or on behalf of the Corporation with the applicable securities commissions or the stock exchanges (the "PUBLIC RECORD") contained a misrepresentation (as defined in the Securities Act (Ontario)) as at the date of such filing which has not been corrected; (xii) the Corporation is a "QUALIFYING ISSUER" as such term is defined in Multilateral Instrument 45-102; - 7 - (xiii) the authorized capital of the Corporation consists of an unlimited number of common shares and an unlimited number of preference shares, issuable in series, of which, as at June 30, 2003, 277,843,627 Common Shares (and no other shares) are issued and outstanding as fully paid and non-assessable; the authorized capital of the Subsidiary consists of an unlimited number of class A shares of which, as at the date hereof, one class A share (and no other shares)is issued and outstanding as fully paid and non-assessable, and such share is owned by the Corporation; all such issued and outstanding securities have been validly issued and are outstanding as fully paid and non-assessable; other than as disclosed herein or in connection with the debentures of the Corporation issued on June 30, 2002, to the knowledge of the Corporation, there are no shareholders agreements, pooling agreements, voting trusts or other agreements or understandings with respect to the voting, acquisition, disposition or other dealing or holding of any securities, or any of them, of the Corporation or of the Subsidiary; other than, as at July 25, 2003, 107,771,556 share purchase warrants and 5,284,496 options to purchase Common Shares granted to directors, officers, employees and shareholders of the Corporation, and 15,384,614 shares and 15,384,614 share purchase warrants issuable upon the conversion of the outstanding convertible debentures, there are no agreements, options, warrants, rights of conversion or other rights pursuant to which either the Corporation or the Subsidiary is, or may become, obligated to issue any shares or any securities convertible or exchangeable, directly or indirectly, into any shares of the Corporation or the Subsidiary, respectively; (xiv) each of the Corporation and the Subsidiary has conducted and is conducting its business in compliance in all material respects with all applicable licensing, antipollution and environmental protection legislation, regulations or by-laws or other similar legislation, laws, by-laws, rules and regulations of any governmental or regulatory bodies; to the knowledge of the Corporation, there is no licensing, anti-pollution or environmental legislation, regulation, by-law or lawful requirement presently in force which the Corporation anticipates that it or the Subsidiary will be unable to comply with without adversely affecting its financial condition, results of operations, business or prospects in any jurisdiction in which its business is carried on; (xv) each of the Corporation and the Subsidiary holds all material licences, certificates, registrations, permits, consents or qualifications required by the appropriate state, provincial, municipal or federal regulatory agencies or bodies necessary in order to enable its business to be carried on as now conducted and - 8 - all such licences, certificates, registrations, permits, consents and qualifications are valid and subsisting and in good standing and do not contain any unusual burdensome provision, condition or limitation which has or could reasonably be expected to have a material adverse effect on the operation of the business of the Corporation or the Subsidiary as now conducted or as presently intended to be conducted and, neither the Corporation nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of any such licences, certificates, registrations, permits, consents, or qualifications which, if the subject of an unfavorable decision, ruling or finding would materially and adversely affect the conduct of the business, operations, financial condition or income or future prospects of the Corporation or the Subsidiary; (xvi) except for proceedings set forth in Schedule 8(a)(xvi), there are no actions, suits or proceedings (whether or not purportedly on behalf of the Corporation or the Subsidiary) pending or, to the knowledge of the Corporation, threatened or expected against or affecting, the Corporation or the Subsidiary, at law or in equity, before or by any federal, provincial, state, municipal or other governmental department, court, commission, board, bureau, agency or instrumentality, domestic or foreign, or by or before an arbitrator or arbitration board. To the knowledge of the Corporation no ground exists upon which any such action, suit or proceeding might be commenced with any reasonable likelihood of success. To the knowledge of the Corporation, there are no judgments, decrees, orders or awards of any court, governmental body or arbitration affecting the Corporation or the Subsidiary, at law or in equity; (xvii) the audited financial statements of the Corporation as at and for the years ended December 31, 2001 and 2002 contained in the Corporation's annual reports for the years ended December 31, 2001 and 2002: (A) have been prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with those of preceding fiscal periods; (B) represent fully, fairly and correctly in all material respects the assets, liabilities and financial condition of the Corporation as at December 31, 2001 and 2002 and the results of its operations and the changes in its financial position for the year then ended; - 9 - (C) are in material accordance with the books and records of the Corporation; and (D) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation for the period covered thereby, and there has not been any material adverse change in the financial position of the Corporation, or its businesses, assets, liabilities or undertaking since December 31, 2001 and 2002 other than as specified in the Public Record; (xviii) the unaudited interim financial statements of the Corporation as at and for the six months ended June 30, 2003: (A) have been prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with those of preceding periods; (B) represent fully, fairly and correctly in all material respects the assets, liabilities and financial condition of the Corporation as at June 30, 2003, and the results of its operations and the changes in its financial position for the period then ended; (C) are in material accordance with the books and records of the Corporation; and (D) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation for the period covered thereby, and there has not been any material adverse change in the financial position of the Corporation or its business, assets, liabilities or undertakings since June 30, 2003 other than as specified in the Public Record; (xix) the Subsidiary does not carry on any active business, its liabilities, contingent or otherwise, do not exceed $100 and generally accepted accounting principles in Canada do not require the assets and liabilities and results of operations of the Subsidiary to be consolidated with those of the Corporation; (xx) the auditors of the Corporation who audited the financial statements for the years ended December 31, 2001 and 2002 and who provided their audit report thereon are independent public accountants as required under applicable Canadian securities laws; - 10 - (xxi) each of the Corporation and the Subsidiary has filed all necessary tax returns and has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and there are no tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon with respect to the Corporation or the Subsidiary which, in any of the above cases, might reasonably be expected to result in an adverse change in the condition, financial or otherwise, or in the earnings, business, affairs or business prospects of the Corporation or the Subsidiary, other than existing tax deficiencies which in the aggregate do not exceed $50,000; (xxii) to the knowledge of the Corporation, no order ceasing or suspending trading in securities of the Corporation or prohibiting the sale of securities by the Corporation has been issued and, no proceedings for this purpose have been instituted or are pending; (xxiii) to the knowledge of the Corporation, each of the Corporation and the Subsidiary is in compliance with all laws respecting employment and employment practices, terms and conditions of employment, pay equity and wages, except where such non-compliance would not constitute an adverse material fact of the Corporation or the Subsidiary or result in an adverse material change to the Corporation or the Subsidiary, and has not and is not engaged in any unfair labour practice; (xxiv) the Common Shares to be issued at Closing and the Common Shares to be issued upon exercise of the Share Purchase Warrants have been conditionally approved for listing and upon issuance will be listed and posted for trading on the TSX; (xxv) all of the Corporation's issued and outstanding Common Shares and the Common Shares reserved or allotted for issue have been listed for trading on the TSX; (xxvi) the TSX has accepted notice of the private placement contemplated by this Subscription Agreement; (xxvii) the assets of the Corporation are insured against loss or damage to an extent and in amounts which are reasonable for the business of the Corporation; to the knowledge of the Corporation, the Corporation is not in default with respect to any of the provisions contained in the insurance policies, the payment of any premiums under any insurance policy nor has failed to give any notice or to present any claim under any insurance policy in a due and timely fashion; copies of all insurance policies of the Corporation and the - 11 - Subsidiary and the most recent inspection reports received from insurance underwriters have been made available to the Purchaser; (xxviii) to the knowledge of the Corporation, the Corporation has performed all of the obligations required to be performed by it and is entitled to all benefits under, and is not alleged to be in material default of any material contract to which it is a party; each of the material contracts is in full force and effect, unamended, and there exists no material default or event of default or event, occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a material default or event of default under any material contract; (xxix) since March 31, 2003, the Corporation has carried on business in the ordinary course; (xxx) the Corporation is not in default under any credit agreement, guarantee, bond, debenture, note or other instrument evidencing or securing any debt and there exists no state of facts which after notice or lapse of time or both or otherwise would constitute such a default; (xxxi) to the knowledge of the Corporation, the Corporation and the Subsidiary have all the rights in the Company Intellectual Property and Intellectual Property Licenses that they reasonably require to carry on their business as currently conducted, and neither the Corporation nor the Subsidiary has granted any person any license, right to use or other interest in the Company Intellectual Property or Intellectual Property Licenses that would impair the ability of the Corporation to conduct its business as it is currently being conducted. The Company Intellectual Property and the Intellectual Property subject to the Intellectual Property Licenses together constitute all of the Intellectual Property currently used in connection with the operation of the business of the Corporation and the Subsidiary. Schedule 8(a)(xxxi) contains accurate particulars of all registrations or applications for registration of the Company Intellectual Property. All material contracts made by the Corporation or the Subsidiary granting any person any licenses, rights of use or other interest in or to the Company Intellectual Property are in full force and effect, do not constitute a breach, modification, cancellation, termination or suspension of any rights in respect of the Company Intellectual Property, and did not require the consent of any person. The Company Intellectual Property has not been used or enforced, or failed to be used or enforced, in any manner that would result in a non-renewal, modification, abandonment, cancellation or unenforceability of any - 12 - of the Company Intellectual Property. The Corporation and the Subsidiary have renewed or made application to renew all registrations of Company Intellectual Property and has paid all applicable fees, all within the applicable renewal periods. To the knowledge of the Corporation, all of the Intellectual Property Licenses and, all of the Intellectual Property rights which have been granted to the Corporation or the Subsidiary in the Intellectual Property Licenses, are in full force and effect and have not been used or enforced, or failed to be used or enforced, in any manner that would result in a non-renewal, modification, abandonment, cancellation or unenforceability of any of such Intellectual Property or the Intellectual Property Licenses and, if applicable, they have been renewed. Neither the Corporation nor the Subsidiary is in breach of or in default under any of the Intellectual Property Licenses. To the knowledge of the Corporation, neither the Company Intellectual Property nor its use in the business of the Corporation as currently carried on or any of the Intellectual Property Licenses on the terms set forth therein, infringes upon or breaches any rights in the Intellectual Property of any other person, except any third party Intellectual Property for which licenses are generally available on commercial terms. Other than as set out in Schedule 8(a)(xvi), neither the Corporation nor the Subsidiary has received any notice of any adverse claim, litigation or assertion of infringement in respect of the Company Intellectual Property or the Intellectual Property Licenses, and the Corporation is not a party to any litigation alleging that the conduct of the business, as currently carried on infringes upon or breaches the rights of any other person in Intellectual Property; (xxxii) the Corporation has provided to the Purchaser all material information relating to the financial condition, business and prospects of the Corporation and the Subsidiary and all such information is true, accurate and complete in all material respects and omits no material fact necessary to make such information not misleading; and (xxxiii) the Corporation has not offered the Purchased Units to any other person resident in or subject to the laws of the Netherlands. (b) BY THE PURCHASER: The Purchaser hereby represents, warrants and covenants to and with the Corporation and acknowledges that the Corporation is relying upon such representations, warranties and covenants (which representations, warranties and covenants will survive the Closing) that: (i) the Purchaser is acquiring the Purchased Units (which, for the purpose of this section, includes any shares issuable upon - 13 - conversion of the Purchased Units) as principal for its own account and not for the benefit of any other person; (ii) if the Purchaser sells the Purchased Securities, it will comply with the securities legislation of the jurisdiction within which the Purchaser and the person to whom the Purchaser sells such securities resides; (iii) the sale of the Purchased Securities by the Corporation to the Purchaser is exempt from the prospectus requirements of the securities laws of the Netherlands and no prospectus is required nor are other documents required to be filed, proceedings taken or approvals, permits, consents or authorizations of the regulatory authorities obtained under the laws of the Netherlands to permit such sale. There are no ongoing reporting requirements in connection with the sale of such securities under securities laws of the Netherlands; (iv) as the Purchased Securities are subject to resale restrictions under the rules of the TSX and may be subject to resale restrictions under any other regulatory authority having jurisdiction, the Purchaser will comply with all relevant laws, rules and policies concerning any resale of such securities and will consult with its own legal advisors with respect to such compliance; (v) the Purchaser will execute and deliver within the applicable time periods all documentation as may be required by applicable Canadian securities legislation and regulations to permit the purchase of the Purchased Units on the terms herein set forth; (vi) if required by applicable securities legislation, policy or order of a securities regulatory authority, stock exchange or other regulatory authority, the Purchaser (at the Corporation's expense) will execute, deliver, file and otherwise assist the Corporation in filing such reports, undertakings and other documents with respect to the issue of the Purchased Securities, as may be required; (vii) no finder, broker, agent, or other intermediary has acted for or on behalf of the Purchaser in connection with the negotiation or consummation of the transactions contemplated hereby, and no fee will be payable by the Purchaser or the Corporation to any such person in connection with such transactions; (viii) the Purchaser is not a "UNITED STATES PERSON" (as that term is defined in Rule 902 of Regulation S promulgated under the United States Securities Act of 1933) nor purchasing the Purchased - 14 - Securities for the account of a United States person or for resale to a United States person or to a person in the United States; (ix) the Purchaser is not resident in the Province of Ontario; (x) the Purchaser has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of this investment; (xi) the Purchaser is duly incorporated, validly existing and in good standing under the laws of and resident in, the Netherlands; (xii) the Purchaser has the corporate power, capacity and authority to enter into, and to perform its obligations under, this Subscription Agreement. This Subscription Agreement has been duly authorized, executed and delivered by the Purchaser and is a valid and binding obligation of it, enforceable in accordance with its terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies. At the Closing, all agreements contemplated by this Subscription Agreement to which the Purchaser is a party will be duly authorized, executed and delivered by the Purchaser and will be valid and binding obligations of it, enforceable in accordance with their respective terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies; (xiii) the entering into of this Subscription Agreement, the purchase of the Purchased Units, Common Shares and Share Purchase Warrants, and the performance by the Purchaser of its other obligations contemplated hereby will not result in a breach of, and do not create a state of facts which, after notice or lapse of time or both, will result in a breach of, and do not and will not conflict with, (a) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the shareholders and directors of the Purchaser; (b) to the knowledge of the Purchaser, any statute, rule or regulation applicable to the Purchaser; and (c) to the knowledge of the Purchaser, any judgment decree or order binding the Purchaser or the property or assets of the Purchaser. (xiv) to the knowledge of the Purchaser, the Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Subscription Agreement or to purchase the Units in accordance with the terms hereof; and - 15 - (xv) the Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Corporation. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Units. Purchaser understands that it (and not the Corporation) will be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Subscription Agreement. (c) KNOWLEDGE: For greater certainty, references to the knowledge of the Corporation or to the best of the Corporation's knowledge in paragraph (a) above, refer to the knowledge of each of Leslie Dan, Anthony Schincariol, Michael Byrne and Nicholas Glover after having made reasonable enquiries. 9. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS The Purchaser acknowledges that the representations, warranties and covenants of the Purchaser contained in this Subscription Agreement are made with the intent that they may be relied upon by the Corporation to, among other things, determine its eligibility to purchase Purchased Units. The Purchaser further agrees that by accepting the Purchased Units, the Purchaser will be representing and warranting that the foregoing representations and warranties are true as at the Closing Time with the same force and effect as if they had been made by the Purchaser at the Closing Time and that they will survive the purchase by the Purchaser of the Purchased Units and will continue in full force and effect notwithstanding any subsequent disposition by them of the Purchased Units, Common Shares, Share Purchase Warrants or Common Shares issued upon the exercise of the Share Purchase Warrants. 10. PRE-EMPTIVE RIGHT (a) Except as expressly provided in this Section 10, no Equity Securities will be issued by the Corporation, and no option or other right for the purchase of, acquisition of, or subscription for, any Equity Securities will be granted, at any time after the date hereof except upon compliance with the provisions of this Section 10. Without limiting the generality of the foregoing, nothing in this section 10 will be construed to prohibit the Corporation from issuing securities at any time and from time to time, on such terms and conditions as may be acceptable to the board of directors of the Corporation. (b) If the Corporation proposes to undertake a Public Share Issuance, the Corporation will ensure that the terms of such Public Share Issuance will enable the Purchaser to purchase that number of Equity Securities in order that the Purchaser may maintain its percentage holding of the total issued and outstanding Common Shares of the Corporation on a fully diluted basis, excluding Excluded Share Issuances, determined immediately prior - 16 - to the Public Share Issuance (the "OWNERSHIP LEVEL") on the same terms and conditions as the other participants in the Public Share Issuance. (c) If the Corporation proposes to undertake a Public Share Issuance and the circumstances of the Public Share Issuance in the Corporation's judgment, acting reasonably, do not permit the Purchaser to participate in the offering, then the Corporation may proceed with the offering provided that the Purchaser is afforded an opportunity within 180 days of the closing of such offering to participate in that offering or in another offering on substantially the same terms as the original offering (that offering or another offering being referred to herein as the "ALTERNATIVE TRANSACTION"). Until the completion of the Alternative Transaction, or until the Purchaser declines to participate fully in the Alternative Transaction, the Purchaser will be deemed to have the same share ownership percentage interest in the Corporation as it had prior to the Public Share Issuance in which the Purchaser was not permitted to participate. If the Purchaser agrees to participate in the Alternative Transaction but not to its full pro rata share, it will, immediately upon such agreement, have its share ownership percentage deemed to be reduced to the actual share ownership percentage interest it would have upon completion of such Alternative Transaction and, should it fail to complete the Alternative Transaction, the share ownership percentage interest of the Purchaser will be reduced to its actual level at that time. (d) The pre-emptive rights pursuant to this Section 10 will terminate immediately and will be lost for all future time on the earlier of: (i) five years from the date of this Agreement; and (ii) if at any time, the Purchaser ceases to hold Common Shares whether or not the Purchaser subsequently acquires securities of the Corporation. (e) Commencing 4 years and 6 months from the date of this agreement, the Purchaser and the Corporation will commence negotiations in good faith to extend the rights provided to the Purchaser in Section 10 on commercially reasonable terms. 11. FIRST RIGHT OF NEGOTIATION (a) Provided that the Purchaser (or its successors or assigns) continues to hold any Common Shares of the Corporation (the "OWNERSHIP THRESHOLD"), the Corporation hereby grants a right of first negotiation (the "RIGHTS") to the Purchaser to obtain an exclusive license (the "LICENSE") to develop, market, sell, promote and distribute (in a geographic territory to be negotiated) the next five Indications (the "FIVE INDICATIONS") for which the Corporation seeks a licensee to develop, market, sell, promote and distribute the applicable Indication. (b) The Rights will expire on the earlier of: - 17 - (i) five years from the date of this Agreement; and (ii) the delivery of Negotiation Notices to the Purchaser by the Corporation in respect of Five Indications and the earlier of: (A) the expiry of the Negotiation Period in respect of each of the applicable Indications; and (B) the execution and delivery by each of the Purchaser and the Corporation of a License and Development Agreement in respect of each of the applicable Indications; (iii) if the holding of Common Shares by the Purchaser falls below the Ownership Threshold, the Purchaser's Rights under this Section 11 will terminate immediately and will be lost for all future time and thereafter the Purchaser will not have any rights under Section 11 in respect of the Five Indications whether or not the Purchaser subsequently acquires securities of the Corporation. (c) (i) The Corporation will notify the Purchaser that it wishes to trigger the obligations in this Section at a time determined by the Corporation in respect of each Indication, but not earlier than the initiation of the first clinical trials using human subjects in respect of each of the Five Indications (the "NEGOTIATION NOTICE"). (ii) Upon receipt of a Negotiation Notice, each of the Corporation and the Purchaser will negotiate for a period of up to 60 days (the "NEGOTIATION PERIOD") the terms under which: (A) the Purchaser would obtain the License from the Corporation and its Affiliates; and (B) the Purchaser and the Corporation will jointly develop the applicable Indication (the "DEVELOPMENT AND LICENSE AGREEMENT"). (C) The Development and License Agreement will contain, without limitation, the following terms and conditions (I) payment terms (including, without limitation, license fees, ongoing royalties, milestone payments, cost sharing on joint development activities and minimum sales commitments); and (II) further assurances by the Corporation to assist the Purchaser in obtaining any regulatory approval or registration or any patent, trade-mark, trade dress or - 18 - other intellectual property rights in respect of the Corporation products which are necessary for the marketing, sale, promotion or distribution of the applicable indications. (iii) For greater certainty, the Corporation will not negotiate or enter into discussions with any other party in respect of licensing or development of any of the Five Indications until the earlier of: (A) the expiry of the Negotiation Period in respect of an applicable Indication; (B) the execution and delivery by each of the Corporation and the Purchaser of a Development and License Agreement (to the extent permitted under that agreement) in respect of an applicable Indication; or (C) the Purchaser's ownership in the Corporation falls below the Ownership Threshold. (iv) For greater certainty, if the Corporation and the Purchaser do not execute and deliver a Development and License Agreement before the expiry of the Negotiation Period, the Corporation will have no further obligations to the Purchaser in respect of that Indication, and the Corporation may negotiate, enter into discussions with and execute and deliver agreements with any other person in respect of the particular Indication that is the subject of the Negotiation Notice, provided that the Corporation may not offer the applicable Indication to any other party on terms which are materially more favourable to the other person than the terms offered to the Purchaser having regard to all of the circumstances of the applicable offers. (d) Commencing 4 years and 6 months from the date of this agreement, the Purchaser and the Corporation will commence negotiations in good faith to extend the rights provided to the Purchaser in Section 11 on commercially reasonable terms. 12. INTERPRETATION All terms not otherwise defined herein will have the meaning ascribed to them in Schedule "A" to this Agreement. 13. FURTHER ASSURANCES The Purchaser and the Corporation agree to deliver such documents, certificates, assurances and other instruments as may be required to carry out the provisions of this Subscription Agreement. - 19 - 14. GOVERNING LAW This Subscription Agreement is governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein. The Purchaser and the Corporation irrevocably attorn to the jurisdiction of the courts of the Province of Ontario. 15. SURVIVAL Except where specifically provided otherwise herein, this Subscription Agreement, including without limitation the representations, warranties and covenants contained herein, will survive and continue in full force and effect and be binding upon the Purchaser and the Corporation notwithstanding the completion of the purchase of the Purchased Securities by the Purchaser pursuant hereto and any subsequent disposition by the Purchaser of the Purchased Securities. 16. ASSIGNMENT This Subscription Agreement is not transferable or assignable by any party without the consent of the other parties. 17. COUNTERPARTS This Subscription Agreement may be executed by fax and in counterparts, each of which will be deemed to be an original and all of which will constitute one and the same document. 18. SUBSCRIPTION PARTICULARS (a) The number of Purchased Units being subscribed for is 14,021,000 at a price equal to $0.20 per Unit, with the aggregate price of the Purchased Units being subscribed for being Cdn.$2,804,200. (b) The Common Shares and Share Purchase Warrants that constitute the Purchased Units are to be registered in the name of Teva Pharma B.V., whose address is Industrieweg 23, 3640 RK Mijdrecht, The Netherlands. (c) The certificates representing the Common Shares and Share Purchase Warrants comprising the Purchased Units are to be delivered at Closing to counsel to the Purchaser. [THE REST OF THE PAGE INTENTIONALLY LEFT BLANK] - 20 - 19. COMMUNICATIONS Subject to applicable law, the Corporation shall provide the Purchaser with an opportunity to review any press release, announcement or public statement to be issued in connection with the execution of this Subscription Agreement and the sale of the Purchased Units prior to the release thereof. DATED this ____day of September, 2003. TEVA PHARMA B.V. By: --------------------------------------- Name: Title: ACCEPTANCE The above-mentioned Subscription Agreement is hereby accepted and agreed to by the undersigned. DATED at Toronto, Ontario, this ____day of September, 2003. VIVENTIA BIOTECH INC. By: --------------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary SCHEDULE "A" In this Subscription Agreement: 1. "Affiliate" will have the meaning set forth in the Business Corporations Act (Ontario). 2. "Arm's Length" will have the meaning attributed to such term in the Income Tax Act (Canada). 3. "Company Intellectual Property" means all material Intellectual Property owned or acquired by the Corporation and the Subsidiary or in which the Corporation or the Subsidiary has any rights necessary for the conduct of the Corporation's business as it is currently being conducted. 4. "Corporation Products" means products developed solely by or solely on behalf of and for the sole benefit of, the Corporation, which for greater certainty, excludes products discovered pursuant to collaboration agreements with third parties from time to time. 5. "Equity Securities" means equity securities (including securities which are, directly or indirectly, convertible, exercisable or exchangeable for equity securities, whether at the option of the Corporation, the holder or automatically) issued in connection with a Public Share Issuance. 6. "Excluded Share Issuance" includes any issuance of securities of the Corporation for non-financing purposes, including, without limitation, in connection with: (a) a business acquisition or other strategic transaction; (b) the Corporation's stock option or other incentive compensation plans; (c) securities issued as share dividends or pursuant to the exercise of conversion privileges, options, or rights previously granted by the Corporation or issued in accordance with Section 10; or (d) securities issued in connection with arm's length lease financing, bank financing or other similar transactions that are primarily of a non-equity financing nature. 7. "Indications" means an indication of any of the Corporation Products and in respect of such indication the Corporation has conducted or is conducting or has had or is having conducted on its behalf the first clinical trials using human subjects. 8. "Intellectual Property" means all: (a) rights in respect of all trade secrets, confidential information and confidential know-how; (b) all copyrights, whether registered or not, and all registrations and records of such copyrights; (c) all industrial designs, design patents and other designs and all registrations and records of them; (d) all rights pursuant to the Integrated Circuit Topography Act and all registrations and records of them; (e) all patents and applications for patents and all inventions in each of them, applied for or registered in any jurisdiction, all patents which may issue out of such applications and all divisions, reissues, renewals, reexaminations, continuations, continuations in part and extensions; (f) all trade-marks and other commercial symbols, whether registered or not, including: (i) both registered trade and service marks (as defined in the Trademarks Act) and unregistered trade and service marks; (ii) designs, logos, indicia, distinguishing guises, trade names, business names and other source or business identifiers; (iii) fictitious characters; (iv) all registrations and applications for registration in respect of such marks or symbols that have been made in the Canadian Trademarks Office or any such similar office in any other country, all records of such registrations and applications, and all reissues, extensions or renewals of such registrations and applications; (v) all common law and other rights in such marks and symbols; and (g) all names, marks and symbols which are registered in the name of the Corporation as domain names with any Internet domain name registration authority. 9. "Intellectual Property Licenses" means all licenses and other contracts granting the Corporation or the Subsidiary a license, right to use, or any other interest in Intellectual Property other than a full conveyance of all rights in such Intellectual Property. 10. "Public Share Issuance" means a treasury issuance by the Corporation of equity securities principally for the purpose of financing of the Corporation that is not an Excluded Share Issuance. SCHEDULE 8(a)(XVI) LITIGATION 1. The Corporation is involved in a claim against the National Research Counsel of Canada, Simon Foote, Saran Narang and Colin Roger MacKenzie, with respect to a dispute of co-inventorship regarding specific aspects of the Corporation's H-11 based invention entitled "antigen binding fragments that specifically detects cancer cells, nucleotides encoding the fragments and use thereof for the prophylaxis and detection of cancers" and the related patents and patent applications. 2. The Corporation is involved in a claim against it and seven other parties, including Novopharm Ltd., by First Monitor Canada Inc. for the alleged breach of a distribution agreement between the plaintiff and Novopharm Ltd. SCHEDULE 8(a)(XXXI) INTELLECTUAL PROPERTY Status as of August 26, 2003 PAGE 1
PATENT/ APPLICATION PRODUCT TITLE FILED COUNTRY PATENT NO. DATE OF ISSUE 95 922 373.6 A6 Human Monoclonal June 16, 1995 Europe EP 0 766 736 September 12, 2001 Antibodies Specific to Cell Cycle Independent Glioma Surface(A6) 695 22 689.4-08 A6 Human Monoclonal November 5, 2001 Germany DE 695 22 689.4-08 April 12, 2002 Antibodies Specific to Cell Cycle Independent Glioma Surface(A6) EP 0 766 736 A6 Human Monoclonal November 5, 2001 France Antibodies Specific to Cell Cycle Independent Glioma Surface(A6) EP 0 766 736 A6 Human Monoclonal November 5, 2001 U.K. Antibodies Specific to Cell Cycle Independent Glioma Surface(A6) 08/264,093 A6 Human Monoclonal June 21, 1994 U.S. 5,639,863 June 17, 1997 Antibodies Specific to Cell Cycle Independent Glioma Surface(A6) 33696/97 H11 Antigen Binding Fragments May 22, 1997 Australia 725238 January 25, 2001 (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers PI 9710811-1 H11 Antigen Binding Fragments November 10, 1998 Brazil (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 2,255,540 H11 Antigen Binding Fragments May 22, 1997 Canada (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers CN 97194815.1 H11 Antigen Binding Fragments November 28, 1998 China (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 97929703.3 H11 Antigen Binding Fragments May 22, 1997 Europe (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers P9902713 H11 Antigen Binding Fragments May 22, 1997 Hungary (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 127193 H11 Antigen Binding Fragments November 28, 1998 Israel (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. PATENT/ CONFIDENTIAL INFORMATION APPLICATION A BRIEF STATUS 95 922 373.6 [ ] 695 22 689.4-08 [ ] EP 0 766 736 [ ] EP 0 766 736 [ ] 08/264,093 [ ] 33696/97 [ ] PI 9710811-1 [ ] 2,255,540 [ ] CN 97194815.1 [ ] 97929703.3 [ ] P9902713 [ ] 127193 [ ]
Status as of August 26, 2003 PAGE 2
PATENT/ PRODUCT TITLE FILED COUNTRY PATENT NO. DATE OF ISSUE APPLICATION 9-542853 H11 Antigen Binding Fragments May 22, 1997 Japan (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 989695 H11 Antigen Binding Fragments May 22, 1997 Mexico (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 332566 H11 Antigen Binding Fragments May 22, 1997 New Zealand 332566 December 7, 2000 (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 985,150 H11 Antigen Binding Fragments May 22, 1997 Norway (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 9805601-3 H11 Antigen Binding Fragments May 22, 1997 Singapore 60444 April 18, 2000 (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 09/194,164 H11 Antigen Binding Fragments November 20, 1998 US (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 101,108 H11 Antigen Binding Fragments May 22, 2000 Hong Kong (H11) That Specifically Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 505305 H11 Antigen Binding Fragments June 21, 2000 N.Zealand NZ 505305 October 7, 2002 (Divisional of (H11) That Specifically 332566) Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 72432/00 H11 Antigen Binding Fragments December 20, 2000 Australia (Divisional of AU (H11) That Specifically Patent 725238) Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 08/862,124 H11 Antigen Binding Fragments May 22, 1997 US 6,207,153 March 27, 2001 (Priority over (H11) That Specifically 08/657,449); CIP) Detect Cancer Cells, Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 09/782,397 (2nd H11 Antigen Binding Fragments February 13, 2001 US Publication No. January 30, 2003 Continuation of (H11) That Specifically US-2003-0021779-A1 US Application Detect Cancer Cells, No. 08/862,124) Nucleotides Encoding The Fragments, And Use Thereof For The Prophylaxis And Detection Of Cancers 10/290,703 (New 4B5* Antigen Binding Fragments November 8, 2002 US Published June 23, 2003 Continuation of Designated 4B5, That 09/747,669 Specifically Detect 12/21/2000 which Cancer Cells, Nucleotides is a Continuation Encoding the Fragments, of 09/111,286 and Use Thereof for the 07/07/1998 Prophylaxis and Detection (Abandoned) which of Cancers claims benefit of 60/051,945 07/08/1997) 79273/98 4B5* Antigen Binding Fragments December 23, 1999 Australia Designated 4B5, That Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers INTELLECTUAL PROPERTY VIVENTIA BIOTECH INC. PATENT/ CONFIDENTIAL INFORMATION APPLICATION A BRIEF STATUS 9-542853 [ ] 989695 [ ] 332566 [ } 985,150 [ ] 9805601-3 [ ] 09/194,164 [ ] 101,108 [ ] 505305 [ (Divisional of 332566) ] 72432/00 [ (Divisional of AU Patent 725238) ] 08/862,124 (Priority over 08/657,449); CIP) ] 09/782,397 (2nd [ Continuation of US Application No. 08/862,124) ] 10/290,703 (New [ Continuation of 09/747,669 12/21/2000 which is a Continuation of 09/111,286 07/07/1998 (Abandoned) which claims benefit of 60/051,945 07/08/1997) ] 79273/98 [ ]
Status as of August 26, 2003 PAGE 3
PATENT/ PRODUCT TITLE FILED COUNTRY PATENT NO. DATE OF ISSUE APPLICATION 2002301149 4B5* Antigen Binding Fragments September 23, 2002 Australia (Divisional of Designated 4B5, That 79273/98) Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 98929569.6 4B5* Antigen Binding Fragments January 10, 2000 Europe Designated 4B5, That Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 2000-502064 4B5* Antigen Binding Fragments December 23, 1999 Japan Designated 4B5, That Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 501990 4B5* Antigen Binding Fragments December 23, 1999 New Zealand 501990 January 7, 2003 Designated 4B5, That Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 2,295,375 4B5* Antigen Binding Fragments December 24, 1999 Canada Designated 4B5, That Specifically Detect Cancer Cells, Nucleotides Encoding the Fragments, and Use Thereof for the Prophylaxis and Detection of Cancers 548378 4B5* Anti-idiotypic antibody October 23, 1995 U.S. US 5,653,977 August 5, 1997 that mimics the GD2 antigen 10/070,503 based Camelized A6 Enhanced Phage Display March 7, 2002 U.S. on PCT/CA00/01027 Libraries and Methods for filed September Producing Same (based on 7, 2000 Carmelized A6) 00 960243-4 Camelized A6 Enhanced Phage Display March 3, 2002 Canada Libraries and Methods for Producing Same (based on Carmelized A6) 00 960243-4 Camelized A6 Enhanced Phage Display March 12, 2002 Europe EP Publication Published: June 19, Libraries and Methods for No.1 214 352 2002 Producing Same (based on Carmelized A6) PCT/CA01/01845 Llama A6 Phage Display Libraries December 21, 2001 Canada (PCT filed on of Human VH Fragments Provisional 60/258,031) PCT/CA01/01845 Llama A6 Phage Display Libraries Priority from Canada (National Phase of Human VH Fragments Provisional filed Entry in Canada) December 21, 2000 Official S. No and filing date awaited. PCT/CA01/01845 Llama A6 Phage Display Libraries Priority from U.S. (National Phase of Human VH Fragments Provisional filed Entry in Canada) December 21, 2000 Official S. No and filing date awaited. PCT/CA01/01845 Llama A6 Phage Display Libraries Priority from Europe (National Phase of Human VH Fragments Provisional filed Entry in Canada) December 21, 2000 Official S. No and filing date awaited. 2,424,255 (1st VB4-845 Immunotoxin March 26, 2003 Canada Provisional filed in Canada) 60/466,608 VB4-845 Methods for Treating April 30, 2003 U.S. Cancer Using a Recombinant Immunotoxin 2nd U.S. VB4-845 Methods for Treating yet to be filed, U.S. Provisional Cancer Using a final draft (filing imminent) Recombinant Immunotoxin application being reviewed. [ INTELLECTUAL PROPERT VIVENTIA BIOTECH INC. PATENT/ CONFIDENTIAL INFORMATION APPLICATION A BRIEF STATUS 2002301149 [ (Divisional of 79273/98) ] 98929569.6 [ ] 2000-502064 [ ] 501990 [ ] 2,295,375 [ ] 548378 10/070,503 based [ on PCT/CA00/01027 filed September 7, 2000 ] 00 960243-4 [ ] 00 960243-4 [ ] PCT/CA01/01845 [ (PCT filed on Provisional 60/258,031) ] PCT/CA01/01845 [ (National Phase Entry in Canada) Official S. No and filing date awaited. ] PCT/CA01/01845 [ (National Phase Entry in Canada) Official S. No and filing date awaited. ] PCT/CA01/01845 [ (National Phase Entry in Canada) Official S. No and filing date awaited. ] 2,424,255 (1st [ Provisional filed in Canada) ] 60/466,608 2nd U.S. [ Provisional (filing imminent) ] [ ]
EX-3.22 29 t17062exv3w22.txt EXHIBIT 3.22 EXHIBIT 3.22 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: February 17, 2005 FOR VALUED RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Leslie Dan, in lawful money of Canada, the amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. /s/ Michael Byrne by: ------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-3.23 30 t17062exv3w23.txt EXHIBIT 3.23 EXHIBIT 3.23 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: March 1, 2005 FOR VALUED RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Leslie Dan, in lawful money of Canada, the amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. by: /s/ Michael Byrne -------------------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-3.24 31 t17062exv3w24.txt EXHIBIT 3.24 EXHIBIT 3.24 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: March 23, 2005 FOR VALUE RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Clairmark Investments Ltd., in lawful money of Canada, the amount of TWO MILLION SIX HUNDRED THOUSAND DOLLARS ($2,600,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. by: /s/ Michael Byrne -------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-3.25 32 t17062exv3w25.txt EXHIBIT 3.25 EXHIBIT 3.25 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: April 28, 2005 FOR VALUED RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Clairmark Investments Ltd., in lawful money of Canada, the amount of ONE MILLION FIVE HUNDRED THOUSAND ($1,500,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. by: /s/ Michael Byrne -------------------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-3.26 33 t17062exv3w26.txt EXHIBIT 3.26 EXHIBIT 3.26 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: February 17, 2005 FOR VALUED RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Leslie Dan, in lawful money of Canada, the amount of ONE MILLION ONE HUNDRED THOUSAND ($1,100,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. by: /s/ Michael Byrne ------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-3.27 34 t17062exv3w27.txt EXHIBIT 3.27 EXHIBIT 3.27 VIVENTIA BIOTECH INC. DEMAND PROMISSORY NOTE Date: May 12, 2005 FOR VALUED RECEIVED the undersigned hereby unconditionally promises to pay on demand to the order of Clairmark Investments Ltd., in lawful money of Canada, the amount of FOUR HUNDRED THOUSAND ($400,000) and interest thereon. Interest shall accrue on a basis which is equal four and one-half percent (4.5%) per annum, calculated on the basis of a 365-day year and actual days elapse, and compounded annually. This note may be prepaid in full or in part at any time without penalty. Payments of principal and interest hereunder must be made at such other location as may be notified by Leslie Dan to the undersigned. The undersigned waives presentment for payment, notice of non-payment, protest and notice of protest of this promissory note and diligence in collection or bringing suit. This promissory note shall be governed by and construed in accordance with the laws of the Province of Ontario. VIVENTIA BIOTECH INC. by: /s/ Michael Byrne ------------------------------- Name: Michael Byrne Title: Chief Financial Officer and Secretary EX-14.1 35 t17062exv14w1.txt EXHIBIT 14.1 EXHIBIT 14.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 4, 2005 [except as to note 19, which is as at March 23, 2005] with respect to the financial statements of Viventia Biotech Inc. as at December 31, 2004 and 2003 and for each of the years in the three year period ended December 31, 2004 in the Registration Statement for the registration of shares of common stock (Form 20-F) of the Company dated April 28, 2005. /s/ ERNST & YOUNG LLP --------------------- Toronto, Canada Chartered Accountants April 28, 2005 -----END PRIVACY-ENHANCED MESSAGE-----