<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM
_____________________________ TO ____________________________________
COMMISSION FILE NO. 0-29608
GENETRONICS BIOMEDICAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BRITISH COLUMBIA, CANADA 33-002-4450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
for Genetronics,
Inc.)
11199 SORRENTO VALLEY ROAD 92121-1334
SAN DIEGO, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Company's telephone number, including area code: (858) 597-6006
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Company's Common Stock, no par
value, was 22,031,266 as of August 13, 1999.
<PAGE> 2
GENETRONICS BIOMEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a) Consolidated Balance Sheet as of June 30, 1999 (unaudited)
and March 31, 1999 ....................................... 1
b) Consolidated Statements of Loss and Deficit
for the Three Months Ended June 30, 1999
and 1998 (unaudited) ..................................... 2
c) Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1999
and 1998 (unaudited) ..................................... 3
d) Notes to Consolidated Financial Statements ............... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 2. Changes in securities ...................................... 13
Item 6. Exhibits and Reports on Form 8-K ........................... 15
SIGNATURES ................................................................. 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In U.S. dollars)
June 30 March 31
1999 1999
$ $
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 14,487,034 6,189,284
Accounts receivable, net of allowance for
uncollectible accounts of $19,685
[March 31, 1999 - $19,685] 635,521 776,648
Inventories [note 2] 754,809 655,906
Prepaid expenses and other 59,736 6,095
----------- -----------
TOTAL CURRENT ASSETS 15,937,100 7,627,933
----------- -----------
Fixed assets, net 1,093,371 1,177,393
Other assets, net 1,132,386 1,002,318
----------- -----------
18,162,857 9,807,644
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued expenses 1,180,560 1,377,443
Current portion of obligations under
capital leases 47,694 45,892
----------- -----------
TOTAL CURRENT LIABILITIES 1,228,254 1,423,335
----------- -----------
Obligations under capital leases 105,727 118,384
Deferred rent 5,977 9,564
----------- -----------
TOTAL LIABILITIES 1,339,958 1,551,283
----------- -----------
SHAREHOLDERS' EQUITY
Share capital 28,540,182 28,357,863
Special Warrants [note 4] 11,331,267 --
Cumulative translation adjustment (105,821) (103,001)
Deficit (22,942,729) (19,998,501)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 16,822,899 8,256,361
----------- -----------
18,162,857 9,807,644
=========== ===========
</TABLE>
Note: The financial statements at March 31, 1999 are derived from Audited
financial statements but do not include all of the footnote and other
disclosures required by generally accepted accounting principles.
See accompanying notes
1
<PAGE> 4
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF
LOSS AND DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(In U.S. dollars)
THREE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30 JUNE 30
1999 1998
$ $
----------- -----------
<S> <C> <C>
REVENUE
Net sales 699,078 814,405
Grant funding 198,385 62,883
Revenues under collaborative research
and development arrangements -- 6,000
Interest income 68,283 69,849
----------- -----------
965,746 953,137
----------- -----------
EXPENSES
Cost of sales 326,737 380,634
Research and development 1,969,863 1,483,235
Selling, general and administrative 1,606,663 998,749
Interest expense 6,711 4,226
----------- -----------
3,909,974 2,866,844
----------- -----------
NET LOSS FOR THE PERIOD (2,944,228) (1,913,707)
Deficit, beginning of period (19,998,501) (13,394,664)
----------- -----------
DEFICIT, END OF PERIOD (22,942,729) (15,308,371)
=========== ===========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED [note 3] (0.14) (0.10)
=========== ===========
SHARES USED IN COMPUTING NET LOSS PER SHARE 21,673,079 19,158,762
=========== ===========
</TABLE>
See accompanying notes
2
<PAGE> 5
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In U.S. dollars)
THREE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30 JUNE 30
1999 1998
$ $
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (2,944,228) (1,913,707)
Items not involving cash:
Depreciation and amortization 127,247 70,518
Changes in working capital items:
Accounts receivable 141,127 (53,634)
Inventories (98,903) 36,944
Prepaid expenses and other (53,641) 1,067
Amount payable and accrued expenses (196,883) (204,604)
Deferred rent (3,587) (3,586)
----------- -----------
CASH USED IN OPERATING ACTIVITIES (3,028,868) (2,067,002)
----------- -----------
INVESTING ACTIVITIES
Purchase of capital assets (17,329) (139,676)
Increase in other assets (155,964) (151,886)
----------- -----------
CASH USED IN INVESTING ACTIVITIES (173,293) (291,562)
----------- -----------
FINANCING ACTIVITIES
Payments on obligations under capital leases (10,855) (4,817)
Proceeds from issuance of Special Warrants - net 11,431,065 --
Proceeds from issuance of common shares - net 82,521 220,980
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 11,502,731 216,163
----------- -----------
Effect of exchange rate changes on cash (2,820) (29,293)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,297,750 (2,171,694)
Cash and cash equivalents, beginning of period 6,189,284 6,521,990
----------- -----------
Cash and cash equivalents, end of period 14,487,034 4,350,296
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The Consolidated Statements of Loss and Deficit for the three-month
periods ended June 30, 1999 and June 30, 1998, the Consolidated Balance Sheets
as of June 30, 1999, and the Consolidated Statements of Changes in Financial
Condition for the three month-periods ended June 30, 1999 and June 30, 1998 have
been prepared by the Company. In the opinion of management, all adjustments
(which include reclassifications and normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
June 30, 1999 and for all periods presented, have been made.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated financial
statements and notes thereto should be read in conjunction with the audited
consolidated financial statements for the year ended March 31, 1999 included in
the Genetronics Biomedical Ltd. Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations for the
three-month period ended June 30, 1999 are not necessarily indicative of the
results for the full year.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(In U.S. dollars)
June 30, 1999 March 31, 1999
------------- --------------
<S> <C> <C>
Raw Materials 537,793 401,634
Work in process 68,262 81,863
Finished Goods 148,754 172,409
------- -------
754,809 655,906
------- -------
</TABLE>
3. PER SHARE DATA
Basic loss per common share is computed by dividing the net loss by the
weighted average shares outstanding during the period. Diluted earnings per
share reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted to common stock.
Since the effect of the assumed exercise of common stock options and other
convertible securities was anti-dilutive, basic and diluted share as presented
on the consolidated statements of operations are the same.
4
<PAGE> 7
4. SHAREHOLDERS' EQUITY
Private Placement
On June 17, 1999 the Company closed a private placement of 4,187,500
special warrants at a price of US$ 3.00 per special warrant for gross proceeds
of US$ 12,562,500 less expenses of US$ 1,231,233. The special warrants are
convertible into common shares for no further consideration upon the earlier
of 1) five days after receipt for the final prospectus is issued by the last of
the securities regulatory authorities in British Columbia and Ontario, or 2)
request for conversion made by special warrant holder after June 17, 1999, or 3)
the date of June 16, 2000.
5. SEGMENT INFORMATION
The Company's reportable business segments include the BTX division and
the Drug Delivery division. The Company evaluates performance based on many
factors including net results from operations before certain unallocated costs.
The Company does not allocate interest income and expenses and general and
administrative costs to its reportable segments. In addition, total assets are
not allocated to each segment.
Substantially all of the Company's assets and operations are located in
the United States and predominantly all revenues are generated in the United
States.
<TABLE>
<CAPTION>
BTX DRUG DELIVERY
DIVISION DIVISION TOTAL
$ $ $
---------- ---------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1999
Reportable segment revenue 699,078 198,385 897,463
---------- ---------- ----------
Add reconciling items
Interest income 68,283
---------- ---------- ----------
Total revenue 965,746
---------- ---------- ----------
Net results of reportable segment (134,531) (1,651,897) (1,786,428)
---------- ---------- ----------
Add (deduct) reconciling items
Interest income 68,283
General and administrative (1,219,372)
Interest expense (6,711)
---------- ---------- ----------
Net loss (2,944,228)
========== ========== ===========
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
BTX DRUG DELIVERY
DIVISION DIVISION TOTAL
$ $ $
---------- ---------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1998
Reportable segment revenue 814,405 68,883 883,288
---------- ---------- ----------
Add reconciling items
Interest income 69,849
---------- ---------- ----------
Total revenue 953,137
---------- ---------- ----------
Net results of reportable segment 98,724 (1,350,527) (1,251,803)
---------- ---------- ----------
Add (deduct) reconciling items
Interest income 69,849
General and administrative (727,527)
Interest expense (4,226)
---------- ---------- ----------
Net loss (1,913,707)
========== ========== ==========
</TABLE>
6. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada (Canadian GAAP), which,
in the case of the Company, conform in all material respects with those in the
United States (U.S. GAAP) and with the requirements of the Securities and
Exchange Comission (SEC), except as described below.
The impact of significant variations to U.S. GAAP on the
consolidated statements of loss and deficit are as follows:
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30 JUNE 30
1999 1998
$ $
----------- -----------
<S> <C> <C>
Loss for the period, Canadian GAAP (2,944,228) (1,913,707)
Adjustment for stock based compensation
- non-employees (102,543) (66,797)
----------- -----------
Loss for the period, U.S. GAAP (3,046,771) (1,980,504)
=========== ===========
Unrealized losses on foreign currency translation (2,820) (29,293)
----------- -----------
Comprehensive loss for the period, U.S. GAAP (3,049,591) (2,009,797)
=========== ===========
Loss per share, U.S. GAAP (0.14) (0.10)
=========== ===========
Weighted average number of shares,
U.S. GAAP 21,673,079 19,158,762
=========== ===========
</TABLE>
The impact of significant variations to U.S. GAAP on the Consolidated Balance
Sheet items are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
$ $
----------- -----------
<S> <C> <C>
Share capital 30,075,969 29,791,107
Deficit (24,478,516) (21,431,745)
=========== ===========
</TABLE>
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although the Company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved. The important factors that could
cause actual results to differ materially from those in the forward-looking
statements herein include, without limitation, the current stage of development
of both Genetronics and its products, the timing and uncertainty of results of
both research and regulatory processes, the extensive government regulation
applicable to its business, the unproven safety and efficacy of its device
products, its significant additional financing requirements, the volatility of
its stock price, the uncertainty of future capital funding, its potential
exposure to product liability or recall, uncertainties relating to patents and
other intellectual property, including whether the Company will obtain
sufficient protection or competitive advantage therefrom, uncertainties relating
to the Company's ability to successfully complete its Year 2000 initiatives and
its dependence upon a limited number of key personnel and consultants and its
significant reliance upon its collaborative partners for achieving its goals,
and other factors detailed in its Annual Report on Form 10-K for the year ended
March 31, 1999.
GENERAL
Through its Drug Delivery Division, Genetronics is engaged in developing
drug delivery systems based on electroporation to be used in the site-specific
treatment of disease. Through its BTX Division, the Company develops,
manufactures, and sells electroporation equipment to the research laboratory
market.
In the past the Company's revenues primarily reflected research grants
and, through the BTX Division, product sales to the research market. In October
1998 the Company entered into comprehensive License and Development and Supply
Agreements with Ethicon, Inc., a Johnson & Johnson company, involving
Genetronics' proprietary drug delivery system for the Electroporation Therapy
Treatment of cancer. As part of the License Agreement, the Company received an
up-front licensing fee and will be receiving future milestone payments if and
when milestones are met. Ethicon Inc. recently transferred its responsibilities
and obligations under the License and Development and Supply Agreements to
Ethicon Endosurgery, Inc., which is also a Johnson & Johnson company.
Until the commercialization of clinical products pursuant to the License
and Development and Supply Agreements, the Company expects revenues to continue
to be attributable to product sales to the research market, milestone payments,
grants, collaborative research arrangements, and interest income.
7
<PAGE> 10
Due to the expenses incurred in the development of the drug delivery
systems, the Company has been unprofitable in the last five years. As of June
30, 1999 the Company has incurred a cumulative net loss of $ 22,942,729. The
Company expects to continue to incur substantial operating losses in the future
due to continued spending on research and development programs, the funding of
preclinical studies, clinical trials and regulatory activities and the costs of
manufacturing and administrative activities.
RESULTS OF OPERATIONS
Revenues
The BTX Division produced net sales of $699,078 for the three months
ended June 30, 1999, compared with net sales of $814,405 for the three months
ended June 30, 1998, a decrease of $ 115,327, or 14%. Export sales (outside of
the United States) for the three month period ended June 30, 1999 were 38% of
total sales compared to 40% of total sales for the three month period ended June
30, 1998. The decrease in export sales as a percentage of total sales were
primarily attributable to a relative decrease in sales to a Japanese
distributor, a customer that has traditionally purchased a high volume of
Genetronics' products over the past years, due in part to the Asian economic
downturn. Also, certain orders from customers received in June 1999 were not
shipped until July because the required pre-payment was not received until July.
Domestic sales decreased by 11% from the three-month period ended June
30, 1998 to the three-month period ended June 30, 1999. An increase in sales to
VWR, one of the Company's domestic distributors, was more than offset by a
decrease in direct sales and sales to Intermountain, another domestic
distributor.
Revenues from grant funding increased from $62,883 for the three months
ended June 30, 1998 to $198,385 for the three months ended June 30, 1999. The
higher grant revenues were primarily a result of increased activities within the
Oncology field for which a two-year Phase II SBIR grant was awarded to the
Company by the NIH in September 1997.
Cost Of Sales
Cost of sales decreased by $53,897, or 14%, from $380,634 for the three
months ended June 30, 1998 to $326,737 for the three months ended June 30, 1999.
The decrease was primarily a result of lower sales in the three-month period
ended June 30, 1999.
Gross Profit and Gross Margin
Primarily due to the lower sales, the gross profit for the three months
ended June 30, 1999, in the amount of $372,341, decreased by $61,430, or 14%,
compared with $433,771 for the three months ended June 30, 1998. The gross
profit margin of 53% for the three months ended June 30, 1999 was equal to the
gross profit margin of 53% for the three months ended June 30, 1998.
8
<PAGE> 11
Selling, General and Administrative Expenses
Selling, general and administrative expenses, which include advertising,
promotion and selling expenses, increased by $607,914, or 61%, from $998,749
for the three months ended June 30, 1998 to $1,606,663 for the three months
ended June 30, 1999. The Company added administrative and management personnel
to support increased research and development activities in the Drug Delivery
Division and the ongoing clinical trials. Sales and marketing expenses in the
BTX Division increased as a result of efforts to build up a distributor sales
force to expand domestic sales.
Research and Development/Clinical Trials
Research and development costs increased by $486,628, or 33%, from
$1,483,235 for the three months ended June 30, 1998 to $1,969,863 for the
three months ended June 30, 1999 primarily because the cost of monitoring
clinical trials in the United States, Canada and Europe increased. Other
increased costs were for personnel in the Quality Assurance Department.
Further, during the three months ended June 30, 1999, the Drug Delivery
Engineering Department continued its work on development of commercial versions
of the Electrode Applicators and the MedPulser, also contributing to the
increase in research and development costs..
Net results of reportable segments (Net results of reportable segments
do not include unallocated costs such as interest income and expense and general
and administrative costs)
The BTX Division reported net expenditures in the amount of $134,531 for
the three months ended June 30, 1999 compared to a net surplus in the amount of
$98,724 for the three months ended June 30, 1998. The decrease was the result of
lower sales and increased sales and marketing efforts to enhance sales through
distributors. Also, increased engineering expenses to upgrade BTX instruments
for CE mark compliance contributed to the net expenditures.
The Drug Delivery Division reported net expenditures in the amount of
$1,651,897 for the three months ended June 30, 1999 compared to $ 1,350,527 for
the three months ended June 30, 1998, an increase of $301,370, or 22%. The
higher net expenditures were primarily a result of increased clinical trial
expenses and engineering expenses.
Net Loss
For the three months ended June 30, 1999, the Company recorded a net
loss of $2,944,228, compared with a net loss of $1,913,707 for the three months
ended June 30, 1998, an increase of $1,030,521, or 54%. The higher net loss is
primarily a result of increased research and development expenses and selling,
general and administrative expenses.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
During the last five fiscal years, the Company's primary uses of cash
have been to finance research and development activities in the Drug Delivery
Division. The Company has satisfied its cash requirements principally from
proceeds from the sale of equities. In June 1999 the Company closed a private
placement of 4,187,500 special warrants at a price of US$ 3.00 per special
warrant for net proceeds to the Company of US$ 11,331,267. Each warrant entitles
the holder to acquire one common share in the capital of the Company at no
additional cost upon exercise.
As of June 30, 1999, the Company had working capital of $14,708,846,
compared to $6,204,598, as of March 31, 1999. On June 30, 1999, the Company's
cash and cash equivalents amounted to $14,487,034. Cash flows used in operating
activities were $3,028,868 for the three months ended June 30, 1999 compared to
$2,067,002 for the three months ended June 30, 1998. The increase in cash
used in operating activities compared to the period ended June 30, 1998 was
primarily attributable to the higher net loss for the three months ended June
30, 1999.
Receivables decreased $141,127, or 18%, from $776,648 at March 31, 1999
to $635,521 at June 30, 1999, as a result of lower sales activity during the
three months ended June 30, 1999.
Inventories increased from $655,906 at March 31, 1999 to $754,809 at
June 30, 1999, primarily due to a further build-up of inventory in the Drug
Delivery Division.
Current liabilities decreased from $1,423,335 at March 31, 1999 to
$1,228,254, at June 30, 1999. The decrease was primarily a result of the timing
of payments of liabilities in the three-month period ended June 30, 1999.
Cash flows used in investing activities were $291,562 and $173,293 for
the three months ended June 30, 1998 and 1999, respectively. The cash used for
other assets in the amount of $155,964 for the three months ended June 30, 1999
was primarily a result of expenditures for patent activities.
The Company believes that its existing cash will be sufficient to fund
its operations at least through the next twelve months.
The Company's long term capital requirements will depend on numerous
factors including
- - The progress and magnitude of the research and development programs,
including preclinical and clinical trials;
- - The time involved in obtaining regulatory approvals;
- - The cost involved in filing and maintaining patent claims;
- - Competitor and market conditions;
- - The Company's ability to establish and maintain collaborative
arrangements;
10
<PAGE> 13
- - The Company's ability to obtain grants to finance research and
development projects; and
- - The cost of manufacturing scale-up and the cost of commercialization
activities and arrangements
The Company's ability to generate substantial funding to continue
research and development activities, preclinical and clinical studies and
clinical trials and manufacturing, scale-up, and administrative activities is
subject to a number of risks and uncertainties and will depend on numerous
factors including:
- - The company's ability to raise funds in the future through public or
private financings, collaborative arrangements, grant awards or from
other sources;
- - The potential for equity investments, collaborative arrangements,
license agreements or development or other funding programs with the
Company in exchange for manufacturing, marketing, distribution or other
rights to products developed by the Company; and
- - The Company's ability to maintain its existing collaborative
arrangements
The Company cannot guarantee that additional funding will be available
when needed. If it is not, the Company will be required to scale back its
research and development programs, preclinical studies and clinical trials and
administrative activities and its business and financial results and condition
would be materially adversely affected.
YEAR 2000 ISSUES
The Year 2000 Problem stems from the fact that many computer systems,
software programs and equipment and instruments with embedded microprocessors
were designed to only recognize the last two digits of a calendar year. With the
arrival of the Year 2000, these systems and microprocessors may encounter
operating problems due to their inability to distinguish years after 1999 from
years preceding 1999. The Company is aware of the issues associated with the
Year 2000 Problem in many existing hardware and software applications. In 1998
the Company established a Year 2000 compliance plan which was approved by the
Company's senior management and Board of Directors. To execute the plan, the
Company formed a Year 2000 committee that is composed of both management and
non-management personnel. In addition, the Company has contracted with an
outside Year 2000 service provider to assist with the implementation of the Year
2000 compliance plan. The plan is a multi-phased approach to the Year 2000
Problem, and includes assessment, inventory, testing and remediation phases.
The Company has completed the assessment and inventory phases of the
Year 2000 compliance plan, and is currently in the final stages of testing the
Company's internal management information and other systems to verify their Year
2000 compliance status. Based on the results of the work performed to date, the
Company believes that the mission critical computer systems and applications
used by the Company either are currently Year 2000 compliant, or will be brought
into compliance per the Year 2000 plan.
11
<PAGE> 14
The Company, in collaboration with its outside Year 2000 consultants,
has examined the products manufactured in the BTX Division and has determined
that the BTX products are not expected to experience any Year 2000-related
failures. In addition, the Company, in collaboration with its outside Year 2000
consultants, has examined the products produced by the Drug Delivery Division,
and has determined that these products are not expected to experience any Year
2000-related failures.
In addition to examining the Company's internal Year 2000 compliance
issues, the Company has contacted the critical companies in the Company's supply
and distribution chain in order to ensure that they are Year 2000 compliant, and
to ensure that there will be no interruption of the Company's business
operations due to Year 2000 failures. The Company is currently evaluating the
responses received from these companies and following up on any Year
2000-related issues. The Company is also evaluating the Year 2000 compliance
status of other critical business dependencies, including business partners,
collaborators, and clinical test sites. As part of this effort, the Company is
establishing a process to monitor the Year 2000 compliance status of its key
outside business dependencies up to and through the Year 2000. However, the
Company cannot guarantee the compliance status of third parties, and the failure
of key suppliers, distributors, business partners, or customers to become Year
2000 compliant on a timely basis, or at all, could have a material adverse
effect on the Company.
The Company is continuing to develop a contingency plan which will be
used by the Company in the event that Year 2000 failures occur which affect
critical operations. Contingency planning may include increasing inventory
levels, establishing secondary sources of supply and manufacturing, and
maintaining back-up lines of communications with our customers. However, it is
unlikely that any contingency plan can fully mitigate the impact of significant
business disruptions among key suppliers or customers.
The Company has established a Year 2000 budget to address Year 2000
issues. The total cost of these Year 2000 compliance activities to date have not
been material to the Company's financial condition or its operating results. In
addition to utilizing outside resources for the Company's Year 2000 program, the
Company is devoting substantial internal resources to the Year 2000 compliance
program. The Company is including the internal costs incurred as part of the
Company's Year 2000 expenditures in this disclosure. The Company will continue
to review and update data for costs incurred related to the Year 2000 and will
revise forecasted costs each quarter. To date, the costs incurred for Year 2000
compliance activities have been approximately $4,000 internally and $19,000 for
external resources. Based on the Company's Year 2000 review to date, the Company
does not believe that the incremental costs of addressing Year 2000 issues will
have a material adverse effect on the Company's consolidated results of
operations, liquidity and capital resources. The Company believes that it will
complete the implementation of its Year 2000 compliance plan by the end of the
third quarter of calendar year 1999.
However, there can be no assurance that the Company will timely identify
and remediate all year 2000 problems, that remedial efforts will not involve
significant time and expense, or that such problems will not have a material
adverse effect on the Company's business, operating results and financial
condition.
12
<PAGE> 15
The statements set forth herein concerning the Year 2000 Problem which
are not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. There can be no guarantee that any estimates or
other forward-looking statements will be achieved and actual results could
differ significantly from those planned or contemplated. The Company plans to
update the status of its Year 2000 program as necessary in its periodic filings
and in accordance with applicable securities laws.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion and analysis of the Company's market risk is described
in the Company's 10-K for the Fiscal year ended March 31, 1999. Through June 30,
1999, there have been no other material changes to the market risks described at
March 31, 1999. Additionally, the Company does not anticipate any near-term
changes in the nature of its market risk exposures or in management objectives
and strategies with respect to managing such exposures.
PART II. OTHER INFORMATION
ITEMS 1 AND 3 THROUGH 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 2. CHANGES IN SECURITIES
(c)
a. SECURITIES SOLD.
Date of sale: June 16, 1999
Title and amount of securities:
4,187,500 special warrants
418,750 Agent's special warrants
30,000 common shares
b. UNDERWRITERS AND OTHER PURCHASERS.
Names of principal underwriters, if any: Canaccord International (L)
Corporation ("Agent")
Class of persons to whom securities sold: 27 accredited investors
c. CONSIDERATION.
Aggregate offering price:
US$3.00 per special warrant for an aggregate offering price of
US$12,562,500
Aggregate underwriting discounts or commissions:
13
<PAGE> 16
8% of gross proceeds of offering payable in cash to Agent 418,750
Agent's special warrants, which are convertible into Agent's
warrants to purchase common shares at US$3.31 until June 16, 2000
for an aggregate amount of US$1,386,063
Nature of transaction for sale of securities other than for cash, and
aggregate consideration received: 30,000 common shares given to Canaccord as
consideration for various corporate finance services rendered by the Agent to
the Company in connection with the private placement, including acting as
financial advisor to the Company. On June 16, 1999, the common shares had a fair
market value of US$91,890 (GEB closed at US$3.063 on AMEX on June 16, 1999).
d. EXEMPTION FROM REGISTRATION CLAIMED.
Exemption under Regulation S and Regulation D promulgated under the
Securities Act of 1933, as amended
e. TERMS OF CONVERSION OR EXERCISE.
Special warrants are converted into common shares for no additional
consideration upon the earlier of 1) five days after receipt for the final
prospectus is issued by the last of the securities regulatory authorities in
British Columbia and Ontario, or 2) request for conversion made by special
warrant holder after June 17, 1999, or 3) the date of June 16, 2000.
Agent's special warrants are converted into an agent's warrant for no
additional consideration upon the earlier of 1) five days after receipt for the
final prospectus is issued by the last of the securities regulatory authorities
in British Columbia and Ontario, or 2) request for conversion made by Agent
after June 17, 1999, or 3) the date of June 16, 2000.
Agent's warrants are exerciseable into common shares for no additional
consideration upon payment of US$3.31 per agent's warrant until June 16, 2000.
f. USE OF PROCEEDS.
Not applicable.
14
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agency Agreement - Special Warrant Private
Placement, dated June 8, 1999 by and between the
Company and Canacord International (L)
Corporation.
10.2 Special Warrant Indenture, dated June 16, 1999
by and between the Company and Montreal Trust
Company of Canada.
27 Financial Data Schedule (filed only
electronically with the SEC)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 30, 1999
15
<PAGE> 18
GENETRONICS BIOMEDICAL LTD.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Genetronics Biomedical Ltd.
<TABLE>
<S> <C>
Date: By:
8/13/99 /s/ Lois J. Crandell
-------------------- -----------------------------------------------------------
Lois J. Crandell, Chief Executive Officer
Date: By:
8/13/99 /s/ Martin Nash
-------------------- -----------------------------------------------------------
Martin Nash, Chief Financial Officer
</TABLE>
16
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
AGENCY AGREEMENT -- SPECIAL WARRANT PRIVATE PLACEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT dated for reference June 8, 1999, is made
BETWEEN
GENETRONICS BIOMEDICAL LTD., Suite 210, 580 Hornby Street,
Vancouver, British Columbia, V6C 3B6
(the "Issuer");
AND
CANACCORD INTERNATIONAL (L) CORPORATION, P.O. Box HM 2567,
Hamilton HM KX, Bermuda
(the "Agent")
WHEREAS:
A. The Issuer wishes to privately place with purchasers up to 4,500,000 Special
Warrants at a price of U.S. $3.00 per Special Warrant;
B. The Issuer wishes to appoint the Agent to distribute the Special Warrants,
and the Agent is willing to accept such appointment on the terms and conditions
of this Agreement;
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
1.1 In this Agreement and the Recitals hereto:
(a) "1933 Act" means the Securities Act of 1933 (United States),
as amended;
(b) "1934 Act" means the Securities and Exchange Act of 1934
(United States), as amended;
(c) "Acts" means the Securities Acts or comparable legislation of
the Filing Provinces;
(d) "Agent's Fee" has the meaning defined in Section 4 hereof;
(e) "Agent's Special Warrants" means special warrants of the
Issuer having the terms provided herein and in the
certificates representing such special warrants;
(f) "Agent's Warrants" means share purchase warrants of the Issuer
having the terms provided herein and in the certificates
representing such share purchase warrants;
(g) "Applicable Legislation" means the Acts, the Regulations and
Rules made thereunder, and all Policy Statements, Blanket
Orders and Rulings, Notices and Interpretation Notes and other
administrative policies and directions issued by Commissions;
(h) "Canaccord" means Canaccord Capital Corporation;
<PAGE> 2
-2-
(i) "Closing" means the completion of the purchase and sale of
some or all of the Special Warrants;
(j) "Commissions" means the securities regulatory authorities in
the Filing Provinces;
(k) "Corporate Finance Shares" means 30,000 common shares in the
capital of the Company, as presently constituted;
(l) "Disclosure Record" means all press releases, Material Change
reports, prospectuses, financial statements and other
documents which the Issuer is required to file with the
securities regulatory authorities in those jurisdictions where
it is a "reporting issuer" under the Acts or has equivalent
status as at the date hereof;
(m) "Distribution" means the proposed issuance of Shares to the
holders of the Special Warrants , and Agent's Warrants to the
holders of the Agent's Special Warrants, on the deemed
exercise of the Special Warrants and Agent's Special Warrants,
free of any resale restrictions in the Filing Provinces other
than those imposed on a "control person", as that term is
defined in the Securities Act (British Columbia);
(n) "Exchange" means the Toronto Stock Exchange;
(o) "Exemptions" means exemptions from the prospectus requirements
of the Acts;
(p) "Filing Deadline" means the day the rules and policies of the
Exchange require that the subscription forms and other
documentation in connection with the Private Placement must be
filed with the Exchange, or any extension thereof;
(q) "Filing Provinces" means British Columbia and Ontario;
(r) "Foreign Issuer" has the meaning defined in Rule 405 of the
1933 Act;
(s) "Institutional Accredited Investor" means an institutional
"accredited investor" as defined in Rule 501 of Regulation D;
(t) "Material Change" has the meaning defined in the Acts, as
supplemented by National Policy No. 40;
(u) "Material Fact" has the meaning defined in the Acts;
(v) "Offering Memorandum" has the meaning defined in Applicable
Legislation;
(w) "Misrepresentation" has the meaning defined in the Acts;
(x) "Private Placement" means the offering of the Special Warrants
on the terms and conditions of this Agreement;
(y) "Prospectus" means a preliminary and final prospectus (which
may include a short form prospectus filed under National
Policy 47 of the Canadian Securities Administrators),
including any amendments made thereto, which, upon issuance of
a receipt therefore by the Commissions, will qualify the
Distribution;
(z) "Purchasers" means the purchasers of Special Warrants;
(aa) "Qualification Date" means the date on which a receipt for the
final Prospectus is issued by the last of the Commissions to
do so;
(ab) "Registration Statement" means a registration statement in
compliance with the 1933 Act relating to the Shares;
<PAGE> 3
-3-
(ac) "Regulation D" means Regulation D promulgated under the 1933
Act;
(ad) "Regulation S" means Regulation S promulgated under the 1933
Act;
(ae) "Regulatory Authorities" means the Commissions and the
Exchange;
(af) "Securities" means the Special Warrants, the Agent's Special
Warrants, the Corporate Finance Shares, the Agent's Warrants
and the Shares;
(ag) "Shares" means previously unissued common shares in the
capital of the Issuer, as presently constituted, to be issued
upon the exercise or deemed exercise of the Special Warrants,
and the Agent's Warrants;
(ah) "Special Warrant Indenture" means an indenture to be made
between the Issuer and the Trustee providing for issuance of
the Special Warrants;
(ai) "Special Warrants" means special warrants of the Issuer having
the terms and conditions provided in this Agreement and in the
Special Warrant Indenture;
(ak) "Subsidiary" has the meaning defined in the Securities Act
(British Columbia); and
(al) "Trustee" means Montreal Trust Company of Canada;
1.2 In this Agreement, the following terms have the meanings
defined in Regulation "S":
(a) "Directed Selling Efforts";
(b) "Substantial U.S. Market Interest";
(c) "U.S. Person" and
(d) "United States".
2. APPOINTMENT OF AGENT AND GREENSHOE OPTION
2.1 The Issuer appoints the Agent as its exclusive agent and the Agent accepts
the appointment and agrees to act as the exclusive agent of the Issuer to use
commercially reasonable efforts to find and introduce to the Issuer potential
purchasers to purchase up to 4,500,000 Special Warrants, at a price of U.S.
$3.00 per Special Warrant, by way of sale under the Exemptions.
2.2 The sale of the Special Warrants to the Purchasers will be effected only
pursuant to Exemptions which do not require the delivery or filing of an
Offering Memorandum.
2.3 The Agent may solicit and accept subscriptions for additional Special
Warrants up to a maximum of 15% of the Private Placement (the "Greenshoe
Option").
2.4 The number of additional Special Warrants subject to the Greenshoe Option
will be the lesser of 15% of the Private Placement or the actual number of
additional Special Warrants for which subscriptions have been received.
2.5 On receipt of notice in writing from the Agent given on or before the final
Closing, the Issuer will issue and deliver to the Agent forthwith, at a price of
U.S. $3.00 per Special Warrant, the number of Special Warrants subject to the
Greenshoe Option.
<PAGE> 4
-4-
3. SPECIAL WARRANTS AND AGENT'S SPECIAL WARRANTS
SPECIAL WARRANTS
3.1 The Special Warrants will be issued under and governed by the Special
Warrant Indenture, and will be registered in the names of the Purchasers or
their nominees.
3.2 The Special Warrant Indenture will be satisfactory in form and substance to
the Agent, acting reasonably.
3.3 The Issuer covenants with the Agent, and the Special Warrant Indenture will
provide (among other things):
(a) that each Special Warrant will be exercisable, for no
additional consideration, to acquire one Share;
(b) that the Issuer will use its reasonable best efforts to retain
the listing of its common shares on the Exchange and either or
both of the American Stock Exchange and NASDAQ, during the
term of the Special Warrants and thereafter;
(c) that the Issuer will use its reasonable best efforts to file
and obtain receipts for the preliminary and (final) Prospectus
from the Commissions, and to file the Registration Statement
with the United States Securities and Exchange Commission, and
have the Registration Statement declared effective, as soon as
practicable, and in any event within 90 days from the date of
the first Closing;
(d) that the Special Warrants may be exercised by the holders
thereof in whole or in part at any time after the Closing on
which they are issued. Any unexercised Special Warrants will
be deemed to be exercised on that day which falls on the
earlier of:
(i) the fifth business day after the Qualification Date;
and
(iii) 12 months from the date of the final Closing
(e) that upon exercise or deemed exercise, the Special Warrants
will be automatically cancelled and will have no further force
or effect;
(f) that the Special Warrants will be transferable, subject to
Applicable Legislation and the rules and policies of the
Exchange;
(g) for the appropriate adjustment in the class and number of the
securities to be issued upon exercise of the Special Warrants
upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the common
shares of the Issuer, the payment of stock dividends and the
amalgamation of the Issuer; and
(h) that the Issuer will use its reasonable best efforts to remain
a "reporting issuer" in the Filing Provinces where it is
presently a reporting issuer, not in default of Applicable
Legislation therein, for one year from the date of the final
Closing;
AGENT'S SPECIAL WARRANTS
3.4 The Agent's Special Warrants will be represented by certificates, and will
be registered in the names of the Agent or as directed by the Agent, subject to
Applicable Legislation.
<PAGE> 5
-5-
3.5 The certificates representing the Agent's Special Warrants will be
satisfactory in form and substance to the Agent, and will provide, among other
things:
(a) that each Agent's Special Warrant will be exercisable, for no
additional consideration, to acquire one Agent's Warrant;
(b) that the Agent's Special Warrants may be exercised by the
holders thereof in whole or in part at any time after the
Closing on which they are issued. Any unexercised Agent's
Special Warrants will be deemed to be exercised on that day
which falls on the earlier of:
(i) the fifth business day after the Qualification Date;
and
(ii) 12 months from the date of the final Closing.
(c) that upon exercise or deemed exercise, the Agent's Special
Warrants will be automatically cancelled and will have no
further force or effect;
(d) that the Agent's Special Warrants will not be transferable,
except as provided by Applicable Legislation or any order
issued by either of the Commissions; and
(e) for the appropriate adjustment in the class and number of the
securities to be issued upon exercise of the Agent's Special
Warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the common
shares of the Issuer, the payment of stock dividends and the
amalgamation of the Issuer.
AGENT'S WARRANTS
3.6 The Agent's Warrants will be represented by certificates, and will be issued
and registered in the name of the holders of the Agent's Special Warrants,
subject to Applicable Legislation.
3.7 The certificates representing the Agent's Warrants will be satisfactory in
form and substance to the Agent, and will provide, among other things:
(a) that the right to purchase a Share upon exercise of an Agents'
Warrant may be exercised at any time until the close of
business on that day which falls 12 months from the Closing on
which the Agent's Special Warrant pursuant to which the
Agent's Warrant was acquired was issued;
(b) that one Agent's Warrant will entitle the holder, on exercise,
to purchase one Share at a price of U.S. $3.31 per Share;
(c) that upon exercise or expiry, the Agent's Warrants will be
automatically cancelled and will have no further force and
effect;
(d) that the Agent's Warrants will not be transferable, except in
accordance with Applicable Legislation and any order which may
be issued by either of the Commissions; and
(e) for the appropriate adjustment in the class, number and price
of the Shares to be issued upon exercise of the Agent's
Warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the Issuer's
common shares, the payment of stock dividends and the
amalgamation of the Issuer.
4. AGENT'S FEE
4.1 In consideration of the introduction of the Purchasers to the Company by the
Agent under this Agreement, the Issuer will, on each Closing:
<PAGE> 6
-6-
(a) pay to the Agent a commission of 8% of the gross proceeds from
the sale of the Special Warrants, including Special Warrants
sold pursuant to the Greenshoe Option, in lawful currency of
the United States (the "Agent's Fee"); and
(b) issue to the Agent or according to the Agent's direction such
number of Agent's Special Warrants as is equal to 10% of the
Special Warrants sold on such Closing; and
4.2 In consideration of various corporate finance services rendered by the Agent
to the Issuer in connection with the Private Placement, including without
limitation acting as financial advisor to the Issuer, the Issuer will, on the
first Closing, issue to the Agent or according to the Agent's direction 30,000
Corporate Finance Shares.
4.3 The Issuer will not endorse the certificates representing the Agent's
Special Warrants, the Agent's Warrants and Shares which may be obtained upon
exercise thereof, the Shares which may be obtained upon exercise of the Agent's
Warrants, or the Corporate Finance Shares with any legend denoting restrictions
on resale under United States securities law.
5. OFFERING RESTRICTIONS
5.1 The Agent will only sell the Special Warrants to persons who represent
themselves as being:
(a) qualified to purchase the Special Warrants under the
Exemptions; and
(b) persons who are not resident in Canada.
5.2 The Agent acknowledges that the Securities have not been registered under
the 1933 Act and may not be offered or sold except in accordance with Regulation
S or, for offers and sales to U.S. Persons, pursuant to Regulation D or Section
4(2) of the 1933 Act. Accordingly, the Agent represents, warrants and covenants
to the Issuer that, with respect to each offer or sale of Securities, either (a)
or (b) is true:
(a) it has offered and sold, and will offer and sell, Securities
only in accordance with Rule 903 of Regulation S. Accordingly,
neither the Agent, its affiliates nor any persons acting on
its behalf, has made or will make:
(i) any offer to sell, or any solicitation of an offer to
buy, Securities to any U.S. Person or to any person
in the United States;
(ii) any sale of Securities to any purchaser unless, at
the time the buy order was or will have been
originated, the purchaser was outside the United
States, or such Agent, affiliate or person acting on
behalf of either reasonably believed that such
purchaser was outside the United States; or
(iii) any Directed Selling Efforts in the United States
with respect to the Securities; or
(b) it has offered and sold, and will offer and sell, securities
only in the following manner;
(i) immediately prior to soliciting offerees, the Agent
had reasonable grounds to believe and did believe
that each offeree was an Institutional Accredited
Investor;
(ii) no form of general solicitation or general
advertising (as those terms are used in Regulation D)
has been or will be used, including advertisements,
articles, notices or other communications published
in any newspaper, magazine, or similar media or
broadcast over radio or television, or any seminar or
meeting whose attendees had been invited by general
solicitation or general advertising, in connection
with the offer or sale of the Securities to U.S.
Persons; and
<PAGE> 7
-7-
(iii) any offer, sale or solicitation of an offer to buy
Securities that has been made or will be made to U.S.
Persons was or will be made only to Institutional
Accredited Investors.
5.3 The Issuer represents, warrants, covenants and agrees that:
(a) the Corporation is a Foreign Issuer and reasonably believes
that there is no Substantial U.S. Market Interest in the
Securities;
(b) except with respect to offers or sales to Institutional
Accredited Investors in reliance upon an exemption from
registration under Rule 506 of Regulation D or section 4(2) of
the 1933 Act, neither the Issuer nor any of its affiliates,
nor any person acting on their behalf, has made or will make:
(i) any offer to sell, or any solicitation of an offer to
buy, any Securities to a U.S. Person, or a person in
the United States; or
(ii) any sale of Securities unless, at the time the buy
order was or will have been originated, the purchaser
is:
(A) outside the United States; or
(B) the Issuer, its affiliates, and any person
acting on their behalf reasonably believe
that the purchaser is outside the United
States;
(c) during the period in which the Securities are offered for
sale, neither it nor any of its affiliates, nor any person
acting on their behalf has made or will make any Directed
Selling Efforts in the United States with respect to
distributions under Regulation S, or has taken or will take
any action that would cause the exemption afforded by Section
4(2) of the 1933 Act, Regulation D or Regulation S to be
unavailable for offers and sales of the Securities, pursuant
to this Agreement; and
(d) none of the Issuer, its affiliates or any person acting on its
or their behalf have engaged or will engage in any form of
general solicitation or general advertising (as those terms
are used in Regulation D) with respect to offers or sales of
the Securities in the United States, including advertisements,
articles, notices or other communications published in any
newspaper, magazine or similar media, or broadcast over radio,
or television, or any seminar or meeting whose attendees have
been invited by general solicitation or general advertising.
6. SUBSCRIPTIONS
6.1 The Agent will use its reasonable best efforts to obtain from each Purchaser
introduced by the Agent, and deliver to the Issuer, on or before the Filing
Deadline duly completed and signed subscriptions in the form attached as
Schedule "A" (for non-U.S. Persons) and Schedule "B" (for U.S. Persons) or in
such other form consented to by the Issuer and the Agent and executed by the
Purchaser.
6.2 The Issuer will accept each properly completed subscription agreement
tendered by the Agent, unless:
(a) the subscriber thereunder would, by virtue of exercise of the
Special Warrants subscribed for, become a "control person" of
the Company, with the meaning of the Securities Act (British
Columbia); or
(b) the Issuer's directors determine, acting reasonably, that it
would not be in the best interests of the Issuer to accept
such subscription.
<PAGE> 8
-8-
7. FILINGS WITH THE REGULATORY AUTHORITIES
7.1 The Issuer will forthwith provide to the Exchange written notice of the
terms of this Agreement and the proposed Private Placement and all other
information required by the rules and policies of the Exchange (the "Notice").
7.2 The Issuer will forthwith provide the Agent and its solicitors with a copy
of the Notice, and, forthwith on receipt, a copy of the preliminary and final
letters of acceptance of the Notice from the Exchange.
7.3 The Issuer will use its reasonable best efforts to satisfy as expeditiously
as possible each of the conditions required to be satisfied by the Exchange
prior to acceptance by the Exchange of the Notice.
7.4 Within 10 days of each Closing, the Issuer will:
(a) file with the Commissions any report required to be filed by
Applicable Legislation, in connection with the Private
Placement, in the required form; and
(b) provide the Agent's solicitors with copies of the report or
reports.
8. CLOSINGS
8.1 In this Section:
(a) "Certificates" means the certificates representing the Special
Warrants sold on a Closing in the names and denominations
reasonably requested by the Purchasers and the Agent, and the
certificates representing the Agent's Special Warrants and the
Corporate Finance Shares to be issued on such Closing;
(b) "Proceeds" means the gross proceeds of the sale of Special
Warrants, less:
(i) the Agent's Fee;
(ii) the reasonable expenses of the Agent in connection
with the Private Placement which have not been paid
by the Issuer;
(iii) any amount which has been attached by garnishing
order or other form of attachment; and
(iv) any amount paid directly to the Issuer by Purchasers
in connection with the Private Placement.
8.2 Closings will take place on a day or days to be agreed between the Issuer
and the Agent.
8.3 The Issuer will, on each Closing, issue and deliver the Certificates to the
Agent, or according to the Agent's direction, against payment of the Proceeds.
8.4 If the Issuer has satisfied all of its obligations under this Agreement, the
Agent will, on the Closing, pay the Proceeds to the Issuer against delivery of
the Certificates.
8.5 The Issuer will endorse the Certificates, and the certificates representing
any Shares issued prior to the earlier of the day a receipt is issued for the
(final) Prospectus by the last of the Commissions and the expiry of the
applicable "hold period", with a statement that:
(a) the securities represented by the certificate are subject to a
hold period and may not be traded until the expiry of the hold
period except as permitted by Applicable Legislation; and
<PAGE> 9
-9-
(b) specifies the date the hold period expires.
8.6 Except with respect to Special Warrants purchased by U.S. Persons, the
Issuer will not endorse the Certificates, or the certificates representing the
Shares, with any legend referring to resale restrictions imposed under the 1933
Act.
9. CONDITIONS OF CLOSINGS
9.1 The obligations of the Agent on each Closing will be conditional upon the
following:
(a) the Issuer will take all necessary corporate action in order
to validly create, issue and sell the Special Warrants to the
Purchasers and the Agent's Special Warrants and the Agent's
Warrants and the Corporate Finance Shares to the Agent;
(b) the Issuer will make all necessary filings and obtain all
necessary approvals of the Regulatory Authorities, subject
only to conditions imposed by the rules and policies of the
Exchange, to issue and sell the Special Warrants to the
Purchasers and the Agent's Special Warrants and the Corporate
Finance Shares to the Agent;
(c) the issue and sale of the Special Warrants, the Agent's
Special Warrants and the Corporate Finance Shares will be
exempt from the prospectus requirement of the Acts and the
registration requirement of the 1933 Act;
(d) the issue of Shares upon exercise of the Agent's Warrants will
be exempt from the prospectus requirement of the Acts and the
registration requirement of the 1933 Act;
(e) the Issuer's outstanding common shares will be listed on the
Exchange and the American Stock Exchange, and the Shares and
the Corporate Finance Shares will be accepted for listing on
the Exchange and the American Stock Exchange, subject only to
conditions which may only be fulfilled after Closing;
(f) the Issuer will deliver to the Agent and its solicitors
favourable opinions of the Issuer's Canadian and United States
solicitors dated as of the date of such Closing, in form and
substance acceptable to the Agent and its solicitors, acting
reasonably, as to all legal matters reasonably requested by
the Agent relating to the business of the Issuer and the
creation, issuance and sale of the Securities;
(g) the Issuer will deliver to the Agent and its solicitors such
other certificates, comfort letters or opinions of its
auditors or other experts or other documents relating to the
Private Placement or the affairs of the Issuer as the Agent
and its solicitors may reasonably request;
(h) the directors of the Issuer will pass a resolution,
satisfactory in form and substance to the Agent and its
solicitors, with respect to certain corporate governance
matters; and
(i) each representation and warranty of the Issuer herein shall be
true, and the Issuer will perform or comply with all of its
covenants and obligations hereunder.
9.2 Each Closing and the obligations of the Issuer and the Agent to complete the
issue and sale of the Securities are subject to:
(a) receipt of all required regulatory approval for or acceptance
of the Private Placement; and
(b) the removal or partial revocation of any cease trading order
or trading suspension made by any competent authority to the
extent necessary to complete the Private Placement.
<PAGE> 10
-10-
10. MATERIAL CHANGES
10.1 If, between the reference date of this Agreement and that day which falls
five days from the day a receipt is issued for the (final) Prospectus by the
last of the Commissions, a Material Change relating to the Issuer or the
Subsidiaries (as hereinafter defined), or a change in a Material Fact relating
to any of the Securities occurs, the Issuer will:
(a) as soon as practicable notify the Agent and Canaccord in
writing, setting forth the particulars of such change;
(b) as soon as practicable, issue and file with the Regulatory
Authorities a press release that is authorized by a senior
officer disclosing the nature and substance of the change;
(c) as soon as practicable file with the Commissions the report of
the Material Change required by Applicable Legislation and in
any event no later than 10 days after the date on which the
change occurs;
(d) provide copies of that press release, when issued, and that
report, when filed, to the Agent and Canaccord and their
solicitors;
(e) if required by Applicable Legislation, amend the Prospectus to
reflect the change, provided it has first obtained the
approval of Canaccord for the form and substance of the
amendment; and
(f) if an amendment is prepared to the Prospectus, file such
amendment with the Commissions in the time limited by
Applicable Legislation, and provide the Agent without charge
with as many commercial copies of such amendment as it may
reasonably require.
10.2 If the Issuer is uncertain as to whether there has been a Material Change,
or a change in a Material Fact, it will promptly provide the Agent and Canaccord
with full particulars of the event giving rise to the uncertainty, and will
consult with the Agent and Canaccord as to whether such event constitutes a
Material Change, or a change in a Material Fact.
11. PROSPECTUS
11.1 The Prospectus will be satisfactory in form and substance to the Agent,
Canaccord and their solicitors, acting reasonably.
11.2 The Issuer will permit the Agent, Canaccord and their solicitors to
participate in the preparation of the Prospectus, to discuss the Issuer's
business with its corporate officials and auditors and to conduct such full and
comprehensive review and investigation of the Issuer's business, affairs,
capital and operations as the Agent, Canaccord and their solicitors reasonably
consider to be necessary to establish a "due diligence" defence under the Acts
to an action for rescission or damages based on an allegation that the
Prospectus contained a Misrepresentation, and to enable Canaccord to responsibly
execute the underwriter's certificate in the Prospectus.
11.3 The Prospectus will contain a contractual right of rescission granted by
the Issuer to the Purchasers for Misrepresentations in the Prospectus.
11.4 Provided the Agent, Canaccord and their solicitors, acting reasonably are
satisfied that the Prospectus contains full, true and plain disclosure of all
Material Facts relating to the Issuer, the Subsidiaries and the Securities, and
provided the Issuer delivers to the Agent the documents to be delivered on the
date of the (final) Prospectus, the Agent will use its best efforts to have
Canaccord execute the underwriter's certificate in the (final) Prospectus.
11.5 The delivery by the Issuer to the Agent and Canaccord of the Prospectus and
any amendment or supplement thereto will constitute the Issuer's representation
and warranty to the Agent and Canaccord that all material information and
statements contained therein (other than information and statements supplied by
and
<PAGE> 11
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relating solely to the Agent and Canaccord) is contained in the Prospectus, that
the Prospectus does not contain any Misrepresentation, and the Prospectus
constitutes full, true and plain disclosure of all Material Facts relating to
the Issuer and its Subsidiary, and to the Securities.
11.6 On the date of the (final) Prospectus, the Issuer will deliver the
following documents to the Agent, Canaccord and their solicitors, each of which
will be in form and substance satisfactory to the Agent, Canaccord and their
solicitors, acting reasonably:
(a) an opinion of the auditors of the Issuer, dated as of the date
of the (final) Prospectus and addressed to the Agent and
Canaccord, relating to the accuracy of the financial
statements included in the Prospectus and verification of the
accuracy of the financial, numerical and certain other
information disclosed in the (final) Prospectus;
(b) a certificate of the Issuer issued to the Agent and Canaccord
and their solicitors, dated as of the date of the (final)
Prospectus and executed by the President of the Issuer or by
another officer approved by the Agent and Canaccord,
certifying certain facts relating to the Issuer and its
affairs reasonably requested by the Agent and Canaccord and
their solicitors; and
(c) any other certificates, comfort letters or opinions in
connection with any matter related to the Prospectus which are
reasonably requested by the Agent, Canaccord or their
solicitors.
11.7 On the day a receipt is issued for the Prospectus by the last of the
Commissions, the Issuer will deliver the following documents to the Agent,
Canaccord, and their solicitors, each of which will be in form and substance
satisfactory to the Agent, Canaccord and their solicitors, acting reasonably:
(a) an opinion of counsel of the Issuer, dated as of such date and
addressed to the Agent, Canaccord and their solicitors,
relating to any legal matters in connection with the Issuer
and the Distribution for which the Agent, Canaccord or their
solicitors may reasonably request an opinion; and
(b) any other certificates, comfort letters or opinions in
connection with any matter related to the Prospectus which are
reasonably requested by the Agent, Canaccord or their
solicitors.
11.8 The Issuer will furnish to the Agent such number of commercial copies of
the Prospectus and each amendment and supplement thereto and such other relevant
documents as the Agent may reasonably request.
11.9 Once the Commissions have issued receipts for the (final) Prospectus, and
the Issuer has delivered to the Agent copies of such receipts and all documents
required to be delivered to the Agent on the date of the (final) Prospectus and
the date a receipt is issued for the (final) Prospectus by the last of the
Commissions, the Agent will deliver, or cause to be delivered, one copy of the
(final) Prospectus to each holder of Special Warrants.
12. TERMINATION
12.1 The Agent may terminate its obligations under this Agreement by notice in
writing to the Issuer at any time before the final Closing if:
(a) an adverse Material Change relating to the Issuer or the
Subsidiaries, or an adverse change in a Material Fact relating
to any of the Securities, occurs or is announced by the
Issuer;
(b) there is an event, accident, governmental law or regulation or
other occurrence of any nature which, in the opinion of the
Agent, seriously affects or will seriously affect the
financial markets, or the market for the Issuer's securities
in particular, or the business of the Issuer or the
Subsidiaries, or the ability of the Agent to perform its
obligations under this Agreement, or a Purchaser's decision to
purchase the Special Warrants;
(c) following a consideration of the history, business, products,
property or affairs of the Issuer, its principals and
promoters, or the Subsidiaries, or of the state of the
financial markets in general, or
<PAGE> 12
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the state of the market for the Issuer's securities in
particular, the Agent determines, in its sole discretion, that
it is not in the interest of the Purchasers to complete the
purchase and sale of the Special Warrants;
(d) an enquiry or investigation (whether formal or informal) in
relation to the Issuer, the Issuer's directors, officers or
promoters, the Subsidiaries or its directors or officers is
commenced or threatened by an officer or official of any
competent authority;
(e) any order to cease, halt or suspend trading (including an
order prohibiting communications with persons in order to
obtain expressions of interest) in the securities of the
Issuer prohibiting or restricting the Private Placement or the
Distribution is made by a competent regulatory authority and
that order is still in effect;
(f) the Issuer is in breach of any material term of this
Agreement; or
(g) the Agent determines that any of the representations or
warranties made by the Issuer in this Agreement is false or
has become false.
12.2 The obligations of the Agent hereunder will terminate if the Exchange has
not granted approval for the Private Placement, subject only to filings with the
Exchange which may only be made after Closing, within 90 days of the reference
date hereof.
12.3 The Agent may terminate its obligations under this Agreement with respect
to the Distribution and the Prospectus at any time prior to the expiry of the
last of the "hold periods" applicable to any of the Securities if:
(a) any order to cease trading (including an order prohibiting
communications with persons in order to obtain expressions of
interest) in the securities of the Issuer is made by a
competent regulatory authority and that order is still in
effect;
(b) the Issuer is in breach of any material term of this
Agreement; or
(c) the Agent determines that any of the representations or
warranties made by the Issuer in this Agreement is false or
has become false.
13. WARRANTIES, REPRESENTATIONS AND COVENANTS
13.1 The Issuer warrants and represents to the Agent that:
(a) the Issuer is a valid and subsisting company duly incorporated
and organized under the laws of British Columbia, is a
"reporting issuer" under the Acts, and the Issuer:
(i) is in good standing and up to date with all filings
required under the Company Act (British Columbia);
and
(ii) has the corporate power and capacity to enter into
this Agreement and to carry out the transactions
herein contemplated;
(b) the Issuer is a "reporting issuer" under the 1934 Act, and is
not in default of any of the requirements thereof or the rules
and regulations made thereunder;
(c) the Issuer is a Foreign Issuer within the meaning of Rule 405
made under the 1933 Act, and there is no "Substantial U.S.
Market Interest", within the meaning of Rule 902 made under
the 1933 Act, in the Issuer' securities;
(d) the Issuer is a "Qualifying Issuer" within the meaning of
Blanket Order and Ruling 98/7 issued by the British Columbia
Securities Commission, and has filed a "Current AIF" within
the meaning of
<PAGE> 13
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Local Policy Statement 3-27 issued by the British Columbia
Securities Commission, together with all supporting documents;
(e) the Issuer carries on business in the Province of British
Columbia and does not carry on business in any other province
or territory of Canada or in any other country;
(f) the Issuer has no "Subsidiaries" or "affiliated" companies,
each within the meaning of the Securities Act (British
Columbia), and owns no equity interest in any business
organization, apart from Genetronics, Inc. and Genetronics
S.A. (the "Subsidiaries");
(g) Genetronics, Inc. is a valid and subsisting company duly
incorporated and organized under the laws of California, and
is in good standing and up to date with all filings required
under the California Corporations Code.
(h) Genetronics S.A. is a valid and subsisting company duly
incorporated and organized under the laws of France, and is in
good standing and up to date with all filings required under
the corporate legislation of France.
(i) the Issuer is the recorded and beneficial owner of 100% of the
issued and outstanding shares in the capital of the
Subsidiaries. No person has any right, agreement or option,
present or future, contingent or absolute, or any right
capable of becoming such a right, agreement or option to
acquire any such shares or, for the issue or allotment of any
shares in the capital of the Subsidiaries, or any other
security convertible or exchangeable for such shares.
(j) the Issuer and the Subsidiaries each hold all material
licences and permits that are required for carrying on their
businesses in the manner and in the jurisdictions in which
such businesses are presently being carried on;
(k) the Issuer and the Subsidiaries each have the corporate power
and capacity to own their assets and to carry on the
businesses presently carried on by them;
(l) the authorized capital of the Issuer consists of 200,000,000
shares divided into 100,000,000 common shares without par
value and 100,000,000 Class A preferred shares without par
value of which 21,666,226 common and no Class A preferred
shares are issued and outstanding as at the date hereof, and
the outstanding shares are fully paid and non-assessable;
(m) the Issuer will reserve or set aside sufficient shares in its
treasury to issue the Shares and the Corporate Finance Shares;
(n) the minute books of the Issuer contain all records of the
proceedings of the meetings of the Issuer's directors,
shareholders and committees of directors since its date of
incorporation, except for the minutes of the meeting of
directors held on May 28, 1999;
(o) the minute books of the Subsidiaries contain all records of
the proceedings of the meetings of its directors, shareholders
and committees of directors since its date of incorporation,
except for the minutes of the meeting of directors held on May
28, 1999;
(p) since their respective dates of incorporation the businesses
of the Issuer and the Subsidiaries have been carried on in the
usual and ordinary course and neither the Issuer nor the
Subsidiaries have entered into any transaction out of the
usual and ordinary course of business;
(q) since October 7, 1994, there has not been any adverse Material
Change in the position (financial, business or otherwise) or
condition of the Issuer (on a consolidated basis);
(r) the Issuer has filed all documents which it is required to
file under the continuous disclosure provisions of the Acts,
and the Issuer has filed no Material Change reports on a
confidential basis
<PAGE> 14
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with the securities regulatory authorities in these
jurisdictions where it is a "reporting issuer" which remain
confidential;
(s) the Issuer's outstanding common shares are listed, posted and
called for trading on the Exchange, and the Issuer is not in
material breach of its Listing Agreement with the Exchange;
(t) the Issuer's outstanding common shares are listed, posted and
called for trading on the American Stock Exchange, and the
Issuer is not in material breach of its Listing Agreement with
the American Stock Exchange;
(u) neither the Issuer nor the Subsidiaries are subject to any
material mortgage, lien, lease, agreement, instrument or any
other restriction of any kind or character which would prevent
the consummation of the transactions contemplated herein;
(v) the Issuer or the Subsidiaries are the beneficial owners of
the properties, business and assets or the interests in the
properties, business or assets referred to in the Disclosure
Record, free and clear of all liens, charges and encumbrances,
except as may be disclosed in the Disclosure Record, and all
agreements by which the Issuer or the Subsidiaries holds an
interest in a property, business or assets are in good
standing according to their terms;
(w) the audited consolidated financial statements of the Issuer
for its fiscal year ended March 31, 1998 (the "Audited
Financial Statements) and the unaudited consolidated financial
statements of the Issuer for the three month period ended
December 31, 1998 (the "Interim Financial Statements") have
been prepared in accordance with Canadian generally accepted
accounting principles, accurately reflect the financial
position and all material liabilities (accrued, absolute,
contingent or otherwise) of the Issuer as at the respective
dates thereof, and there have been no adverse Material Changes
in the financial position of the Issuer on a consolidated
basis since the date of the Audited Financial Statements,
except as recorded in the books of the Issuer and fully and
plainly disclosed in the Disclosure Record;
(x) since the date of the Audited Financial Statements, there has
not been any adverse Material Change of any kind whatsoever in
the financial position or condition of the Issuer on a
consolidated basis or any damage, loss or other change of any
kind whatsoever in circumstances materially affecting the
business or assets of the Issuer or the Subsidiaries, or the
right or capacity of the Issuer or the Subsidiaries to carry
on their businesses;
(y) no financial statements of the Issuer are publicly available
as at any date, or for any period, subsequent to the Interim
Financial Statements;
(z) all of the material transactions of the Issuer and the
Subsidiaries have been promptly and properly recorded or filed
in or with the books or records of the Issuer;
(aa) all of the material contracts of the Issuer and the
Subsidiaries are described in the Disclosure Record and are in
good standing in all material respects, and neither the Issuer
nor the Subsidiaries are in default in any material respect
thereof, and neither the Issuer nor the Subsidiaries are aware
of any default in any material respect by any other party to
such contracts;
(ab) neither the Issuer nor the Subsidiaries are party to any
agreement, option, understanding or commitment, or any right
or privilege capable of becoming an agreement, option,
understanding or commitment, for the purchase of any of the
businesses, properties or assets or interests in the
businesses properties or assets referred to in the Disclosure
Record, except as may be disclosed in the Disclosure Record;
(ac) the subscription form and all other written or oral
representations made by the Issuer to an investor or potential
investor in connection with the Private Placement will be
accurate in all material respects and will omit no fact, the
omission of which will make such representation misleading;
<PAGE> 15
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(ad) the Issuer has complied in all material respects and will
comply in all material respects with the requirements of all
applicable corporate and securities laws including, without
limitation, Applicable Legislation, the Company Act (British
Columbia), the 1933 Act and the 1934 Act in relation to the
issue and trading of its securities and in all matters
relating to the Private Placement;
(ae) the issue and sale of the Special Warrants by the Issuer and
the Agent does not and will not conflict with, and does not
and will not result in a breach of, any of the terms of its
incorporating documents or those of the Subsidiaries, or any
agreement or instrument to which the Issuer or the
Subsidiaries are a party;
(af) neither the Issuer nor the Subsidiaries are a party to any
actions, suits or proceedings which could materially affect
the Issuer's business or financial condition (on a
consolidated basis), and to the best of the Issuer's knowledge
no such actions, suits or proceedings are contemplated or have
been threatened;
(ag) there are no judgments against the Issuer or the Subsidiaries
which are unsatisfied, nor are there any consent decrees or
injunctions to which the Issuer or the Subsidiaries is
subject;
(ah) neither the Issuer nor the Subsidiaries are in breach of any
law, rule, statute, regulation or by-law applicable to its
operations, properties or assets, the breach of which would
result in a adverse Material Change in the position
(financial, business or otherwise) or condition of the Issuer
(on a consolidated basis), or would affect the rights of the
Issuer or the Subsidiaries;
(ai) no order ceasing or suspending trading in securities of the
Issuer or prohibiting the sale of such securities has been
issued against the Issuer or its directors, officers or
promoters or against any other companies that have common
directors, officers or promoters, and to the best of the
knowledge of the Issuer, no investigations or proceedings for
such purposes are pending or threatened;
(aj) the Issuer and the Subsidiaries have filed all federal,
provincial, state, local and foreign tax returns which are
required to be filed, or have requested extensions thereof,
and have paid all taxes required to be paid by them and any
other assessment, fine or penalty levied against them, to the
extent that any of the foregoing is due and payable, except
for such assessments, fines and penalties which are currently
being contested in good faith;
(ak) the Issuer and the Subsidiaries have established on their
books and records reserves which are adequate for the payment
of all taxes not yet due and payable and there are no liens
for taxes on the assets of the Issuer or the Subsidiaries,
except for taxes not yet due, and there are no audits of any
of the tax returns of the Issuer or the Subsidiaries which are
known by the Issuer's management to be pending, and there are
no claims which have been or may be asserted relating to any
such tax returns which, if determined adversely, would result
in the assertion by any governmental agency of any deficiency
which would have a material adverse effect on the properties,
business or assets of the Issuer on a consolidated basis;
(al) this Agreement has been duly authorized by all necessary
corporate action on the part of the Issuer;
(am) this Agreement is, and the Special Warrant Indenture and the
certificates representing the Agent's Special Warrants will
be, upon execution and delivery by the Issuer, legal, valid
and binding agreements of the Issuer, enforceable against the
Issuer in accordance with their terms, subject only to
customary qualifications regarding the availability of
equitable remedies; and
(an) the Issuer or the Subsidiaries. own or possess adequate rights
to use all material patents, trade-marks, service marks, trade
names, copyrights, trade secrets, information, proprietary
rights and processes necessary for the Issuer's business (on a
consolidated basis) as now conducted and as proposed to be
conducted, without any conflict with or infringement of the
rights of the others.
<PAGE> 16
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Neither the Issuer nor the Subsidiaries has received any
communication alleging that the Issuer or the Subsidiaries has
violated or, by conducting such business as proposed, would
violate any of the patents, trade-marks, service marks, trade
names, copyrights or trade secrets or other proprietary rights
of any other person or entity, apart from on April 7, 1999
pursuant to an ongoing discussion of issues initiated by the
Issuer between the Issuer and the University of South Florida
("USF"), the Issuer received correspondence from USF
purporting to claim certain rights to U.S. Patent No. 5,702,
359, "Needle Electrodes for Mediated Delivery of Drugs and
Genes" issued to Gunther A. Hoffman, Richard A. Gilbert,
Yauhico Hayakawa, Richard Heller and Mark J. Jaroszeski on
December 30, 1997. Such patent is assigned to the Issuer, and
the Issuer disputes USF's claim of rights to such patent.
Neither the execution or delivery of this Agreement, the
conduct of the Issuer's business (on a consolidated basis),
nor the activities of any employees of the Issuer, or the
Subsidiaries in conducting that business will conflict with or
result in a breach of the terms, conditions or provisions of
or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated.
13.3 The representations and warranties of the Issuer contained herein will be
true and correct at each Closing, will survive each Closing, and no
investigation by or on behalf of the Agent will diminish in any respect its
right to rely on such representations and warranties.
13.4 The Agent warrants and represents to the Issuer that:
(a) it is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated; and
(b) it will sell the Special Warrants in compliance with the Acts
and the 1933 Act.
14. EXPENSES OF AGENT
14.1 The Issuer will pay all of the expenses of the Private Placement, the
Prospectus and the Distribution and all the expenses reasonably incurred by the
Agent and Canaccord in connection with the Private Placement, the Prospectus and
the Distribution including, without limitation, the reasonable fees and expenses
of the solicitors for the Agent and Canaccord.
14.2 The Issuer will pay the expenses referred to in Subsection 14.1 even if the
transactions contemplated by this Agreement are not completed or this Agreement
is terminated, unless the failure of acceptance or completion or the termination
is the result of a breach of this Agreement by the Agent.
14.3 The Agent and Canaccord may, from time to time, render accounts for their
expenses in connection with the Private Placement, the Prospectus and the
Distribution to the Issuer for payment on or before the payment dates set out in
the accounts.
14.4 The Issuer authorizes the Agent to deduct its reasonable expenses and those
of Canaccord in connection with Private Placement from the gross proceeds of the
Private Placement and any advance payments made by the Issuer, including
expenses for which an account has not yet been rendered.
15. GARNISHING ORDERS
15.1 If at any time, up to and including the final Closing, the Agent receives a
garnishing order or other form of attachment purporting to attach or garnish a
part or all of the sale price of any of the Securities, the Agent will be free
to pay the amount purportedly attached or garnished into court.
15.2 Any payment by the Agent into court pursuant to a garnishing order will be
deemed to have been received by the Issuer as payment by the Agent against the
sale price of the Securities to the extent of the amount paid, and the Issuer
will be bound to issue and deliver the Securities proportionately to the amount
paid by the Agent.
<PAGE> 17
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15.3 The Agent will not be bound to ascertain the validity of any garnishing
order or attachment, or whether in fact it attaches any moneys held by the
Agent, and the Agent will be free to act with impunity in replying to any
garnishing order or attachment.
15.4 The Issuer will release, indemnify and save harmless the Agent in respect
of all damages, costs, expenses or liability arising from any acts of the Agent
under this Section.
16. INDEMNITY
16.1 The Issuer will indemnify the Agent, Canaccord and each of their respective
directors, officers, employees and agents (collectively, the "Indemnified
Parties") and save them harmless against all losses, claims, damages or
liabilities:
(a) existing by reason of an untrue statement contained in the
subscription agreement, the Disclosure Record or other written
or oral representation made by the Issuer to a Purchaser or
potential Purchaser in connection with the Private Placement,
or in the Prospectus, the Registration Statement or other
written or oral representation made by the Issuer in
connection with the Distribution, or by reason of the omission
to state any fact necessary to make such statements or
representations not misleading (except for information and
statements supplied by and relating solely to the Agent or
Canaccord);
(b) arising directly or indirectly out of any order made by any
regulatory authority based upon an allegation that any such
untrue statement or representation, or omission exists (except
information and statements supplied by and relating solely to
the Agent or Canaccord), that trading in or distribution of
any of the Securities is to cease;
(c) resulting from the failure by the Issuer to obtain the
requisite regulatory approval for the Private Placement, the
Prospectus or the Registration Statement unless the failure to
obtain such approval is the result of a breach of this
Agreement by the Agent;
(d) resulting from the breach by the Issuer of any of the terms of
this Agreement;
(e) resulting from any representation or warranty made by the
Issuer herein not being true or ceasing to be true;
(f) if the Issuer fails to issue and deliver the certificates
representing the Securities in the form and denominations
satisfactory to the Agent at the time and place required by
the Agent with the result that any completion of a sale of the
Securities does not take place; or
(g) if, following the completion of a sale of any of the
Securities, a determination is made by any competent authority
setting aside the sale, unless that determination arises out
of an act or omission by the Agent.
16.2 If any action or claim is brought against an Indemnified Party in respect
of which indemnity may be sought from the Issuer pursuant to this Agreement, the
Indemnified Party will promptly notify the Issuer in writing.
16.3 The Issuer will assume the defence of the action or claim, including the
employment of counsel and the payment of all expenses.
16.4 The Indemnified Party will have the right to employ separate counsel, and
the Issuer will pay the fees and expenses of such counsel.
16.5 The indemnity provided for in this Section will not be limited or otherwise
affected by any other indemnity obtained by the Indemnified Party from any other
person in respect of any matters specified in this
<PAGE> 18
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Agreement and will continue in full force and effect until all possible
liability of the Indemnified Parties arising out of the transactions
contemplated by this Agreement has been extinguished by the operation of law.
16.6 If indemnification under this Agreement is found in a final judgment (not
subject to further appeal) by a court of competent jurisdiction not to be
available for reason of public policy, the Issuer and the Indemnified Parties
will contribute to the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) for which such indemnification is held unavailable
in such proportion as is appropriate to reflect the relative benefits to and
fault of the Issuer, on the one hand, and the Indemnified Parties on the other
hand, in connection with the matter giving rise to such losses, claims, damages,
liabilities or expenses (or actions in respect thereof). No person found liable
for a fraudulent Misrepresentation will be entitled to contribution from any
person who is not found liable for such fraudulent Misrepresentation.
16.7 To the extent that any Indemnified Party is not a party to this Agreement,
the Agent will obtain and hold the right and benefit of this section in trust
for and on behalf of such Indemnified Party.
17. ASSIGNMENT AND SELLING GROUP PARTICIPATION
17.1 The Agent will not assign this Agreement or any of its rights under this
Agreement or, with respect to the Securities, enter into any agreement in the
nature of an option or a sub-option unless and until, for each intended
transaction, the Agent has obtained the consent of the Issuer, and any required
notice has been given to and accepted by the Regulatory Authorities.
17.2 The Agent may offer selling group participation in the normal course of the
brokerage business to selling groups of other dealers, brokers and investments
dealers outside of Canada and the United States, who may or who may not be
offered part of the Agent's Fee.
18. NOTICE
18.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by telegram or telecopier or mailed by prepaid post and
addressed to the party to which notice is to be given at the address indicated
above, or at another address designated by the party in writing.
18.2 If notice is sent by telegram or telecopier or is delivered, it will be
deemed to have been given at the time of transmission or delivery.
18.3 If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
18.4 If there is an interruption in normal mail service due to strike, labour
unrest or other cause at or prior to the time a notice is mailed the notice will
be sent by telegram or telecopier or will be delivered.
19. TIME
Time is of the essence of this Agreement and will be calculated in accordance
with the provisions of the Interpretation Act (British Columbia).
20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, covenants and indemnities of the Issuer
contained in this Agreement will survive the final Closing.
<PAGE> 19
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21. LANGUAGE
This Agreement is to be read with all changes in gender or number as required by
the context.
22. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors and permitted assigns.
23. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
24. COUNTERPARTS
This Agreement may be executed in two or more counterparts and may be delivered
by telecopier, each of which will be deemed to be an original and all of which
will constitute one agreement, effective as of the reference date given above.
<PAGE> 20
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25. LAW
This Agreement is governed by the law of British Columbia and shall be
considered in all respects a British Columbia contract, and the parties hereto
irrevocably attorn and submit to the jurisdiction of the courts of British
Columbia with respect to any dispute related to this Agreement.
This document was executed and delivered as of the date given above.
The common seal of GENETRONICS )
BIOMEDICAL LTD. was hereunto )
affixed in the presence of: )
)
)
/s/ James L. Heppell )
- --------------------------------------- )
Authorized Signatory ) c/s
)
CANACCORD )
INTERNATIONAL (L) CORPORATION )
)
)
)
/s/ Elizabeth A. Watkins )
- --------------------------------------- )
Authorized Signatory )
)
)
- --------------------------------------- )
Authorized Signatory )
<PAGE> 21
SCHEDULE "A"
SUBSCRIPTION AGREEMENT
(THE "AGREEMENT")
The undersigned (the "Subscriber") hereby subscribes for and agrees to purchase
_____________________ special warrants (the "Special Warrants") of Genetronics
Biomedical Ltd. (the "Company") at a price of US$3.00 per Special Warrant for
aggregate proceeds of US$_____________________ (the "Subscription Price"), all
on the terms and subject to the conditions set forth in Schedule A attached
hereto and in the Agency Agreement and the Special Warrant Indenture (each as
defined herein).
EXECUTION BY SUBSCRIBER
------------------------------------
Name of Subscriber
------------------------------------
Address of Subscriber
Signature of Individual Subscriber or
Authorized Signatory of Subscriber ------------------------------------
(if Subscriber is NOT an individual) Name of Contact Person, if
Subscriber not an individual
( )
------------------------------------
Telephone Number of Subscriber or
Contact Person
( )
------------------------------------
Facsimile Number of Subscriber or
Contact Person
EXECUTED BY THE SUBSCRIBER THIS __________ DAY OF _________________, 1999.
PLEASE COMPLETE THE FOLLOWING SECTION IF YOU REQUIRE THE CERTIFICATE(S)
REPRESENTING THE SECURITIES TO APPEAR IN THE NAME OF AN INTERMEDIARY, SUCH AS
YOUR BROKER, OR REQUIRE THE CERTIFICATE(S) TO BE DELIVERED TO AN ADDRESS OTHER
THAN THAT SHOWN ABOVE.
- ------------------------------------ ------------------------------------
REGISTRATION INSTRUCTIONS DELIVERY INSTRUCTIONS
- ------------------------------------ ------------------------------------
Name to appear on certificate(s) Name and account reference, if
applicable
- ------------------------------------ ------------------------------------
Account reference, if applicable Contact Person
- ------------------------------------ ------------------------------------
Address of Intermediary Address for Delivery
------------------------------------
Telephone Number of Contact Person
ACCEPTED by the Company this __________ day of ________________, 1999.
GENETRONICS BIOMEDICAL LTD.
Per: __________________________________
Authorized Signatory
<PAGE> 22
-2-
SCHEDULE A
In consideration of the covenants and agreements herein, and the payment of one
dollar made by each party to the other, the receipt and sufficiency of which is
acknowledged by each party, the parties agree as follows:
1. DESCRIPTION OF SPECIAL WARRANTS
The Special Warrants will be transferable and will be issued pursuant to
an indenture to be made between the Company and Montreal Trust Company of Canada
(the "Special Warrant Indenture") and shall entitle the holders thereof to
receive, without additional payment, upon exercise of the Special Warrants, one
common share (a "Share") of the Company for each Special Warrant held.
The Special Warrants will be exercisable at any time on or before 4:30
p.m. (Vancouver time) (the "Expiry Time"), on the day which is the earlier of:
(a) 12 months from the Closing (as defined below); and (b) the day which is five
business days after a receipt for a (final) prospectus (the "Prospectus")
qualifying the issuance of the Shares issuable upon due exercise of the Special
Warrants has been issued by the securities regulatory authorities in British
Columbia and such other Provinces in Canada that the Agent reasonably requires
(collectively, the "Filing Jurisdictions"). Special Warrants not expressly
exercised by the holders thereof prior to the Expiry Time shall be deemed to
have been so exercised immediately prior thereto.
The Company has covenanted and agreed to, among other things, use its
reasonable best efforts to finalize and obtain a receipt for the Prospectus in
each of the Filing Jurisdictions no later than 5:00 p.m. (Vancouver time) on the
day which is 90 days from Closing (the "Qualification Deadline").
IN THE EVENT THAT THE COMPANY IS UNABLE TO OBTAIN A RECEIPT FOR THE
PROSPECTUS IN ANY OF THE FILING JURISDICTIONS, THE SPECIAL WARRANTS AND THE
SHARES (COLLECTIVELY, THE "SECURITIES") WILL BE SUBJECT TO STATUTORY HOLD
PERIODS DURING WHICH, SUBJECT TO THE AVAILABILITY OF ANOTHER EXEMPTION, THE
SECURITIES MAY NOT BE RESOLD IN SUCH FILING JURISDICTIONS. IN ADDITION, ANY
SHARES OBTAINED PURSUANT TO THE EXERCISE OF SPECIAL WARRANTS PRIOR TO THE
ISSUANCE OF RECEIPTS FOR THE PROSPECTUS BY THE SECURITIES COMMISSIONS IN THE
FILING JURISDICTIONS WILL BE SUBJECT TO STATUTORY RESTRICTIONS ON RESALE. THE
COMPANY IS A REPORTING ISSUER IN BRITISH COLUMBIA AND ONTARIO. THE COMPANY IS
NOT A REPORTING ISSUER IN ANY OTHER JURISDICTION AND A HOLDER RESIDENT IN
ANOTHER JURISDICTION MAY BE SUBJECT TO DIFFERENT AND LONGER RESALE RESTRICTIONS.
RESIDENTS OF SUCH OTHER JURISDICTIONS ARE URGED TO CONSULT WITH COUNSEL THEREIN
ABOUT APPLICABLE RESALE RESTRICTIONS.
IT IS A FURTHER PROVISION OF THE SPECIAL WARRANT INDENTURE THAT THE
AGGREGATE PROCEEDS OF THE SALE OF THE SPECIAL WARRANTS (THE "PROCEEDS"), WILL BE
DELIVERED TO THE COMPANY AT THE CLOSING (AS DEFINED BELOW).
THE TERMS AND CONDITIONS WHICH GOVERN THE SPECIAL WARRANTS ARE CONTAINED
IN THE SPECIAL WARRANT INDENTURE WHICH CONTAINS, AMONG OTHER THINGS,
ANTI-DILUTION PROVISIONS AND PROVISIONS FOR THE APPROPRIATE ADJUSTMENT IN THE
CLASS, NUMBER AND PRICE OF THE SHARES UPON THE OCCURRENCE OF CERTAIN EVENTS,
INCLUDING ANY SUBDIVISION, CONSOLIDATION OR
<PAGE> 23
-3-
RECLASSIFICATION OF THE SHARES OR PAYMENTS OF STOCK DIVIDENDS OR THE
AMALGAMATION OR OTHER SUBSTANTIAL REORGANIZATION OF THE COMPANY.
The Special Warrants herein subscribed for form part of a larger
offering (the "Offering") of up to 4,500,000 Special Warrants to be issued by
the Company pursuant to an agency agreement (the "Agency Agreement") between the
Company and Canaccord International (L) Corporation (the "Agent").
The foregoing description of the Special Warrants is a summary only and
is subject to the detailed provisions of the Special Warrant Indenture under
which they are to be issued.
2. PAYMENT
The Subscription Price must be paid by wire transfer of funds in United
States dollars at par.
3. REGISTRATION AND DELIVERY INSTRUCTIONS
The Subscriber must complete, sign and return by courier to Canaccord
Capital Corporation of P.O. Box 10337, 2200 - 609 Granville Street, Vancouver,
British Columbia, V7Y 1H2:
(a) an executed copy of this Agreement;
(b) delivery instructions attached as Exhibit A;
(c) Toronto Stock Exchange Questionnaire and Undertaking in the form
attached as Exhibit B;
(d) if an individual, Form 20A(IP) attached as Exhibit C; and
(e) if applicable, an Undertaking of Foreign Portfolio Manager,
attached as Exhibit D; and
(f) a wire transfer of funds to:
Bank of Montreal
Montreal, Quebec
Swift: BOFMCAM2
Account: 0004 4625407
Beneficiary: Canaccord Capital Corp.
Client Name: Canaccord International Corporation
Client Account Number: 252-974B-9
in the amount of the Subscription Price.
<PAGE> 24
-4-
The Subscriber (or if applicable, others for whom it is contracting
hereunder) shall complete, sign and return to the Company as soon as possible on
request by the Company any documents, questionnaires, notices and undertakings
as may be required of the Subscriber by regulatory authorities and applicable
law.
4. CLOSING
The closing of the transactions contemplated herein will be completed at
the offices of Catalyst Corporate Finance Lawyers at Suite 1100, 1055 West
Hastings Street, Vancouver, British Columbia, V6E 2E9 or at such other place as
the Company and the Agent shall agree, at 10:00 a.m. (Vancouver Time) on the
date upon which the Company and the Agent agree (the "Closing").
This executed Agreement is open for acceptance in whole or in part by
the Company in its sole discretion in each case or at any time prior to the
Closing. Confirmation of acceptance or rejection of a subscription will be
forwarded to the Subscriber promptly after acceptance or rejection has been
made. If this Agreement is rejected in whole and if the Subscriber has delivered
a certified cheque or bank draft representing the Subscription Price for the
Special Warrants, then such cheque or bank draft will be promptly returned to
the Subscriber without deduction or interest. If this Agreement is accepted only
in part and the Subscriber has delivered a certified cheque or bank draft as
aforesaid, a cheque representing the portion of the Subscription Price for that
portion of the Subscriber's subscription for Special Warrants which is not
accepted will be promptly returned to the Subscriber without interest.
Certificates representing the Special Warrants (individually, a "Special
Warrant Certificate", and collectively, the "Special Warrant Certificates") will
be available for delivery at the Closing against payment of the aggregate
Subscription Price in the manner specified above. If the Subscriber does not
choose to attend the Closing to receive the Special Warrant Certificate
representing the Special Warrants subscribed for herein, then the Subscriber, on
its own behalf or on behalf of others for whom it is contracting hereunder,
hereby appoints the Agent, with full power of substitution, as its true and
lawful attorney and agent with the full power and authority in its place and
stead to swear, execute, file and record any document necessary to accept
delivery of the Special Warrants at the Closing, to terminate this Agreement on
its behalf in the event that any condition precedent to the offering has not
been satisfied, to execute a receipt for the Special Warrants and any other
documentation, modify or waive any conditions or grant any waivers on its behalf
in connection with this transaction, and to deliver Special Warrant Certificates
to the Subscriber at the address set forth above promptly after the Closing.
5. PROSPECTUS EXEMPTIONS
The sale and delivery of the Special Warrants to the Subscriber (or
others for whom it is contracting hereunder) is conditional upon such sale being
exempt from the requirement to file a prospectus, as defined in applicable
securities legislation, in the Filing Jurisdictions or upon the issuance of such
rulings, orders, consents or approvals as may be required to permit such sale
and delivery without the requirement of filing a prospectus.
<PAGE> 25
-5-
The Subscriber on its own behalf (or on behalf of others for whom it is
contracting hereunder, if applicable) acknowledges and agrees that:
(a) it (or others from whom it is contracting hereunder) has not
been provided with, nor has it requested, nor does it have any
need to receive an offering memorandum as defined in applicable
securities legislation (an "Offering Memorandum") or other
documents (other than annual financial statements, interim
financial statements or any other document the content of which
is prescribed by statute) describing the business and affairs of
the Company which has been prepared for delivery to and to be
reviewed by prospective purchasers in order to assist these
purchasers in making an investment decision in respect of the
Special Warrants;
(b) its decision to execute this Agreement and purchase the Special
Warrants (on its own behalf or on behalf of those for whom it is
contracting hereunder) has not been based upon any verbal or
written representations as to fact or otherwise made by or on
behalf of the Agent or the Company;
(c) to the best of its knowledge, the sale of the Special Warrants
was not accompanied by any advertisement in printed media of
general and regular paid circulation, radio or television or
otherwise; and
(d) it (or others for whom it is contracting hereunder) has been
independently advised as to applicable resale restrictions in
the jurisdiction in which it resides, confirms that no
representation has been made to it by or on behalf of the Agent
or the Company with respect thereto, acknowledges that it is
aware of the characteristics of the Special Warrants, the risks
relating to an investment therein and of the fact that it (or
others for whom it is contracting hereunder) may not be able to
resell the Special Warrants or Shares except in accordance with
exemptions under applicable securities legislation and
regulatory policy and that if it (or others for whom it is
contracting hereunder) exercises the Special Warrants prior to
the issuance of final receipt for a prospectus in the Filing
Jurisdictions, the Shares acquired may be subject to applicable
resale restrictions in the Filing Jurisdictions.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER
The Subscriber (on its own behalf or on behalf of others for
whom it is contracting hereunder) hereby represents, warrants and covenants to
the Agent and the Company, which representations and warranties shall survive
the Closing, that:
(a) the Subscriber is purchasing sufficient Special Warrants so that
the aggregate acquisition cost of the Special Warrants to the
Subscriber is not less than Cdn.$97,000;
(b) the Subscriber is purchasing as principal and is not a
corporation, partnership, trust, fund, association, or any other
organized group of persons created, or used
<PAGE> 26
-6-
primarily, to permit the purchase of the Special Warrants (or
other similar purchases) by a group of individuals whose
individual share of the aggregate acquisition cost of the
Special Warrants is less than Cdn.$97,000 or, if not purchasing
the Special Warrants as principal, is duly authorized to enter
into this Agreement and to execute all documentation in
connection with the purchase on behalf of each beneficial
purchaser, it acknowledges that the Company may in the future be
required by law to disclose on a confidential basis to
securities regulatory authorities the identity of each
beneficial purchaser of Special Warrants for whom it may be
acting, and is a portfolio manager in a jurisdiction other than
Canada, provided that the total asset value of the investment
portfolio it manages on behalf of its clients is not less than
Cdn.$20,000,000 and it is purchasing the Special Warrants as an
agent or trustee for accounts that are fully managed by it;
(c) no prospectus has been filed by the Company with the British
Columbia Securities Commission in connection with the issuance
of the Special Warrants, the issuance is exempted from the
prospectus requirements of the Securities Act (British Columbia)
(the "Act"), and that:
(i) the Subscriber is restricted from using most of the
civil remedies available under the Act;
(ii) the Subscriber may not receive information that would
otherwise be required to be provided to him or her under
the Act; and
(iii) the Company is relieved from certain obligations that
would otherwise apply under the Act;
(d) if the Subscriber is a syndicate, partnership or other form of
unincorporated organization, every participant in the syndicate,
partnership or unincorporated organization would have an
aggregate acquisition cost of not less than Cdn.$97,000 for the
Special Warrants purchased if the participant were acquiring its
proportionate interest in the Special Warrants purchased;
(e) subject to paragraph 6(d) above, if the Subscriber is not an
individual or a corporation, each member of the partnership,
syndicate or other unincorporated organization which is the
beneficial purchaser, or each beneficiary of the trust which is
the beneficial purchaser, as the case may be, is an individual
who has an aggregate acquisition cost of not less than
Cdn.$97,000 for the Special Warrants;
(f) if the Subscriber is an individual, he or she has attained the
age of majority and in every case he or she is legally competent
to execute this Agreement and to take all actions required
pursuant hereto;
(g) if the Subscriber is other than an individual, it is legally
competent to execute this Agreement and to take all actions
required pursuant thereto and all approvals necessary for the
Subscriber to do so have been obtained;
<PAGE> 27
-7-
(h) the Subscriber acknowledges that as the Special Warrants are
subject to a hold period under applicable British Columbia
securities legislation, the Company will be required to legend
the Special Warrant Certificate and certificates representing
the Shares (in the event such Shares are acquired prior to the
issuance of a receipt by the securities regulatory authorities
in the Filing Jurisdictions for the Prospectus) in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL
SEPTEMBER __, 1999 EXCEPT AS PERMITTED BY THE SECURITIES ACT OF
BRITISH COLUMBIA AND THE RULES MADE THEREUNDER.";
(i) the Subscriber (or the others for whom it is contracting
hereunder) is resident in the jurisdiction set out on the first
page of this Agreement;
(j) if the Subscriber (or the others for whom it is contracting
hereunder) trades the Securities before receipts for the final
Prospectus are obtained, it will comply with the securities
legislation respecting such trades in the jurisdiction within
which such Subscriber (or the others for whom it is contracting
hereunder) resides and sells the Securities and, in the Filing
Jurisdictions, other applicable securities laws;
(k) this Agreement has been duly executed and delivered by the
Subscriber and constitutes a valid and binding agreement of the
Subscriber enforceable against the Subscriber;
(l) no offer of Special Warrants was made to the Subscriber (or the
others for whom it is contracting hereunder) in the "United
States" (as defined in Regulation S under the United States
Securities Act of 1933 (the "1933 Act"), the Subscriber is not a
"U.S. Person" (as defined in Regulation S) and is executing this
Agreement outside the United States;
(m) the activities of the Subscriber (or the others for whom it is
contracting hereunder) contemplated hereunder are not a scheme
to avoid the registration requirements of the 1933 Act;
(n) no person has made to the Subscriber any written or oral
representation:
(i) that any person will resell or repurchase the Special
Warrants or the Shares;
(ii) that any person will refund the purchase price of the
Special Warrants;
(iii) as to the future price of the Special Warrants or the
Shares; or
(iv) that the Special Warrants or Shares will be listed and
posted for trading on a stock exchange or that
application has been made to list and post the
<PAGE> 28
-8-
Special Warrants or Shares for trading on a stock
exchange, apart from an application to list the Shares
on The Toronto Stock Exchange and the American Stock
Exchange;
(o) the delivery of this Agreement, the acceptance of it by the
Company, the issuance of the Special Warrants to the Subscriber
and the acquisition of the Shares upon exercise of the Special
Warrants comply with all applicable laws of the Subscriber's
jursidiction of residence or domicile and all other applicable
laws and will not cause the Company to become subject to or
comply with any disclosure, prospectus or reporting requirements
under any such applicable laws;
(p) the Subscriber (and the others for whom it is contracting
hereunder) has no intention to distribute, and shall not
transfer, either directly or indirectly any of the Special
Warrants or the Shares to any person within the United States or
to U.S. persons (as defined in Regulation S under the 1933 Act)
within 90 days from the Closing; and
(q) it has such knowledge in financial and business affairs as to be
capable of evaluating the merits and risks of its investment and
it, or, where it is not purchasing as principal, each beneficial
purchaser, is able to bear the economic risk of loss of its
investment.
7. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
The Subscriber acknowledges that the representations and
warranties and covenants contained in this Agreement are made with the intent
that they may be relied upon by the Company and the Agent in determining its
eligibility to purchase the Special Warrants and the Subscriber hereby agrees to
indemnify the Company and the Agent against all losses, claims, costs, expenses
and damages or liabilities which they may suffer or incur that are caused by or
arise from the reliance thereon by the Company and the Agent. The Subscriber
further agrees that by accepting the Special Warrants the Subscriber shall be
representing and warranting that the foregoing representations and warranties
are true as at the Closing with the same force and effect as if they had been
made by the Subscriber at the Closing and that they shall survive the purchase
by the Subscriber of the Special Warrants and shall continue in full force and
effect notwithstanding any subsequent disposition of the Special Warrants or the
Shares.
8. ACKNOWLEDGEMENT
THE SUBSCRIBER ACKNOWLEDGES THAT THE SUBSCRIBER HAS RECEIVED
SUCH INDEPENDENT ADVICE FROM INDEPENDENT LEGAL, ACCOUNTING AND TAX PROFESSIONAL
ADVISORS AS THE SUBSCRIBER HAS DETERMINED NECESSARY TO MAKE A DECISION TO
PURCHASE THE SPECIAL WARRANTS.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE> 29
-9-
The Company agrees that the Subscriber shall have the benefit of
each and all of the representations and warranties made by the Company to the
Agent in the Agency Agreement, with the same effect as if such representations
and warranties were repeated herein and made to the Subscriber, and acknowledges
that the Subscriber is relying upon such representations and warranties in
entering into this Agreement. The Company will, upon request of the Subscriber
and without charge, provide the Subscriber with an extract from the Agency
Agreement setting forth all such representations and warranties.
10. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
In the event that a holder of Special Warrants, who acquires
Shares upon the exercise of the Special Warrants as provided for in the
Prospectus, is or becomes entitled under the Securities Act of British Columbia,
to the remedy of rescission by reason of the Prospectus or any amendment thereto
containing a misrepresentation, such holder shall, subject to available defences
and any limitation period under applicable securities legislation, be entitled
to rescission not only of the holder's exercise of its Special Warrants but also
of this Agreement pursuant to which the Special Warrants were initially
acquired, and shall be entitled in connection with such rescission to a full
refund from the Company of all consideration paid on the acquisition of the
Special Warrants. In the event such holder is a permitted assignee of the
interest of the original Special Warrant subscriber, such permitted assignee
shall be entitled to exercise the rights of rescission and refund granted
hereunder as if such permitted assignee were such original subscriber. The
foregoing is in addition to any other right or remedy available to a holder of
Special Warrants under section 131 of the Act (or equivalent provisions of the
securities laws of other provinces in Canada) or otherwise at law.
11. APPOINTMENT OF AGENT
The Subscriber, on its own behalf and on behalf of others for
whom it is contracting hereunder, hereby:
(a) irrevocably authorizes the Agent to negotiate and settle the
form of the Special Warrant Indenture and any other agreement to
be entered into in connection with this transaction and to waive
on its own behalf and on behalf of the Subscribers in whole or
in part, or extend the time for compliance with, any of the
Closing conditions in such manner and on such terms and
conditions as the Agent may determine, acting reasonably,
without in any way affecting the Subscriber's obligations or the
obligations of such others hereunder;
(b) acknowledges and agrees that the Agent and the Company may vary,
amend, alter or waive, in whole or in part, one or more of the
conditions set forth in the Agency Agreement in such manner and
on such terms and conditions as they may determine, acting
reasonably, without affecting in any way the Subscriber or such
others' obligations hereunder; provided however, that the Agent
shall not vary, amend, alter or waive any such condition where
to do so would result in a material change to any of the
material attributes of the Special Warrants described herein;
and
<PAGE> 30
-10-
(c) irrevocably authorizes the Agent to swear, execute, file and
record any documents necessary to accept delivery of the Special
Warrants at the Closing and to terminate this Agreement on
behalf of the Subscriber in the event that any condition
precedent to the offering has not been satisfied.
Should the Offering be over subscribed, the number of Special
Warrants subscribed for shall be allocated to the Subscriber in the discretion
of the Company. The Agent shall be authorized to amend the information contained
herein to reduce the number of Special Warrants subscribed for and the
Subscription Price to reflect the number of Special Warrants allocated to the
Subscriber and the Subscription Price therefor.
12. TERMINATION OF AGREEMENT
The Subscriber may terminate his or her subscription hereunder
if the Agent terminates its obligations under the Agency Agreement, and hereby
irrevocably constitutes the Agent as his or her attorney for purposes of
notifying the Company of such termination.
13. COMMISSION TO THE AGENT
The Subscriber acknowledges and agrees that the gross proceeds
derived from the sale of the Special Warrants less the Cash Commission (as
defined below) shall be paid to the Company on the Closing. The Subscriber
understands that upon completion of the Offering, the Agent will receive from
the Company a cash commission (the "Cash Commission") equal to 8% of the
Subscription Price of the Special Warrants to be sold under this offering to
Subscribers. Agent's special warrants (the "Agent's Option") exercisable to
acquire Agent's warrants to purchase that number of Shares equal to 10% of the
Shares issuable upon the exercise of Special Warrants will be issued to the
Agent or according to the Agent's direction. No other fee or commission is
payable by the Company in connection with the sale of the Special Warrants.
However, the Company will pay those fees and expenses in connection with the
offering as are set out in the Agency Agreement. The Agent and its directors,
officers, employees and affiliates may, from time to time, hold positions in
securities of the Company.
Both the Company and the Subscriber acknowledge that the Agent
is acting as agent in this transaction and the Subscriber hereby acknowledges
that all warranties, conditions, representations or stipulations, whether
express or implied and whether arising hereunder or under prior agreement or
statement or by statute or at common law are expressly those of the Company,
other that those relating solely to the Agent. The Subscriber acknowledges that
its decision to execute this Agreement and purchase the Special Warrants has not
been based upon any information or representation concerning the Company
provided to the Subscriber by the Company or the Agent other than those
contained in this Agreement and such as are contained in documents publicly
available in the Company's files at the offices of the British Columbia
Securities Commission or The Toronto Stock Exchange (the "Disclosure Record"),
and that the Subscriber is relying entirely upon this Agreement and the
Disclosure Record. Any information given or statement made is given or made
without liability or responsibility howsoever arising on the part of the Agent.
No person in the employment of, or acting as agent of, the Agent has any
authority to make or give any representation or warranty and the Company and the
Subscriber hereby release the Agent from any claims that may arise in respect
thereof.
<PAGE> 31
-11-
14. COSTS
The Subscriber acknowledges and agrees that all costs and
expenses incurred by the Subscriber (including any fees and disbursements of any
special counsel retained by the Subscriber) relating to the purchase of the
Special Warrants shall be borne by the Subscriber, other than the Cash
Commission and Agent's Option which shall be borne by the Company as set out
above.
15. GOVERNING LAW
This Agreement is governed by the laws of the Province of
British Columbia and the federal laws of Canada applicable therein. The
Subscriber, in his or her personal or corporate capacity and, if applicable, on
behalf of each beneficial purchaser for whom he is acting, irrevocably attorns
to the jurisdiction of the courts of the Province of British Columbia.
16. SURVIVAL
This Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the Subscriber
notwithstanding the completion of the purchase of the Special Warrants by the
Subscriber pursuant hereto, the completion of the issue of Special Warrants and
the Shares and any subsequent disposition by the Subscriber of the Special
Warrants or Shares.
17. ASSIGNMENT
This Agreement is not transferable or assignable.
18. TIME IS OF THE ESSENCE
For the purposes of this Agreement, time is of the essence.
19. COUNTERPARTS
This Agreement may be executed in as many counterparts as may be
necessary and by facsimile, each of such counterparts so executed will be deemed
to be an original and such counterparts together will constitute one and the
same instrument and notwithstanding the date of execution will be deemed to bear
the date as of the day and year first above written.
<PAGE> 32
EXHIBIT A
INSTRUCTION SHEET - COMPLETING THE SUBSCRIPTION AGREEMENT
(i) FIRST PARAGRAPH OF FACE PAGE - insert the number of securities
being purchased and the total purchase price;
(i) "EXECUTION BY SUBSCRIBER" IF AN INDIVIDUAL:
- to the left - sign on first line;
- to the right - print the name of the Subscriber on the first
line and the residential address of the Subscriber on the second
line. Do not complete the Name of Contact Person, but provide
your telephone and fax numbers on the last two lines;
(iii) "EXECUTION BY SUBSCRIBER" IF NOT AN INDIVIDUAL (e.g. a
corporation, partnership or trust):
- to the left - have the authorized signatory of the Subscriber
sign on the first line;
- to the right - print the name of the Subscriber on the first
line and the address of the Subscriber on the second line. Print
the name of the person that the Company should call if it has
any questions regarding the subscription documents on the third
line and provide his or her telephone and fax numbers on the
last two lines;
(iv) MIDDLE OF FACE PAGE - insert the date that the Subscription
Agreement was executed;
(v) "REGISTRATION INSTRUCTIONS" - only complete this section if the
certificates for the securities are to be registered in the name
of a nominee (such as your financial institution, broker or
RRSP);
(vi) "DELIVERY INSTRUCTIONS" - only complete this section if the
certificates for the securities are to be delivered to an
address that is different from the address of the Subscriber;
(vii) REMAINING LINES (Accepted date lines and signature line for the
Company) - leave these lines blank.
<PAGE> 33
EXHIBIT B
Form P1
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of issuer of the securities: Genetronics Biomedical Ltd.
-------------------------------
(b) Number and class of securities to be purchased: Special Warrants
-----------------
(c) Purchase Price: US$3.00 per Special Warrant
-------------------------------------------------
2. DETAILS OF PURCHASER
(a) Name of purchaser:
----------------------------------------------
(b) Address:
--------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the purchaser:
----------------------------------------------------------------
----------------------------------------------------------------
3. RELATIONSHIP TO ISSUER
(a) Is the purchaser, or any person named in response to 2(c) above,
an insider of the issuer for the purposes of the Ontario
Securities Act (before giving effect to this private placement)?
If so, state the capacity in which the purchaser qualifies as an
insider:
(b) If the answer to (a) is "no", are the purchaser and the issuer
controlled by the same person or company? If so, give details:
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the purchaser, as principal, in the
securities of the issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
60 days preceding the date hereof:
------------------------------------------------------------------------
------------------------------------------------------------------------
<PAGE> 34
2
UNDERTAKING
TO: THE TORONTO STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of six
months from the date of closing of the transaction herein or until a receipt is
issued by the British Columbia Securities Commission for a Prospectus qualifying
the issue of Shares on exercise of the Special Warrants, without the prior
consent of The Toronto Stock Exchange and any other regulatory body having
jurisdiction.
Dated at
---------------------- -----------------------------------
on , 1999 (Name of Purchaser-please print)
----------------------
------------------------------------
(Authorized Signature)
------------------------------------
(Official Capacity-please print)
(Please print here name of
individual whose signature appears
above, if different from name of
purchaser printed above)
<PAGE> 35
EXHIBIT C
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 76 of the Securities Act
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Genetronics Biomedical Ltd. (the
"Issuer") ________________ Special Warrants (the "Securities") of the
Issuer. Each Special Warrant is exercisable to acquire one common share
of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I [CIRCLE ONE] have/have not received an offering memorandum describing
the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those restrictions
are and to comply with them before selling the Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus, I
will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from the
requirement to sell through a dealer registered under the Act,
except purchases referred to in paragraph 5(g) and as a result I
do not have the benefit of any protection that might have been
available to me by having a dealer act on my behalf.
5. I also acknowledge that: [CIRCLE ONE]
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the date
of the agreement of purchase and sale of the security, is not
less than $400,000, OR
<PAGE> 36
2
(c) my annual net income before tax is not less than $75,000, or my
annual net income before tax jointly with my spouse is not less
than $125,000, in each of the two most recent calendar years,
and I reasonably expect to have annual net income before tax of
not less than $75,000 or annual net income before tax jointly
with my spouse of not less than $125,000 in the current calendar
year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director of
the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a person
[NAME OF REGISTERED PERSON: ___________________________ (THE
"REGISTERED PERSON")] who has advised me that the Registered
Person is registered to trade or advise in the Securities and
that the purchase of the Securities is a suitable investment for
me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: [CIRCLE ONE]
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person [NAME OF ADVISER:
______________________ (THE "ADVISER")] who has advised me that
the Adviser is:
(i) registered to advise, or exempted from the requirement
to be registered to advise, in respect of the
Securities, and
(ii) not an insider of, or in a special relationship with,
the Issuer.
The statements made in this report are true.
DATED ________________, 1999.
------------------------------------
Signature of the Purchaser
------------------------------------
Name of Purchaser
------------------------------------
Address of Purchaser
<PAGE> 37
INSTRUCTION SHEET - FORM 20A(IP)
- - Item 1 - insert number of securities being purchased;
- - Item 3 - if you have received an offering memorandum, circle "have"; if
you have not received an offering memorandum, circle "have not";
- - Item 5 - if you are purchasing securities that have cost you at least
$97,000, circle item (a); if you are purchasing securities that have
cost you less than $97,000, CIRCLE ONE of items (b), (c), (e), (f) or
(g) only and, if you circle (g), print in the space provided the name of
the individual broker or adviser and the name of the firm at which he or
she works;
NOTE: If items (a), (b), (c), (e), (f) or (g) do not apply, then
you may not lawfully purchase securities under this offering.
- - Item 6 - IF you circled (b) or (c) in Item 5, complete Item 6 by
circling (a) or (b). If you circle (b), print in the space provided the
name of the individual adviser and the name of the firm at which he or
she works;
- - Remaining lines on page 2 - sign above Signature of Purchaser, date and
clearly print name and address of the Purchaser.
<PAGE> 38
EXHIBIT D
CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
The undersigned is purchasing securities of Genetronics Biomedical Ltd. (the
"Issuer").
The undersigned hereby certifies that:
(a) it is purchasing securities of the Issuer on behalf of managed accounts
over which it has absolute discretion as to purchasing and selling, and
in respect of which it receives no instructions from any person
beneficially interested in such accounts or from any other person;
(b) it carries on the business of managing the investment portfolios of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ____________________ [jurisdiction],
and it is permitted by law to carry on a portfolio manager business in
that jurisdiction;
(c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
(d) the total asset value of the investment portfolios it manages on behalf
of clients is not less than $20,000,000;
(e) it does not believe, and has no reasonable grounds to believe, that any
resident of British Columbia has a beneficial interest in any of the
managed accounts for which it is purchasing; and
(f) the Issuer has provided it with a list of the directors, senior officers
and other insiders of the Issuer, and the persons that carry on investor
relations activities for the Issuer (which list is attached as a
schedule to this Form), and it does not believe, and has no reasonable
grounds to believe, that any of those persons has a beneficial interest
in any of the managed accounts for which it is purchasing, except as
follows:
_________________________________________________ (name of insider(s) or
person(s) carrying on investor relations activities for the Issuer that
have a beneficial interest in an account.)
The undersigned acknowledges that it is bound by the provisions of the British
Columbia Securities Act including, without limitation, sections 87 and 111
concerning the filing of insider reports and reports of acquisitions.
Dated at ____________________________________ this _____ day of _________, 1999.
------------------------------------
(Name of Purchaser - please print)
------------------------------------
(Authorized Signature)
------------------------------------
(Official Capacity - please print)
(please print name of individual
whose signature appears above, if
different from name of purchaser
printed above)
<PAGE> 39
SCHEDULE TO EXHIBIT D - CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
LIST OF DIRECTORS, SENIOR OFFICERS AND OTHER INSIDERS
OF THE COMPANY AND OTHER PERSONS THAT CARRY ON
INVESTOR RELATIONS ACTIVITIES FOR THE COMPANY
Lois J. Crandell
Gunter Hofmann
Martin Nash
James L. Heppell
Suzanne Wood
Stan Yakatan
Gordon J. Politeski
Wayne Schnarr
James Lierman
Al Snyder
Dietmar Rabussay
William McGlone
Markus Hofmann
E. Terrie Roe-Dierlam
Gerard Seroussi
Andrea DeKertanguy
Miles Lewis
Malcome McGuire
Maria De Geer
Marc Moreau
<PAGE> 40
INSTRUCTION SHEET - CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
- - Item (b) - insert name of jurisdiction.
- - Item (f) - insert name of insider(s) or person(s) carrying on investor
relations activities for the Issuer that have a beneficial interest in
an account.
- - Insert name of city and country and date.
- - Clearly print name of purchaser, sign above Authorized Signature, insert
official capacity and print name of individual whose signature appears
on Authorized Signature line, if different from name of purchase
printed.
<PAGE> 41
SCHEDULE "B"
SUBSCRIPTION AGREEMENT
(THE "AGREEMENT")
The undersigned (the "Subscriber") hereby subscribes for and agrees to purchase
_____________________ special warrants (the "Special Warrants") of Genetronics
Biomedical Ltd. (the "Company") at a price of US$3.00 per Special Warrant for
aggregate proceeds of US$_____________________ (the "Subscription Price"), all
on the terms and subject to the conditions set forth in Schedule A attached
hereto and in the Agency Agreement and the Special Warrant Indenture (each as
defined herein).
EXECUTION BY SUBSCRIBER
------------------------------------
Name of Subscriber
------------------------------------
Address of Subscriber
Signature of Individual Subscriber or
Authorized Signatory of Subscriber ------------------------------------
(if Subscriber is NOT an individual) Name of Contact Person, if
Subscriber not an individual
( )
------------------------------------
Telephone Number of Subscriber or
Contact Person
( )
------------------------------------
Facsimile Number of Subscriber or
Contact Person
EXECUTED BY THE SUBSCRIBER THIS __________ DAY OF _________________, 1999.
PLEASE COMPLETE THE FOLLOWING SECTION IF YOU REQUIRE THE CERTIFICATE(S)
REPRESENTING THE SECURITIES TO APPEAR IN THE NAME OF AN INTERMEDIARY, SUCH AS
YOUR BROKER, OR REQUIRE THE CERTIFICATE(S) TO BE DELIVERED TO AN ADDRESS OTHER
THAN THAT SHOWN ABOVE.
- ------------------------------------ ------------------------------------
REGISTRATION INSTRUCTIONS DELIVERY INSTRUCTIONS
- ------------------------------------ ------------------------------------
Name to appear on certificate(s) Name and account reference, if
applicable
- ------------------------------------ ------------------------------------
Account reference, if applicable Contact Person
- ------------------------------------ ------------------------------------
Address of Intermediary Address for Delivery
------------------------------------
Telephone Number of Contact Person
ACCEPTED by the Company this __________ day of ________________, 1999.
GENETRONICS BIOMEDICAL LTD.
Per: __________________________________
Authorized Signatory
<PAGE> 42
SCHEDULE A
In consideration of the covenants and agreements herein, and the payment of one
dollar made by each party to the other, the receipt and sufficiency of which is
acknowledged by each party, the parties agree as follows:
1. DESCRIPTION OF SPECIAL WARRANTS
The Special Warrants will be transferable and will be issued pursuant to
an indenture to be made between the Company and Montreal Trust Company of Canada
(the "Special Warrant Indenture") and shall entitle the holders thereof to
receive, without additional payment, upon exercise of the Special Warrants, one
common share (a "Share") of the Company for each Special Warrant held.
The Special Warrants will be exercisable at any time on or before 4:30
p.m. (Vancouver time) (the "Expiry Time"), on the day which is the earlier of:
(a) 12 months from the Closing (as defined below); and (b) the day which is five
business days after a receipt for a final prospectus (the "Prospectus")
qualifying the issuance of the Shares issuable upon due exercise of the Special
Warrants has been issued by the securities regulatory authorities in British
Columbia and such other Provinces in Canada that the Agent reasonably requires
(collectively, the "Canadian Filing Jurisdictions"). Special Warrants not
expressly exercised by the holders thereof prior to the Expiry Time shall be
deemed to have been so exercised immediately prior thereto.
The Company has covenanted and agreed to, among other things, use its
reasonable best efforts to finalize and obtain a receipt for the Prospectus in
each of the Canadian Filing Jurisdictions, and to file and to have declared
effective, a registration statement or similar document (the "Registration
Statement") in compliance with the United States Securities Act of 1933 (the
"U.S. Securities Act") to register the resale by the Subscriber of the Shares
held by the Subscriber pursuant to the exercise of the Special Warrants, no
later than 5:00 p.m. (Vancouver time) on the day which is 90 days from Closing
(the "Qualification Deadline").
IN THE EVENT THAT THE COMPANY IS UNABLE TO OBTAIN A RECEIPT FOR THE
PROSPECTUS IN ANY OF THE CANADIAN FILING JURISDICTIONS, THE SPECIAL WARRANTS AND
THE SHARES (COLLECTIVELY, THE "SECURITIES") WILL BE SUBJECT TO STATUTORY HOLD
PERIODS DURING WHICH, SUBJECT TO THE AVAILABILITY OF ANOTHER EXEMPTION, THE
SECURITIES MAY NOT BE RESOLD IN SUCH CANADIAN FILING JURISDICTIONS. IN THE EVENT
THE REGISTRATION STATEMENT IS NOT DECLARED EFFECTIVE, THEN THE SECURITIES MAY
ONLY BE RESOLD PURSUANT TO APPLICABLE EXEMPTIONS FROM REGISTRATION PURSUANT TO
UNITED STATES FEDERAL, STATE AND LOCAL SECURITIES LAWS. IN ADDITION, ANY SHARES
OBTAINED PURSUANT TO THE EXERCISE OF SPECIAL WARRANTS PRIOR TO THE ISSUANCE OF
RECEIPTS FOR THE PROSPECTUS BY THE SECURITIES COMMISSIONS IN THE CANADIAN FILING
JURISDICTIONS OR THE DECLARATION OF EFFECTIVENESS OF THE REGISTRATION STATEMENT
WILL BE SUBJECT TO STATUTORY RESTRICTIONS ON RESALE. THE COMPANY IS A REPORTING
ISSUER IN BRITISH COLUMBIA AND ONTARIO. THE COMPANY IS A REPORTING COMPANY UNDER
THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934. THE COMPANY IS NOT A
REPORTING ISSUER OR A REPORTING COMPANY IN ANY OTHER JURISDICTION. A HOLDER
RESIDENT IN ANOTHER JURISDICTION MAY BE SUBJECT TO DIFFERENT AND LONGER RESALE
RESTRICTIONS. RESIDENTS OF SUCH OTHER JURISDICTIONS ARE URGED TO CONSULT WITH
COUNSEL THEREIN ABOUT APPLICABLE RESALE RESTRICTIONS.
IT IS A FURTHER PROVISION OF THE SPECIAL WARRANT INDENTURE THAT THE
AGGREGATE PROCEEDS OF THE SALE OF THE SPECIAL WARRANTS (THE "PROCEEDS"), WILL BE
DELIVERED TO THE COMPANY AT THE CLOSING (AS DEFINED BELOW).
<PAGE> 43
3
THE TERMS AND CONDITIONS WHICH GOVERN THE SPECIAL WARRANTS ARE CONTAINED
IN THE SPECIAL WARRANT INDENTURE WHICH CONTAINS, AMONG OTHER THINGS,
ANTI-DILUTION PROVISIONS AND PROVISIONS FOR THE APPROPRIATE ADJUSTMENT IN THE
CLASS, NUMBER AND PRICE OF THE SHARES UPON THE OCCURRENCE OF CERTAIN EVENTS,
INCLUDING ANY SUBDIVISION, CONSOLIDATION OR RECLASSIFICATION OF THE SHARES OR
PAYMENTS OF STOCK DIVIDENDS OR THE AMALGAMATION OR OTHER SUBSTANTIAL
REORGANIZATION OF THE COMPANY.
The Special Warrants herein subscribed for form part of a larger
offering (the "Offering") consisting of both an offering to United States
residents under Regulation D and an offering to non-U.S. residents under
Regulation S and applicable exemptions under applicable Canadian securities
laws, of up to 4,500,000 Special Warrants to be issued by the Company pursuant
to an agency agreement (the "Agency Agreement") between the Company and
Canaccord International (L) Corporation (the "Agent").
The foregoing description of the Special Warrants is a summary only and
is subject to the detailed provisions of the Special Warrant Indenture under
which they are to be issued.
2. PAYMENT
The Subscription Price must be paid by wire transfer of funds in United
States dollars at par.
3. REGISTRATION AND DELIVERY INSTRUCTIONS
The Subscriber must complete, sign and return by courier to Canaccord
Capital Corporation of P.O. Box 10337, 2200 - 609 Granville Street, Vancouver,
British Columbia, V7Y 1H2:
(a) an executed copy of this Agreement;
(b) delivery instructions attached hereto;
(c) Toronto Stock Exchange Questionnaire and Undertaking in the form
attached as Exhibit A;
(d) a completed and executed copy of the Investor Qualification
Questionnaire, attached as Exhibit B;
(e) an Undertaking of Foreign Portfolio Manager, attached as Exhibit
C; and
(f) confirmation of a wire transfer of the Subscription Price to:
Bank of Montreal
Montreal, Quebec
Swift: BOFMCAM2
Account: 0004 4625407
Beneficiary: Canaccord Capital Corp.
Client Name: Canaccord International Corporation
Client Account Number: 252-974B-9
in the amount of the Subscription Price.
<PAGE> 44
4
The Subscriber (or if applicable, others for whom it is contracting
hereunder) shall complete, sign and return to the Company as soon as possible on
request by the Company any documents, questionnaires, notices and undertakings
as may be required of the Subscriber by regulatory authorities and applicable
law.
4. CLOSING
The closing of the transactions contemplated herein will be completed at
the offices of Catalyst Corporate Finance Lawyers at Suite 1100, 1055 West
Hastings Street, Vancouver, British Columbia, V6E 2E9 or at such other place as
the Company and the Agent shall agree, at 10:00 a.m. (Vancouver Time) on the
date upon which the Company and the Agent agree (the "Closing").
This executed Agreement is open for acceptance in whole or in part by
the Company in its sole discretion in each case or at any time prior to the
Closing. Confirmation of acceptance or rejection of a subscription will be
forwarded to the Subscriber promptly after acceptance or rejection has been
made. If this Agreement is rejected in whole and if the Subscriber has delivered
a certified cheque or bank draft representing the Subscription Price for the
Special Warrants, then such cheque or bank draft will be promptly returned to
the Subscriber without deduction or interest. If this Agreement is accepted only
in part and the Subscriber has delivered a certified cheque or bank draft as
aforesaid, a cheque representing the portion of the Subscription Price for that
portion of the Subscriber's subscription for Special Warrants which is not
accepted will be promptly returned to the Subscriber without interest.
Certificates representing the Special Warrants (individually, a "Special
Warrant Certificate", and collectively, the "Special Warrant Certificates") will
be available for delivery at the Closing against payment of the aggregate
Subscription Price in the manner specified above. If the Subscriber does not
choose to attend the Closing to receive the Special Warrant Certificate
representing the Special Warrants subscribed for herein, then the Subscriber, on
its own behalf or on behalf of others for whom it is contracting hereunder,
hereby appoints the Agent, with full power of substitution, as its true and
lawful attorney and agent with the full power and authority in its place and
stead to swear, execute, file and record any document necessary to accept
delivery of the Special Warrants at the Closing, to terminate this Agreement on
its behalf in the event that any condition precedent to the offering has not
been satisfied, to execute a receipt for the Special Warrants and any other
documentation, modify or waive any conditions or grant any waivers on its behalf
in connection with this transaction, and to deliver Special Warrant Certificates
to the Subscriber at the address set forth above promptly after the Closing.
5. PROSPECTUS/REGISTRATION EXEMPTIONS
The sale and delivery of the Special Warrants to the Subscriber (or
others for whom it is contracting hereunder) is conditional upon such sale being
exempt from the requirement to file a prospectus or registration statement, as
defined in applicable securities legislation.
The Subscriber on its own behalf (or on behalf of others for whom it is
contracting hereunder, if applicable) acknowledges and agrees that:
(a) its decision to execute this Agreement and purchase the Special
Warrants (on its own behalf or on behalf of those for whom it is
contracting hereunder) has not been based upon any verbal or
written representations as to fact or otherwise made by or on
behalf of the Agent or the Company;
<PAGE> 45
5
(b) to the best of its knowledge, the sale of the Special Warrants
was not accompanied by any advertisement in printed media of
general and regular paid circulation, radio or television or
otherwise;
(c) it (or others for whom it is contracting hereunder) has been
independently advised as to applicable resale restrictions in
the jurisdiction in which it resides, confirms that no
representation has been made to it by or on behalf of the Agent
or the Company with respect thereto, acknowledges that it is
aware of the characteristics of the Special Warrants, the risks
relating to an investment therein and of the fact that it (or
others for whom it is contracting hereunder) may not be able to
resell the Special Warrants or Shares except in accordance with
exemptions under applicable securities legislation and
regulatory policy and that if it (or others for whom it is
contracting hereunder) exercises the Special Warrants prior to
the issuance of final receipt for a prospectus in the Canadian
Filing Jurisdictions or the effectiveness of the Registration
Statement in the United States, the Shares acquired may be
subject to applicable resale restrictions;
(d) it is an accredited investor ("Accredited Investor") within the
meaning of Regulation D under the U.S. Securities Act and is
acquiring the Special Warrants for its own account for
investment only or for the account of an Accredited Investor as
to which it exercises sole investment discretion and not with a
view towards their distribution and has duly completed and
executed a true and accurate United States Subscription
Agreement Questionnaire attached as Exhibit B;
(e) it agrees that if it decides to offer, sell or otherwise
transfer any of the Special Warrants or Shares, it will not
offer, sell or otherwise transfer any of such securities,
directly or indirectly, unless (i) the sale is to the Company;
or (ii) the sale is made outside the United States in compliance
with the requirements of Rule 904 of Regulation S under the U.S.
Securities Act ("Regulation S"); or (iii) the sale is made
pursuant to an exemption from registration under the U.S.
Securities Act provided by Rule 144A or Rule 144 thereunder, if
applicable, and in compliance with any applicable state
securities laws; or (iv) the sale is made under an effective
registration statement under the U.S. Securities Act; (f) it
consents to the Company making a notation on its records or
giving instructions to any transfer agent of the Special
Warrants or Shares in order to implement the restrictions on
transfer set forth and described herein.
6. RESTRICTIONS ON TRANSFER IN THE UNITED STATES.
The Subscriber agrees (on behalf of itself or others for whom it is contracting
hereunder) not to make any disposition of all or any portion of the Special
Warrants or the Shares within the United States unless and until:
(a) there is then in effect a registration statement under the U.S.
Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) (i) the transferee has agreed in writing to be bound by the
terms of this Agreement; (ii) the Subscriber shall have notified
the Company of the proposed disposition and shall have furnished
the Company with a statement of the circumstances surrounding
the
<PAGE> 46
6
proposed disposition; and (iii) if reasonably requested by the
Company, the Subscriber shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such Shares
under the U.S. Securities Act. It is agreed that the Company
will not require opinions of counsel for transactions made
pursuant to Rule 144 or Rule 904 except in unusual
circumstances; or
(c) notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be
necessary for a transfer by a Subscriber which is: (i) a
partnership to its partners or former partners in accordance
with partnership interests; (ii) a corporation either to its
stockholders in accordance with their interest in the
corporation or to its affiliates; (iii) a limited liability
company to its members or former members in accordance with
their interest in the limited liability company; or (iv) to the
Subscriber's family member or trust for the benefit of an
individual Subscriber; provided that in each case the transferee
will be subject to the terms of this Agreement to the same
extent as if it were an original Subscriber hereunder.
Each certificate representing Special Warrants or Shares shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the following (in addition to any legend
required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT EXCEPT: (i) IN
COMPLIANCE WITH RULE 144 OR ANOTHER APPLICABLE EXEMPTION FROM
REGISTRATION UNDER SAID ACT; AND (ii) IF REQUESTED BY THE
COMPANY, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Company shall be obligated to reissue promptly unlegended certificates at
the request of any holder thereof if the Company can obtain an opinion that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend. The Company agrees to use its best
efforts to obtain such opinion.
Any legend endorsed on an instrument pursuant to applicable state securities
laws and the stop-transfer instructions with respect to such securities shall be
removed upon receipt by the Company of an opinion of counsel reasonably
satisfactory to the Company.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER
The Subscriber understands that neither the Special Warrants nor
the Shares have been registered under the U.S. Securities Act. The Subscriber
also understands that the Special Warrants are being offered and sold pursuant
to an exemption from registration contained in the U.S. Securities Act based in
part upon the Subscriber's representations contained in this Agreement and the
attached Investor Qualification Questionnaire.
<PAGE> 47
7
The Subscriber (on its own behalf or on behalf of others for whom it is
contracting hereunder) hereby represents, warrants and covenants to the Agent
and the Company, which representations and warranties shall survive the Closing,
that:
(a) the Subscriber is purchasing sufficient Special Warrants so that
the aggregate acquisition cost of the Special Warrants to the
Subscriber is not less than Cdn.$97,000;
(b) the Subscriber is purchasing as principal and is not a
corporation, partnership, trust, fund, association, or any other
organized group of persons created, or used primarily, to permit
the purchase of the Special Warrants (or other similar
purchases) by a group of individuals whose individual share of
the aggregate acquisition cost of the Special Warrants is less
than Cdn.$97,000 or, if not purchasing the Special Warrants as
principal, is duly authorized to enter into this Agreement and
to execute all documentation in connection with the purchase on
behalf of each beneficial purchaser, it acknowledges that the
Company may in the future be required by law to disclose on a
confidential basis to securities regulatory authorities the
identity of each beneficial purchaser of Special Warrants for
whom it may be acting, and is a portfolio manager in a
jurisdiction other than Canada, provided that the total asset
value of the investment portfolio it manages on behalf of its
clients is not less than Cdn.$20,000,000 and it is purchasing
the Special Warrants as an agent or trustee for accounts that
are fully managed by it;
(c) no prospectus has been filed by the Company with the British
Columbia Securities Commission in connection with the issuance
of the Special Warrants, the issuance is exempt from the
prospectus requirements of the Securities Act (British Columbia)
(the "Act"), and that:
(i) the Subscriber is restricted from using most of the
civil remedies available under the Act;
(ii) the Subscriber may not receive information that would
otherwise be required to be provided to him or her under
the Act; and
(iii) the Company is relieved from certain obligations that
would otherwise apply under the Act;
(d) if the Subscriber is a syndicate, partnership or other form of
unincorporated organization, every participant in the syndicate,
partnership or unincorporated organization would have an
aggregate acquisition cost of not less than Cdn.$97,000 for the
Special Warrants purchased if the participant were acquiring its
proportionate interest in the Special Warrants purchased;
(e) subject to paragraph 6(d) above, if the Subscriber is not an
individual or a corporation, each member of the partnership,
syndicate or other unincorporated organization which is the
beneficial purchaser, or each beneficiary of the trust which is
the beneficial purchaser, as the case may be, is an individual
who has an aggregate acquisition cost of not less than
Cdn.$97,000 for the Special Warrants;
<PAGE> 48
8
(f) if the Subscriber is an individual, he or she has attained the
age of majority and in every case he or she is legally competent
to execute this Agreement and to take all actions required
pursuant hereto;
(g) if the Subscriber is other than an individual, it is legally
competent to execute this Agreement and to take all actions
required pursuant thereto and all approvals necessary for the
Subscriber to do so have been obtained;
(h) the Subscriber acknowledges that as the Special Warrants are
subject to a hold period under applicable British Columbia
securities legislation, the Company will be required to legend
the Special Warrant Certificate and certificates representing
the Shares (in the event such Shares are acquired prior to the
issuance of a receipt for the Prospectus by the securities
regulatory authorities in British Columbia in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL SEPTEMBER __,
1999 EXCEPT AS PERMITTED BY THE SECURITIES ACT OF BRITISH COLUMBIA AND
THE RULES MADE THEREUNDER.";
(i) the Subscriber (or the others for whom it is contracting
hereunder) is resident in the jurisdiction set out on the first
page of this Agreement;
(j) if the Subscriber (or the others for whom it is contracting
hereunder) trades the Securities before receipts for the final
Prospectus are obtained, it will comply with the securities
legislation respecting such trades in the jurisdiction within
which such Subscriber (or the others for whom it is contracting
hereunder) resides and sells the Securities and all other
applicable securities laws;
(k) this Agreement has been duly executed and delivered by the
Subscriber and constitutes a valid and binding agreement of the
Subscriber enforceable against the Subscriber;
(l) no person has made to the Subscriber any written or oral
representation:
(i) that any person will resell or repurchase the Special
Warrants or the Shares;
(ii) that any person will refund the purchase price of the
Special Warrants;
(iii) as to the future price of the Special Warrants or the
Shares; or
(iv) that the Special Warrants or Shares will be listed and
posted for trading on a stock exchange or that
application has been made to list and post the Special
Warrants or Shares for trading on a stock exchange,
apart from an application to list the Shares on The
Toronto Stock Exchange and the American Stock Exchange;
(m) it has such knowledge in financial and business affairs as to be
capable of evaluating the merits and risks of its investment and
it, or, where it is not purchasing as principal, each beneficial
purchaser, is able to bear the economic risk of loss of its
investment.
<PAGE> 49
9
(n) the Subscriber or, where it is not purchasing as principal, each
beneficial purchaser, has substantial experience in evaluating
and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests. The
Subscriber or, where it is not purchasing as principal, each
beneficial purchaser, must bear the economic risk of this
investment indefinitely unless the Special Warrants (or the
Shares) are registered pursuant to the U.S. Securities Act, or
an exemption from registration is available;
(o) by reason of its, or of its management's, business or financial
experience, the Subscriber has the capacity to protect its own
interests in connection with the transactions contemplated in
this Agreement. Further, the Subscriber is aware of no
publication of any advertisement in connection with the
transactions contemplated in the Agreement; and
(p) the Subscriber has had an opportunity to discuss the Company's
business, management and financial affairs with the management
of the Company and has had the opportunity to review the
Company's operations and facilities. The Subscriber has also had
the opportunity to ask questions of, and receive answers from,
the management of the Company regarding the terms and conditions
of this investment.
8. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
The Subscriber acknowledges that the representations and warranties and
covenants contained in this Agreement are made with the intent that they may be
relied upon by the Company and the Agent in determining its eligibility to
purchase the Special Warrants and the Subscriber hereby agrees to indemnify the
Company and the Agent against all losses, claims, costs, expenses and damages or
liabilities which they may suffer or incur that are caused by or arise from the
reliance thereon by the Company and the Agent. The Subscriber further agrees
that by accepting the Special Warrants the Subscriber shall be representing and
warranting that the foregoing representations and warranties are true as at the
Closing with the same force and effect as if they had been made by the
Subscriber at the Closing and that they shall survive the purchase by the
Subscriber of the Special Warrants and shall continue in full force and effect
notwithstanding any subsequent disposition of the Special Warrants or the
Shares.
9. ACKNOWLEDGEMENT
THE SUBSCRIBER ACKNOWLEDGES THAT THE SUBSCRIBER HAS RECEIVED SUCH
INDEPENDENT ADVICE FROM INDEPENDENT LEGAL, ACCOUNTING AND TAX PROFESSIONAL
ADVISORS AS THE SUBSCRIBER HAS DETERMINED NECESSARY TO MAKE A DECISION TO
PURCHASE THE SPECIAL WARRANTS.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company agrees that the Subscriber shall have the benefit of each
and all of the representations and warranties made by the Company to the Agent
in the Agency Agreement, with the same effect as if such representations and
warranties were repeated herein and made to the Subscriber, and acknowledges
that the Subscriber is relying upon such representations and warranties in
entering into this Agreement. The Company will, upon request of the Subscriber
and without charge, provide the Subscriber with an extract from the Agency
Agreement setting forth all such representations and warranties.
<PAGE> 50
10
11. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
In the event that a holder of Special Warrants, who acquires Shares upon
the exercise of the Special Warrants, is or becomes entitled to the remedy of
rescission by reason of the Prospectus, the Registration Statement or any
amendment thereto containing a misrepresentation, such holder shall, subject to
available defences and any limitation period under applicable securities
legislation, be entitled to rescission not only of the holder's exercise of its
Special Warrants but also of this Agreement pursuant to which the Special
Warrants were initially acquired, and shall be entitled in connection with such
rescission to a full refund from the Company of all consideration paid on the
acquisition of the Special Warrants. In the event such holder is a permitted
assignee of the interest of the original Special Warrant subscriber, such
permitted assignee shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were such original
subscriber. The foregoing is in addition to any other right or remedy available
to a holder of Special Warrants under applicable securities legislation.
12. APPOINTMENT OF AGENT
The Subscriber, on its own behalf and on behalf of others for whom it is
contracting hereunder, hereby:
(a) irrevocably authorizes the Agent to negotiate and settle the
form of the Special Warrant Indenture and any other agreement to
be entered into in connection with this transaction and to waive
on its own behalf and on behalf of the Subscribers in whole or
in part, or extend the time for compliance with, any of the
Closing conditions in such manner and on such terms and
conditions as the Agent may determine, acting reasonably,
without in any way affecting the Subscriber's obligations or the
obligations of such others hereunder;
(b) acknowledges and agrees that the Agent and the Company may vary,
amend, alter or waive, in whole or in part, one or more of the
conditions set forth in the Agency Agreement in such manner and
on such terms and conditions as they may determine, acting
reasonably, without affecting in any way the Subscriber or such
others' obligations hereunder; provided however, that the Agent
shall not vary, amend, alter or waive any such condition where
to do so would result in a material change to any of the
material attributes of the Special Warrants described herein;
and
(c) irrevocably authorizes the Agent to swear, execute, file and
record any documents necessary to accept delivery of the Special
Warrants at the Closing and to terminate this Agreement on
behalf of the Subscriber in the event that any condition
precedent to the offering has not been satisfied.
Should the Offering be over subscribed, the number of Special Warrants
subscribed for shall be allocated to the Subscriber in the discretion of the
Company. The Agent shall be authorized to amend the information contained herein
to reduce the number of Special Warrants subscribed for and the Subscription
Price to reflect the number of Special Warrants allocated to the Subscriber and
the Subscription Price therefor.
<PAGE> 51
11
13. TERMINATION OF AGREEMENT
The Subscriber may terminate his or her subscription hereunder if the
Agent terminates its obligations under the Agency Agreement, and hereby
irrevocably constitutes the Agent as his or her attorney for purposes of
notifying the Company of such termination.
14. COMMISSION TO THE AGENT
The Subscriber acknowledges and agrees that the gross proceeds derived
from the sale of the Special Warrants less the Cash Commission (as defined
below) shall be paid to the Company on the Closing. The Subscriber understands
that upon completion of the Offering, the Agent will receive from the Company a
cash commission (the "Cash Commission") equal to 8% of the Subscription Price of
the Special Warrants to be sold under this offering to Subscribers. Agent's
special warrants (the "Agent's Option") exercisable to acquire Agent's warrants
to purchase that number of Shares equal to 10% of the Shares issuable upon the
exercise of Special Warrants will be issued to the Agent or according to the
Agent's direction. No other fee or commission is payable by the Company in
connection with the sale of the Special Warrants. However, the Company will pay
those fees and expenses in connection with the offering as are set out in the
Agency Agreement. The Agent and its directors, officers, employees and
affiliates may, from time to time, hold positions in securities of the Company.
Both the Company and the Subscriber acknowledge that the Agent is acting
as agent in this transaction and the Subscriber hereby acknowledges that all
warranties, conditions, representations or stipulations, whether express or
implied and whether arising hereunder or under prior agreement or statement or
by statute or at common law are expressly those of the Company, other that those
relating solely to the Agent. The Subscriber acknowledges that its decision to
execute this Agreement and purchase the Special Warrants has not been based upon
any information or representation concerning the Company provided to the
Subscriber by the Company or the Agent other than those contained in this
Agreement and such as are contained in documents the Company has filed with
securities regulators and which are publicly available (the "Disclosure
Record"), and that the Subscriber is relying entirely upon this Agreement and
the Disclosure Record. Any information given or statement made is given or made
without liability or responsibility howsoever arising on the part of the Agent.
No person in the employment of, or acting as agent of, the Agent has any
authority to make or give any representation or warranty and the Company and the
Subscriber hereby release the Agent from any claims that may arise in respect
thereof.
15. COSTS
The Subscriber acknowledges and agrees that all costs and expenses
incurred by the Subscriber (including any fees and disbursements of any special
counsel retained by the Subscriber) relating to the purchase of the Special
Warrants shall be borne by the Subscriber, other than the Cash Commission and
Agent's Option which shall be borne by the Company as set out above.
16. GOVERNING LAW
This Agreement is governed by the laws of the Province of British
Columbia and the federal laws of Canada applicable therein. The Subscriber, in
his or her personal or corporate capacity and, if applicable, on behalf of each
beneficial purchaser for whom he is acting, irrevocably attorns to the
jurisdiction of the courts of the Province of British Columbia.
<PAGE> 52
12
17. SURVIVAL
This Agreement, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the Subscriber notwithstanding the
completion of the purchase of the Special Warrants by the Subscriber pursuant
hereto, the completion of the issue of Special Warrants and the Shares and any
subsequent disposition by the Subscriber of the Special Warrants or Shares.
18. ASSIGNMENT
This Agreement is not transferable or assignable.
19. TIME IS OF THE ESSENCE
For the purposes of this Agreement, time is of the essence.
20. COUNTERPARTS
This Agreement may be executed in as many counterparts as may be
necessary and by facsimile, each of such counterparts so executed will be deemed
to be an original and such counterparts together will constitute one and the
same instrument and notwithstanding the date of execution will be deemed to bear
the date as of the day and year first above written.
<PAGE> 53
13
EXHIBIT A
Form P1
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of issuer of the securities: Genetronics Biomedical Ltd.
-------------------------------
(b) Number and class of securities to be purchased: Special Warrants
-----------------
(c) Purchase Price: US$3.00 per Special Warrant
-------------------------------------------------
2. DETAILS OF PURCHASER
(a) Name of purchaser: Capital Research Management Company
----------------------------------------------
(b) Address:
--------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the purchaser:
----------------------------------------------------------------
----------------------------------------------------------------
3. RELATIONSHIP TO ISSUER
(a) Is the purchaser, or any person named in response to 2(c) above,
an insider of the issuer for the purposes of the Ontario
Securities Act (before giving effect to this private placement)?
If so, state the capacity in which the purchaser qualifies as an
insider:
No
-----------------------------------------------------------------
(b) If the answer to (a) is "no", are the purchaser and the issuer
controlled by the same person or company? If so, give details:
No
-----------------------------------------------------------------
<PAGE> 54
2
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the purchaser, as principal, in the
securities of the issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
60 days preceding the date hereof:
None
------------------------------------------------------------------------
------------------------------------------------------------------------
UNDERTAKING
TO: THE TORONTO STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of six
months from the date of closing of the transaction herein or until a receipt is
issued by the British Columbia Securities Commission for a Prospectus qualifying
the issue of Shares on exercise of the Special Warrants, without the prior
consent of The Toronto Stock Exchange and any other regulatory body having
jurisdiction.
Dated at London, England Capital Research Management Company
- ------------------------------------ ------------------------------------
on May 28, 1999 (Name of Purchaser-please print)
------------------------------------
(Authorized Signature)
------------------------------------
(Official Capacity-please print)
------------------------------------
(Please print here name of
individual whose signature appears
above, if different from name of
purchaser printed above)
<PAGE> 55
EXHIBIT B
REGULATION D
INVESTOR QUALIFICATION QUESTIONNAIRE (ENTITY)
In connection with the undersigned's proposed purchase of certain
special warrants and the potential conversion thereof resulting in the issuance
of shares of Common Stock (collectively, the "Securities") of Genetronics
Biomedical Ltd. (the "Company"), the undersigned makes the following
representations on which you are entitled to rely:
1. The undersigned's full name, primary business address, phone
number and federal tax I.D. numbers are:
Capital Research Management Company
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Telephone:
----------------------------------------------------------------
Federal Tax I.D. #
----------------------------------------------------------------
2. The profits and net assets of the entity are such that it is not
now, and does not contemplate that it will be, required to
dispose of its Securities to satisfy any existing or expected
undertaking or indebtedness. It is also able to bear the
economic risk of an investment in the Company as well as the
restriction on its ability to sell or transfer the Securities
for an indefinite period of time because it will not be
registered under the Securities Act of 1933, as amended (the
"Act") or any applicable state securities laws, and therefore
cannot be sold, transferred, pledged or otherwise disposed of or
encumbered unless it is subsequently registered pursuant to the
Act or an exemption from such registration is available.
3. The undersigned makes one of the following representations
regarding its net worth and certain related matters and has
checked the applicable representation:
(a) [ ] The undersigned certifies that it is either (a) a
bank as defined in section 3(a)(2) of the Act, (b) a
savings and loan association or other institution
specified in section 3(a)(5)(A) of the Act, (c) an
insurance company as defined in section 2(13) of the
Act, (d) an investment company registered under the
Investment Company Act of 1940, (e) a business
development company as defined in section 2(a)(48) of
such Act, (f) a Small Business Investment Company
licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment
Act of 1958, (g) any plan established and maintained by
a state, its political subdivisions or any agency or
instrumentality of a state or its political subdivisions
for the benefit of its employees, if such plan has total
assets in
<PAGE> 56
2
excess of $5,000,000, (h) an employee benefit plan
within the meaning of Title I of the Employee Retirement
Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in section 3(21)
of such Act, and the plan fiduciary is either a bank,
insurance company, or registered investment adviser, or
savings and loan association or if the employee benefit
plan has total assets in excess of $5,000,000, or if the
employee benefit plan is a self-directed plan, with
investment decisions made solely by an accredited
investor, (i) an organization described in Section
501(c)(3) of the Internal Revenue Code with total assets
in excess of $5,000,000, (j) a broker or dealer
registered pursuant to section 15 of the Securities
Exchange Act of 1934, (k) a corporation or partnership
with total assets in excess of $5,000,000, or (l) a
trust with total assets in excess of $5,000,000 whose
purchase is directed by a sophisticated person.
(b) [ ] The undersigned certifies that it is a private
business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940.
(c) [ ] The undersigned certifies that it is an entity that
(i) was not organized in the United States, (ii) does
not conduct any business in the United States and (iii)
was not formed for the specific purpose of acquiring the
Securities.
(d) [ ] The undersigned certifies that each and every one of
its equity owners (in the case of a revocable living
trust, its grantor(s)) is able to certify that he meets
at least one of the following three conditions:
(i) The equity owner is a natural person whose
individual net worth, or joint worth with his
spouse (i.e., total assets in excess of total
liabilities) exceeds $1,000,000.
(ii) The equity owner is a natural person who had an
INDIVIDUAL annual adjusted gross income(1) in
excess of $200,000 (or an annual adjusted gross
income with such owner's spouse in excess of
$300,000) in each of the two most recent tax
years and who reasonably expects an individual
annual adjusted gross income in excess of
$200,000 (or an annual adjusted gross income
with such owner's spouse in excess of $300,000)
in his current tax year.
(iii) The equity owner is one of the institutions or
entities set forth in paragraph 7.1 above.
- --------
(1) As used herein "individual annual adjusted gross income" means "adjusted
gross income," as reported for Federal income purposes, less any income
attributable to a spouse or to property owned by a spouse and increased by the
following amounts (but not including any amounts attributable to a spouse: (i)
the amount of any tax-exempt interest income received, (ii) amount of losses
claimed as a limited partner in a limited partnership, (iii) any deduction
claimed for depletion, (iv) amounts contributed to an IRA, Keogh or 401(k)
retirement plan and (v) alimony paid.
<PAGE> 57
3
4. The undersigned represents that the information contained herein
is complete and accurate and may be relied upon by the Company,
and that the undersigned will notify the Company of any material
change in any of such information prior to the undersigned's
investment in the Company.
IN WITNESS WHEREOF, the undersigned has executed this certificate on May
28, 1999
Capital Research Management Company
------------------------------------
NAME OF ENTITY
By:
---------------------------------
------------------------------------
Title or Association with Entity
<PAGE> 58
EXHIBIT C
CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
The undersigned is purchasing securities of Genetronics Biomedical Ltd. (the
"Issuer").
The undersigned hereby certifies that:
(a) it is purchasing securities of the Issuer on behalf of managed accounts
over which it has absolute discretion as to purchasing and selling, and
in respect of which it receives no instructions from any person
beneficially interested in such accounts or from any other person;
(b) it carries on the business of managing the investment portfolios of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ___________ [jurisdiction], and it is
permitted by law to carry on a portfolio manager business in that
jurisdiction;
(c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
(d) the total asset value of the investment portfolios it manages on behalf
of clients is not less than $20,000,000;
(e) it does not believe, and has no reasonable grounds to believe, that any
resident of British Columbia has a beneficial interest in any of the
managed accounts for which it is purchasing; and
(f) the Issuer has provided it with a list of the directors, senior officers
and other insiders of the Issuer, and the persons that carry on investor
relations activities for the Issuer (which list is attached as a
schedule to this Form), and it does not believe, and has no reasonable
grounds to believe, that any of those persons has a beneficial interest
in any of the managed accounts for which it is purchasing, except as
follows:
__________________________________________ (name of insider(s) or
person(s) carrying on investor relations activities for the Issuer that
have a beneficial interest in an account.)
The undersigned acknowledges that it is bound by the provisions of the British
Columbia Securities Act including, without limitation, sections 87 and 111
concerning the filing of insider reports and reports of acquisitions.
Dated at ___________________________________ this _____ day of _________, 1999.
------------------------------------
(Name of Purchaser - please print)
------------------------------------
(Authorized Signature)
------------------------------------
(Official Capacity - please print)
------------------------------------
(please print name of individual
whose signature appears above, if
different from name of purchaser
printed above)
<PAGE> 59
SCHEDULE TO EXHIBIT C - CERTIFICATION BY FOREIGN PORTFOLIO MANAGER
LIST OF DIRECTORS, SENIOR OFFICERS AND OTHER INSIDERS
OF THE COMPANY AND OTHER PERSONS THAT CARRY ON
INVESTOR RELATIONS ACTIVITIES FOR THE COMPANY
Lois J. Crandell
Gunter Hofmann
Martin Nash
James L. Heppell
Suzanne Wood
Stan Yakatan
Gordon J. Politeski
Wayne Schnarr
James Lierman
Al Snyder
Dietmar Rabussay
William McGlone
Markus Hofmann
E. Terrie Roe-Dierlam
Gerard Seroussi
Andrea DeKertanguy
Miles Lewis
Malcome McGuire
Maria De Geer
Marc Moreau
<PAGE> 1
EXHIBIT 10.2
GENETRONICS BIOMEDICAL LTD.
SPECIAL WARRANT INDENTURE
PROVIDING FOR THE ISSUE OF
4,187,500 SPECIAL WARRANTS
JUNE 16, 1999
<PAGE> 2
-2-
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE INTERPRETATION ........................................... 6
SECTION 1.01 - DEFINITIONS ......................................... 6
SECTION 1.02 - GENDER .............................................. 8
SECTION 1.03 - INTERPRETATION NOT AFFECTED BY HEADINGS, ETC ........ 9
SECTION 1.04 - BUSINESS DAY ........................................ 9
SECTION 1.05 - TIME OF THE ESSENCE ................................. 9
SECTION 1.06 - APPLICABLE LAW ...................................... 9
SECTION 1.07 - CURRENCY ............................................ 9
SECTION 1.08 - MEANING OF OUTSTANDING .............................. 9
SECTION 1.09 - TERMINATION ......................................... 9
ARTICLE TWO ISSUE OF WARRANTS ........................................ 9
SECTION 2.01 - ISSUE OF WARRANTS ................................... 9
SECTION 2.02 - FORM AND TERMS OF WARRANTS .......................... 10
SECTION 2.03 - SIGNING OF WARRANT CERTIFICATES ..................... 10
SECTION 2.04 - CERTIFICATION BY THE TRUSTEE ........................ 10
SECTION 2.05 - WARRANTHOLDER NOT A SHAREHOLDER, ETC ................ 10
SECTION 2.06 - ISSUE IN SUBSTITUTION FOR LOST WARRANT CERTIFICATES . 10
SECTION 2.07 - WARRANTS TO RANK PARI PASSU ......................... 11
SECTION 2.08 - REGISTERS FOR WARRANTS .............................. 11
SECTION 2.09 - REGISTERS OPEN FOR INSPECTION ....................... 11
SECTION 2.10 - EXCHANGE OF WARRANTS ................................ 12
SECTION 2.11 - OWNERSHIP AND TRANSFER OF WARRANTS .................. 12
SECTION 2.12 - ADJUSTMENT OF COMMON SHARES ......................... 12
SECTION 2.13 - ADJUSTMENT RULES .................................... 13
SECTION 2.14 - POSTPONEMENT OF SUBSCRIPTION ........................ 14
</TABLE>
<PAGE> 3
-3-
<TABLE>
<S> <C>
SECTION 2.15 - NOTICE OF ADJUSTMENT ................................ 14
SECTION 2.16 - NO ACTION AFTER NOTICE .............................. 14
SECTION 2.17 - PURCHASE OF WARRANTS FOR CANCELLATION ............... 14
SECTION 2.18 - PROTECTION OF TRUSTEE ............................... 15
ARTICLE THREE EXERCISE OF WARRANTS ................................... 15
SECTION 3.01 - METHOD OF EXERCISE OF WARRANTS ...................... 16
SECTION 3.02 - DEEMED EXERCISE OF WARRANTS ......................... 16
SECTION 3.03 - EFFECT OF EXERCISE OF WARRANTS ...................... 16
SECTION 3.04 - CANCELLATION OF WARRANT CERTIFICATES ................ 16
SECTION 3.05 - SECURITIES RESTRICTIONS; LEGENDS .................... 17
ARTICLE FOUR COVENANTS FOR WARRANTHOLDERS' BENEFIT ................... 17
SECTION 4.01 - GENERAL COVENANTS ................................... 17
SECTION 4.02 - SECURITIES QUALIFICATION REQUIREMENTS ............... 18
SECTION 4.03 - TRUSTEE'S REMUNERATION AND EXPENSES ................. 18
ARTICLE FIVE ENFORCEMENT ............................................. 19
SECTION 5.01 - SUITS BY WARRANTHOLDERS ............................. 19
SECTION 5.02 - IMMUNITY OF SHAREHOLDERS, ETC ....................... 19
SECTION 5.03 - LIMITATION OF LIABILITY ............................. 19
ARTICLE SIX MEETINGS OF WARRANTHOLDERS ............................... 19
SECTION 6.01 - RIGHT TO CONVENE MEETINGS ........................... 19
SECTION 6.02 - NOTICE .............................................. 20
SECTION 6.03 - CHAIRMAN ............................................ 20
SECTION 6.04 - QUORUM .............................................. 20
SECTION 6.05 - POWER TO ADJOURN .................................... 20
SECTION 6.06 - SHOW OF HANDS ....................................... 21
SECTION 6.07 - POLL AND VOTING ..................................... 21
</TABLE>
<PAGE> 4
-4-
<TABLE>
<S> <C>
SECTION 6.08 - REGULATIONS ......................................... 21
SECTION 6.09 - CORPORATION, TRUSTEE AND COUNSEL MAY BE REPRESENTED . 21
SECTION 6.10 - POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION ...... 21
SECTION 6.11 - MEANING OF EXTRAORDINARY RESOLUTION ................. 21
SECTION 6.12 - POWERS CUMULATIVE ................................... 23
SECTION 6.13 - MINUTES ............................................. 23
SECTION 6.14 - INSTRUMENTS IN WRITING .............................. 23
SECTION 6.15 - BINDING EFFECT OF RESOLUTIONS ....................... 23
SECTION 6.16 - HOLDINGS BY THE CORPORATION OR SUBSIDIARIES OF
THE CORPORATION DISREGARDED ........................ 23
ARTICLE SEVEN SUPPLEMENTAL INDENTURES ................................ 24
SECTION 7.01 - SUPPLEMENTAL INDENTURES ............................. 24
SECTION 7.02 - SUCCESSOR CORPORATIONS .............................. 24
ARTICLE EIGHT CONCERNING THE TRUSTEE ................................. 25
SECTION 8.01 - TRUST INDENTURE LEGISLATION ......................... 25
SECTION 8.02 - RIGHTS AND DUTIES OF TRUSTEE ........................ 25
SECTION 8.03 - EVIDENCE, EXPERTS AND ADVISERS ...................... 26
SECTION 8.04 - DOCUMENTS, MONIES, ETC. HELD BY TRUSTEE ............. 26
SECTION 8.05 - ACTIONS BY TRUSTEE TO PROTECT INTERESTS ............. 26
SECTION 8.06 - TRUSTEE NOT REQUIRED TO GIVE SECURITY ............... 26
SECTION 8.07 - PROTECTION OF TRUSTEE ............................... 27
SECTION 8.08 - REPLACEMENT OF TRUSTEE .............................. 27
SECTION 8.09 - CONFLICT OF INTEREST ................................ 28
SECTION 8.10 - ACCEPTANCE OF TRUSTS ................................ 28
SECTION 8.11 - TRUSTEE NOT TO BE APPOINTED RECEIVER ................ 28
SECTION 8.12 - AUTHORIZATION TO CARRY ON BUSINESS .................. 28
</TABLE>
<PAGE> 5
-5-
<TABLE>
<S> <C>
ARTICLE NINE FORM OF WARRANT ......................................... 28
SECTION 9.01 - FORM OF WARRANT CERTIFICATE ......................... 28
SECTION 9.02 - SUBSCRIPTION FORM ................................... 32
SECTION 9.03 - TRANSFER FORM ....................................... 33
ARTICLE TEN GENERAL .................................................. 33
SECTION 10.01 - NOTICE TO THE CORPORATION AND THE TRUSTEE .......... 33
SECTION 10.02 - NOTICE TO THE WARRANTHOLDERS ....................... 34
SECTION 10.03 - MAIL SERVICE INTERRUPTION .......................... 34
SECTION 10.04 - COUNTERPARTS AND FORMAL DATE ....................... 34
SECTION 10.05 - SATISFACTION AND DISCHARGE OF INDENTURE ............ 34
SECTION 10.06 - PROVISIONS OF INDENTURE AND WARRANTS FOR
THE SOLE BENEFIT OF PARTIES AND WARRANTHOLDERS .... 35
</TABLE>
<PAGE> 6
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THIS SPECIAL WARRANT INDENTURE made as of June 16, 1999,
B E T W E E N:
GENETRONICS BIOMEDICAL LTD., a corporation incorporated under
the laws of the province of British Columbia and having an
office situate at 11199 Sorrento Valley Road, San Diego,
California, 92121-1334
(the "Corporation")
and
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated
under the laws of Canada and authorized to carry on business in
all provinces of Canada
(the "Trustee")
WITNESSES THAT WHEREAS:
A. The Corporation is desirous of raising money for its corporate purposes and
with a view to doing so proposes to issue and sell 4,187,500 special warrants
(the "Warrants") to be constituted and issued in the manner hereinafter set
forth;
B. The Corporation is duly authorized to create and issue the Warrants as herein
provided;
C. All things necessary have been done and performed to make the Warrants, when
certified by the Trustee and issued as provided in this Indenture, legal, valid
and binding upon the Corporation with the benefits of and subject to the terms
of this Indenture;
D. The Trustee has agreed to enter into this Indenture and to act as Trustee on
behalf of the holders of Warrants issued pursuant to this Indenture on the terms
and conditions set forth herein;
NOW THEREFORE for good and valuable consideration mutually given and
received, the receipt and sufficiency of which are hereby acknowledged, it is
hereby agreed and declared as follows:
ARTICLE ONE
INTERPRETATION
SECTION 1.01 - DEFINITIONS
In this Indenture, unless there is something in the subject matter or context
inconsistent therewith, the following phrases and words have the respective
meanings indicated opposite them as follows:
"1933 ACT" means the Securities and Exchange Act of 1933 (United States), as
amended, and any rules or regulations made thereunder;
"1934 ACT" means the Securities and Exchange Act of 1934 (United States), as
amended, and any rules or regulations made thereunder;
<PAGE> 7
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"AGENT" means Canaccord International (L) Corporation;
"APPLICABLE LEGISLATION" means the provisions of any statute of Canada or a
province thereof and of regulations under any such named or other statute
relating to trust indentures and/or to the rights, duties and obligations of
trustees and of corporations under trust indentures, to the extent that such
provisions are at the time in force and applicable to this Indenture.
"BUSINESS DAY" means a day which is not a Saturday, Sunday, or civic or
statutory holiday in the City of Vancouver or the City of Toronto or a day when
the principal office of the Trustee in either of the said cities is not open to
the public for the transaction of business;
"CAPITAL REORGANIZATION" has the meaning ascribed thereto in Subsection 2.12(1);
"CLOSING DATE" means the date on which the closing of the issue and sale of the
Warrants shall occur being such date upon which the Corporation and Agent may
agree;
"COMMON SHARES" means fully paid and non-assessable common shares without par
value in the capital of the Corporation as currently constituted, provided that
in the event of any adjustment pursuant to Section 2.12, Common Shares will
thereafter mean the securities or property resulting from such adjustment;
"CORPORATION" means Genetronics Biomedical Ltd., a company incorporated under
the laws of the Province of British Columbia;
"CORPORATION'S AUDITORS" means the chartered accountant or firm of chartered
accountants duly appointed as auditor or auditors of the Corporation from time
to time;
"COUNSEL" means a barrister and/or solicitor or a firm of barristers and/or
solicitors (who may be counsel for the Corporation) acceptable to the Trustee
acting reasonably;
"DIRECTOR" means a director of the Corporation for the time being, and unless
otherwise specified herein, reference to "action by the directors" means action
by the directors of the Corporation as a board or, whenever duly empowered,
action by a committee of such board, in each case by resolution duly passed;
"EXERCISE DATE" with respect to any Warrant means the date on which such Warrant
is surrendered to the Trustee for exercise in accordance with the provisions of
Article Three or is deemed to have been exercised in accordance with the
provisions of Section 3.02;
"EXPIRY DATE" means the earlier of (i) the fifth Business Day after the
Qualification Date; and (ii) twelve months from the Closing Date;
"EXTRAORDINARY RESOLUTION" has the meaning ascribed thereto in Sections 6.11 and
6.14;
"FINAL PROSPECTUS" means the (final) prospectus qualifying the distribution of
the Common Shares issuable upon exercise or deemed exercise of the Warrants;
"PERSON" includes an individual, a corporation, a partnership, a trustee, any
unincorporated organization or any other juridical entity and words importing
persons have a similar meaning;
"PRELIMINARY PROSPECTUS" means the preliminary prospectus of the Corporation
qualifying the distribution of the Common Shares issuable upon the exercise or
deemed exercise of the Warrants;
"PROSPECTUS CERTIFICATE" means the certificate executed by the Chief Executive
Officer or the Senior Vice President of the Corporation confirming the issuance
of receipts or similar documents for the Final Prospectus by the Securities
Administrators;
<PAGE> 8
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"QUALIFICATION DATE" means the date of issuance of receipts or similar documents
by the last of the Securities Administrators for the Final Prospectus;
"QUALIFICATION DEADLINE" means 5:00 p.m. (Vancouver time) on the date that is 90
days from the Closing Date or the next Business Day thereafter if the 90th day
is not a Business Day;
"QUALIFYING JURISDICTIONS" mean the Provinces of British Columbia and Ontario;
"SECURITIES ADMINISTRATORS" means the securities regulatory authorities of the
Qualifying Jurisdictions;
"SHAREHOLDER" means a holder of record of one or more Common Shares;
"SUCCESSOR CORPORATION" has the meaning ascribed thereto in Section 7.02;
"THIS WARRANT INDENTURE", "THIS INDENTURE", "HEREIN", "HEREBY", and similar
expressions mean and refer to this Indenture and any indenture, deed or
instrument supplemental or ancillary hereto; and the expressions "ARTICLE",
"SECTION", "SUBSECTION" and "CLAUSE" followed by a number mean and refer to the
specified Article, Section, Subsection or clause of this Indenture;
"TIME OF EXPIRY" means 5:00 p.m., Vancouver time, on the Expiry Date;
"TRANSFER AGENT" means the transfer agent or agents for the time being of the
Common Shares;
"TRUSTEE" means Montreal Trust Company of Canada, a trust corporation
incorporated under the laws of Canada, or its successors for the time being in
the trusts hereby created;
"U.S. ACT" means the United States Securities Act of 1933, as amended;
"U.S. PERSON" has the meaning attributed thereto in Regulation S adopted under
the U.S. Act;
"WARRANTHOLDER" or "HOLDER" or "REGISTERED HOLDER" means a person whose name is
entered for the time being in the register maintained pursuant to clause
2.08(l)(a), as holders of Warrants;
"WARRANT CERTIFICATE" means a certificate evidencing one or more Warrants;
"WARRANTHOLDERS' REQUEST" means an instrument signed in one or more counterparts
by Warrantholders entitled to acquire in the aggregate at least 25% of the
aggregate number of the Common Shares which could be acquired upon the exercise
of all Warrants then outstanding which requests the Trustee to take some action
or proceeding specified therein;
"WARRANTS" means the special warrants of the Corporation available for purchase
at a price of US$3.00 per special warrant entitling registered holders thereof
to acquire one Common Share per Warrant;
"WRITTEN ORDER OF THE CORPORATION", "WRITTEN REQUEST OF THE CORPORATION",
"WRITTEN CONSENT OF THE CORPORATION", "CERTIFICATE OF THE CORPORATION" and any
other document required to be signed by the Corporation, means, respectively, a
written order, request, consent, certificate or other document signed in the
name of the Corporation by any one of the chairman of the board, the
vice-chairman of the board, the president, a vice-president or a director of the
Corporation, and may consist of one or more instruments so executed.
SECTION 1.02 - GENDER
Unless elsewhere otherwise expressly provided or unless the context otherwise
requires, words importing the singular include the plural and vice versa and
words importing the masculine gender include the feminine and neuter genders.
<PAGE> 9
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SECTION 1.03 - INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Indenture into Articles, Sections, Subsections and clauses,
the provision of a table of contents and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Indenture.
SECTION 1.04 - BUSINESS DAY
In the event that any day on or before which any action is required or permitted
to be taken hereunder is not a Business Day, then such action shall be required
or permitted to be taken on or before the requisite time on the next succeeding
day that is a Business Day.
SECTION 1.05 - TIME OF THE ESSENCE
Time shall be of the essence in all respects in this Indenture and the Warrants.
SECTION 1.06 - APPLICABLE LAW
This Indenture and the Warrants shall be governed by and construed in accordance
with the laws of the Province of British Columbia and the laws of Canada
applicable therein and shall be treated in all respects as British Columbia
contracts, and the Corporation and the Trustee irrevocably attorn to the
jurisdiction of the courts of British Columbia in connection with any disputes
which may arise in connection with this Indenture or the Warrants or both.
SECTION 1.07 - CURRENCY
Unless otherwise stated all dollar amounts referred to in this Indenture are in
United States dollars.
SECTION 1.08 - MEANING OF OUTSTANDING
Every Warrant represented by a certificate certified and delivered by the
Trustee hereunder shall be deemed to be outstanding until it shall be cancelled
or delivered to the Trustee for cancellation or until the Time of Expiry;
provided that where a new Warrant certificate has been issued pursuant to
Section 2.06 hereof to replace one which is lost, mutilated, stolen or
destroyed, the Warrants represented by only one of such Warrant Certificates
shall be counted for the purpose of determining the aggregate number of Warrants
outstanding.
SECTION 1.09 - TERMINATION
This Indenture shall continue in full force and effect so long as any Warrant is
outstanding and upon the expiry, exercise or deemed exercise of all the Warrants
issuable hereunder, shall be terminated upon the written consent of the Trustee
and the Corporation.
ARTICLE TWO
ISSUE OF WARRANTS
SECTION 2.01 - ISSUE OF WARRANTS
A total of 4,187,500 Warrants entitling the registered holders thereof to
acquire an aggregate of 4,187,500 Common Shares (as adjusted as contemplated
herein) are hereby created and authorized to be issued hereunder upon the terms
and conditions herein set forth and Warrant Certificates shall be executed by
the Corporation and certified by or on behalf of the Trustee upon the written
order of the Corporation and delivered by the Corporation in accordance with
Sections 2.03 and 2.04, against payment of the purchase price therefor. The
Trustee shall have no duty to confirm that the purchase price for the Warrants
has been paid prior to effecting such certification and delivery.
<PAGE> 10
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SECTION 2.02 - FORM AND TERMS OF WARRANTS
(1) The Warrant Certificates shall be substantially in the form set out in
Article Nine with, subject to the provisions of this Indenture, such additions,
variations and changes as may from time to time be agreed upon by the Trustee
and the Corporation, shall be dated as of the Closing Date (regardless of their
actual date of issue), and shall have such distinguishing letters and numbers
and such legends as the Corporation may, with the approval of the Trustee,
prescribe. All Warrant Certificates shall, save as to denominations, be of like
tenor and effect. The Warrant Certificates may be engraved, printed,
lithographed, photocopied or be partially in one form or another, as the
Corporation may determine. No change in the form of the Warrant Certificate
shall be required by reasons of any adjustment made pursuant to this Article Two
in the number and/or class of securities or type of securities which may be
acquired pursuant to the exercise or deemed exercise of the Warrants.
(2) Each Warrant authorized to be issued hereunder shall entitle the registered
holder thereof to acquire at no additional cost one Common Share upon the due
execution of the subscription form substantially in the form set out in Article
Nine, or other instrument of subscription in such form as the Trustee and/or the
Corporation may from time to time prescribe or upon the exercise or deemed
exercise of such Special Warrants.
(3) Fractional Warrants shall not be issued or otherwise provided for.
SECTION 2.03 - SIGNING OF WARRANT CERTIFICATES
The Warrant Certificates shall be signed by any one director or the chairman,
vice-chairman, president, vice-president or the secretary of the Corporation,
and may, but need not be, under the corporate seal of the Corporation or a
reproduction thereof. The signature of such person may be mechanically
reproduced in facsimile and Warrant Certificates bearing such facsimile
signatures shall be binding upon the Corporation as if they had been manually
signed by such person. Notwithstanding that the person whose manual or facsimile
signature appears on any Warrant Certificate may no longer hold office at the
date of issue of such Warrant Certificate or at the date of certification or
delivery thereof, any Warrant Certificate signed as aforesaid shall, subject to
Section 2.04 be valid and binding upon the Corporation and the registered holder
thereof shall be entitled to the benefits of this Indenture.
SECTION 2.04 - CERTIFICATION BY THE TRUSTEE
(1) No Warrant Certificate shall be issued or, if issued, shall be valid for any
purpose or entitle the registered holder to the benefit hereof or thereof until
it has been certified by manual signature by or on behalf of the Trustee in the
form of the certificate set out in Article Nine and such certification by the
Trustee upon any Warrant Certificate shall be conclusive evidence as against the
Corporation that the Warrant Certificate so certified has been duly issued
hereunder and the holder is entitled to the benefits hereof.
(2) The certification of the Trustee on the Warrant Certificates issued
hereunder shall not be construed as a representation or warranty by the Trustee
as to the validity of this Indenture or the Warrants (except the due
certification thereof) and the Trustee shall in no respect be liable or
answerable for the use made of the Warrants or any of them or of the
consideration therefor except as otherwise specified herein.
SECTION 2.05 - WARRANTHOLDER NOT A SHAREHOLDER, ETC.
The holding of a Warrant shall not be construed as conferring upon a
Warrantholder any right or interest whatsoever as a Shareholder, nor entitle the
holder to any right or interest in respect thereof except as herein and in the
Warrants expressly provided.
SECTION 2.06 - ISSUE IN SUBSTITUTION FOR LOST WARRANT CERTIFICATES
(1) In case any of the Warrant Certificates shall become mutilated or be lost,
destroyed or stolen, the Corporation, subject to applicable law, and Subsection
2.06(2) shall issue and thereupon the Trustee shall certify and deliver a new
Warrant Certificate of like tenor as the one mutilated, lost, destroyed or
stolen in exchange for
<PAGE> 11
-11-
and in place of and upon cancellation of such mutilated certificate, or in lieu
of and in substitution for such lost, destroyed or stolen certificate, and the
substituted certificate shall be in a form approved by the Trustee and shall be
entitled to the benefits hereof and shall rank equally in accordance with its
terms with all other Warrant Certificates issued or to be issued hereunder.
(2) The applicant for the issue of a new certificate pursuant to this Section
2.06 shall bear the cost of the issue thereof and in the case of mutilation
shall as a condition precedent to the issue thereof, deliver to the Trustee the
mutilated certificate, and in the case of loss, destruction or theft shall, as a
condition precedent to the issue thereof, furnish to the Corporation and to the
Trustee such evidence of ownership and of the loss, destruction or theft of the
certificate so lost, destroyed or stolen as shall be satisfactory to the
Corporation and to the Trustee in their sole discretion, and such applicant may
also be required to furnish an indemnity and security bond in amount and form
satisfactory to the Corporation and the Trustee in their sole discretion and
shall pay the reasonable charges of the Corporation and the Trustee in
connection therewith.
SECTION 2.07 - WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date of issue of
the Warrant Certificates by which they are evidenced.
SECTION 2.08 - REGISTERS FOR WARRANTS
(1) The Warrants to be issued shall be in registered form. The Corporation shall
cause to be kept by the Trustee at its principal office in the City of Vancouver
and the City of Toronto a register of holders in which shall be entered the
names and addresses of the holders of the Warrants and of the number of Warrants
held by them and a register of transfers in which shall be entered the date and
other particulars of each transfer of Warrants.
(2) Subject to the terms of this Indenture, Warrants may be transferred. No
transfer of a Warrant shall be valid unless: (a) made by the Warrantholder or
his executors, administrators or other legal representatives or his or their
attorney duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee with signatures guaranteed by a Schedule A bank or
trust company or a member of an acceptable medallion guarantee program and upon
compliance with such reasonable requirements as the Trustee may prescribe and
applicable securities legislation and requirements of regulatory authorities;
and (b) recorded on the register of transfers maintained by the Trustee pursuant
to Subsection 2.08(1), nor until all stamp taxes or governmental or other
charges arising by reason of such transfer have been paid. Notwithstanding any
provision to the contrary contained in this Indenture, the Corporation will, on
the advice of counsel, acting reasonably, be entitled, and may direct the
Trustee, and the Trustee will, at the direction of the Corporation, acting
reasonably, or otherwise on the advice of counsel, be entitled to refuse to
recognize and transfer, or enter the name of any transferee of any Warrant on
the register if such transfer would constitute a violation of the securities
laws of any jurisdiction.
(3) The transferee of a Warrant shall, after the transfer form attached to the
Warrant Certificate or any other form of transfer acceptable to the Trustee is
duly completed and the Warrant Certificate is lodged with the Trustee and upon
compliance with all other conditions in that regard required by this Indenture
or by law, be entitled to have his name entered on the register of holders as
the owner of such Warrant free from all equities or rights of set-off or
counterclaim between the Corporation and the transferor or any previous holder
of such Warrant, save in respect of equities of which the Corporation or the
transferee is required to take notice by statute or by order of a court of
competent jurisdiction.
SECTION 2.09 - REGISTERS OPEN FOR INSPECTION
The registers hereinbefore referred to shall be open at all reasonable times for
inspection by the Corporation, the Trustee or any Warrantholder. The Trustee
shall, from time to time when requested to do so by the Corporation, furnish the
Corporation with a list of the names and addresses of holders of Warrants
entered in the register of holders kept by the Trustee and showing the number of
Common Shares which might then be acquired upon the exercise of the Warrants
held by each such holder.
<PAGE> 12
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SECTION 2.10 - EXCHANGE OF WARRANTS
(1) Warrant Certificates may, upon compliance with the reasonable requirements
of the Trustee, be exchanged for Warrant Certificates in any other authorized
denomination representing in the aggregate the same number of Warrants. The
Corporation shall sign and the Trustee shall certify, in accordance with
Sections 2.03 and 2.04, all Warrant Certificates necessary to carry out the
exchanges contemplated herein.
(2) Warrant Certificates may be exchanged only at the principal office of the
Trustee in the City of Vancouver or the City of Toronto, or at any other place
that is designated by the Corporation with the approval of the Trustee. Any
Warrant Certificates tendered for exchange shall be surrendered to the Trustee
and canceled.
(3) Except as otherwise herein provided, the Trustee may charge Warrantholders
requesting an exchange a reasonable sum for each Warrant Certificate issued; and
payment of such charges and reimbursement of the Trustee or the Corporation for
any and all taxes or governmental or other charges required to be paid shall be
made by the party requesting such exchange as a condition precedent to such
exchange.
SECTION 2.11 - OWNERSHIP AND TRANSFER OF WARRANTS
The Corporation and the Trustee may deem and treat the registered holder of any
Warrant Certificate as the absolute owner of the Warrant represented thereby for
all purposes, and the Corporation and the Trustee shall not be affected by any
notice or knowledge to the contrary except where the Corporation or the Trustee
is required to take notice by statute or by order of a court of competent
jurisdiction. A Warrantholder shall be entitled to the rights evidenced by such
Warrant free from all equities or rights of set-off or counterclaim between the
Corporation and the original or any intermediate holder thereof and all persons
may act accordingly and the receipt by any such Warrantholder of Common Shares
pursuant thereto shall be a good discharge to the Corporation and the Trustee
for the same and neither the Corporation nor the Trustee shall be bound to
inquire into the title of any such holder except where the Corporation or the
Trustee is required to take notice by statute or by order of a court of
competent jurisdiction.
SECTION 2.12 - ADJUSTMENT OF COMMON SHARES
(1) Subject to Sections 2.13 and 2.14, if any time after the date hereof and
prior to the Time of Expiry, and provided that any Warrants remain unexercised,
there shall be:
(a) a reclassification of the Common Shares outstanding at the time
or a change in the Common Shares into other shares or securities
or a subdivision or consolidation of the Common Shares into a
greater or lesser number of Common Shares, or any other
reorganization of the Corporation's share capital;
(b) a consolidation, amalgamation or merger of the Corporation with
or into any other corporation (other than a consolidation,
amalgamation or merger which does not result in any
reclassification of the outstanding Common Shares or a change of
the Common Shares into other shares or securities);
(c) a transfer of the undertaking or assets of the Corporation as an
entirety or substantially as an entirety to another corporation
or entity; or
(d) an issue or distribution to the holders of all or substantially
all of the Corporation's Common Shares of securities of the
Corporation including rights, options or warrants to acquire
shares of the Corporation or securities convertible into or
exchangeable for Common Shares of the Corporation, or any
property or assets, including any evidences of indebtedness,
(any of such events in these clauses (a), (b), (c) and (d) being called a
"Capital Reorganization"), any Warrantholder who thereafter shall exercise his
right to receive Common Shares pursuant to Warrant(s) shall be entitled to
receive, at no additional cost, and shall accept in lieu of the number of Common
Shares to which such holder was theretofore
<PAGE> 13
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entitled upon such exercise, the aggregate number of shares, other securities or
other property which such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the effective date or record date thereof,
as the case may be, the Warrantholder had been the registered holder of the
number of Common Shares to which such holder was theretofore entitled to acquire
upon exercise or deemed exercise of the Warrant. If determined appropriate by
the Trustee and the Corporation acting reasonably, appropriate adjustments shall
be made as a result of any such Capital Reorganization in the application of the
provisions set forth in this Article Two with respect to the rights and
interests thereafter of Warrantholders to the end that the provisions set forth
in this Article Two shall thereafter correspondingly be made applicable as
nearly as may reasonably be in relation to any shares, other securities or other
property thereafter deliverable upon the exercise of any Warrant. Any such
adjustment shall be made by and set forth in an indenture supplemental hereto
approved by the directors and by the Trustee and entered into pursuant to the
provisions of this Indenture and shall for all purposes be conclusively deemed
to be an appropriate adjustment.
(2) Forthwith upon the occurrence of any of the events referred to in the
preceding Subsections above, the Corporation shall:
(a) file with the Trustee a certificate of the Corporation
specifying the required adjustment; and
(b) give notice to the Warrantholders of the required adjustment.
SECTION 2.13 - ADJUSTMENT RULES
For the purposes of Section 2.12:
(1) The adjustments provided for in Section 2.12 are cumulative and such
adjustments shall be made successively whenever an event referred to therein
shall occur, subject to the following Subsections of this Section 2.13.
(2) No adjustment shall be made in the number or kind of Common Shares which may
be acquired on the exercise of a Warrant unless it would result in a change of
at least one-hundredth of a Common Share (provided, however, that any
adjustments which may by reason of this Subsection (2) not be required to be
made, shall be carried forward and then taken into consideration in any
subsequent adjustment).
(3) No adjustment shall be made in respect of any event described in Section
2.12, if Warrantholders are entitled to participate in such event on the same
terms, mutatis mutandis, as if Warrantholders had exercised their Warrants prior
to or on the effective date or record date of such event.
(4) In the event of any question arising with respect to any adjustment provided
for in Section 2.12, such question shall be conclusively determined by the
Corporation's auditors, or if they are unable or unwilling to act, by such other
firm of independent chartered accountants as may be selected by the directors of
the Corporation and any such determination shall be binding upon the
Corporation, the Trustee and the Warrantholders.
(5) If the Corporation shall set a record date to determine the Shareholders for
the purpose of entitling them to receive any dividend or distribution or any
subscription or purchase rights and shall, thereafter and before the
distribution to such Shareholders of any such dividend, distribution, or
subscription or purchase rights, legally abandon its plan to pay or deliver such
dividend, distribution, or subscription or purchase rights, then no adjustment
in the number of Common Shares which may be issuable on the exercise or deemed
exercise of the Warrants shall be required by reason of the setting of such
record date.
(6) As a condition precedent to the taking of any action which would require any
adjustment in any of the subscription rights pursuant to any of the Warrants,
the Corporation shall take any corporate action which may, in the opinion of
counsel, be necessary in order that the Corporation have unissued and reserved
in its authorized capital and may validly and legally issue as fully paid and
non-assessable all the shares or other securities which all the holders of such
Warrants are entitled to receive on the exercise of all the subscription rights
attaching thereto in accordance with the provisions thereof.
<PAGE> 14
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(7) In case the Corporation, after the date hereof, shall take any action
affecting any Common Shares, other than action described in Section 2.12, which
in the opinion of the directors would materially affect the rights of
Warrantholders, the number of Common Shares which shall be issuable on the
exercise or deemed exercise of the Warrants, shall be adjusted in such manner,
if any, and at such time, as the directors, in their sole discretion, may
determine to be equitable in the circumstances. Failure of the taking of action
by the directors so as to provide for such an adjustment prior to the effective
date of any action by the Corporation affecting the Common Shares shall be
conclusive evidence that the directors have determined that it is equitable to
make no adjustment in the circumstances.
SECTION 2.14 - POSTPONEMENT OF SUBSCRIPTION
In any case where the application of Section 2.12 results in an increase of the
number of Common Shares which may be issuable on the exercise or deemed exercise
of the Warrants taking effect immediately after the record date for a specific
event, if any Warrant is exercised after that record date and prior to
completion of the event, the Corporation may postpone the issuance to the holder
of the Warrant or the Common Shares to which he is entitled by reason of such
adjustment but such Common Shares shall be so issued and delivered to that
holder upon completion of that event, with the number of such Common Shares
calculated on the basis of the number of Common Shares provided for after the
adjustment provided for in Section 2.12 hereof on the date of exercise of the
Warrants and the Corporation shall deliver to the person in whose name the
Common Shares are to be issued an appropriate instrument evidencing the right of
such person to receive such Common Shares and the right to receive any dividends
or other distributions which, but for the provisions of this Section, such
person would have been entitled to receive in respect of such Common Shares from
and after the date that the Warrant was exercised in respect thereof.
SECTION 2.15 - NOTICE OF ADJUSTMENT
(1) At least 14 days prior to the effective date or record date, as the case may
be, of any event which requires or might require adjustment pursuant to Section
2.12, the Corporation shall
(a) file with the Trustee a certificate of the Corporation
specifying the particulars of such event (including the record
date or the effective date for such event) and, if determinable,
the required adjustment and the computation of such adjustment;
and
(b) give notice to the Warrantholders of the particulars of such
event (including the record date or the effective date for such
event) and, if determinable, the required adjustment.
(2) In case any adjustment for which a notice in Subsection (1) of this Section
has been given is not then determinable, the Corporation shall promptly after
such adjustment is determinable:
(a) file with the Trustee a computation of such adjustment; and
(b) give notice to the Warrantholders of the adjustment.
SECTION 2.16 - NO ACTION AFTER NOTICE
The Corporation covenants with the Trustee that it will not close its transfer
books or take any other corporate action which might deprive the holder of a
Warrant of the opportunity of exercising the rights of acquisition pursuant
thereto during the period of 14 days after the giving of the notice set forth in
clause (b) of Subsections 2.15(1) and 2.15(2).
SECTION 2.17 - PURCHASE OF WARRANTS FOR CANCELLATION
The Corporation may, at any time and from time to time, purchase Warrants by
invitation for tender, in the market, by private contract or otherwise (which
shall include a purchase through an investment dealer or firm holding membership
on a stock exchange) on such terms as the Corporation may determine. All Warrant
Certificates purchased pursuant to the provisions of this Section 2.17 shall be
forthwith delivered to, cancelled and destroyed by the Trustee and shall not
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be reissued. If required by the Corporation, the Trustee shall furnish the
Corporation with a certificate as to such destruction.
SECTION 2.18 - PROTECTION OF TRUSTEE
The Trustee shall not:
(1) at any time be under any duty or responsibility to any Warrantholder to
determine whether any facts exist which may require any adjustment contemplated
by this Article Two, or to verify the nature and extent of any such adjustment
when made or the method employed in making the same;
(2) be accountable with respect to the validity or value or the kind or amount
of any Common Shares which may at any time be issued or delivered upon the
exercise or deemed exercise of the Warrants;
(3) be responsible for any failure of the Corporation to make any cash payment
or to issue, transfer or deliver the Common Shares, or certificates evidencing
the same upon surrender of the Warrants for the purpose of exercising the rights
or to comply with the provisions or covenants contained in this Article Two; and
(4) incur any liability or responsibility whatsoever or be in any way
responsible for the consequence of any breach on the part of the Corporation of
any of the representations, warranties or covenants of the Corporation or any
acts of deeds of the agents or servants of the Corporation.
ARTICLE THREE
EXERCISE OF WARRANTS
SECTION 3.01 - METHOD OF EXERCISE OF WARRANTS
(1) Subject to Section 3.02, the registered holder of any Warrant may exercise
the right thereby conferred on him to acquire without further payment (except as
provided in Subsection 3.01(2)) the Common Shares to which such Warrant entitles
the holder, by surrendering the Warrant Certificate representing such Warrant to
the Trustee at any time on or before the Time of Expiry at its principal office
in the City of Vancouver or the City of Toronto (or at such additional place or
places as may be decided by the Corporation from time to time with the approval
of the Trustee), with a duly completed and executed subscription of the
registered holder or his executors, or administrators or other legal
representative or his attorney duly appointed by instrument in writing in form
and manner satisfactory to the Trustee, substantially in the form set out in
Article Nine. A Warrant Certificate with the duly completed and executed
subscription shall be deemed to be surrendered only upon personal delivery
thereof to or, if sent by mail or other means of transmission, upon actual
receipt thereof by the Trustee.
(2) Any subscription referred to in Subsection 3.01(1) shall be signed by the
Warrantholder, shall specify the person(s) in whose name such Common Shares are
to be issued, the address(es) of such person(s) and the number of Common Shares
to be issued to each person, if more than one is so specified. If any of the
Common Shares subscribed for are to be issued to a person(s) other than the
Warrantholder, the signatures set out in the subscription referred to in
Subsection 3.01(1) shall be guaranteed by a Schedule A bank or trust company or
a member of an acceptable medallion guarantee program and the Warrantholder
shall pay to the Corporation or the Trustee all applicable transfer or similar
taxes and the Corporation shall not be required to issue or deliver certificates
evidencing Common Shares unless or until such Warrantholder shall have paid to
the Corporation or the Trustee on behalf of the Corporation the amount of such
tax or shall have established to the satisfaction of the Corporation that such
tax has been paid or that no tax is due.
(3) If at the time of exercise of the Warrants, whether upon an exercise in
accordance with the provisions of Subsection 3.01(1) or upon a deemed exercise
in accordance with the provisions of Section 3.02, there remain trading
restrictions on the Common
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Shares pursuant to applicable securities legislation or stock exchange
requirements, the Corporation may, upon the advice of counsel, endorse any
certificates representing the Common Shares to such effect. Notwithstanding the
foregoing, certificates representing Common Shares issued to Warrantholders who
are not U.S. persons shall not be endorsed with any legend referring to trading
or resale restrictions under the 1933 Act or the 1934 Act.
(4) The holder of any Warrant may exercise the Warrant and acquire a number of
Common Shares which is less than the number of Common Shares which the holder is
entitled to acquire pursuant to a surrendered Warrant Certificate. In such
event, the holder thereof shall be entitled to receive a new Warrant Certificate
in respect of the balance of Common Shares which such holder was entitled to
acquire pursuant to the surrendered Warrant Certificate and which were not then
acquired.
SECTION 3.02 - DEEMED EXERCISE OF WARRANTS
If a Warrantholder has not exercised prior to the Time of Expiry the right to
acquire without further payment the Common Shares, then the Warrants held by
such Warrantholder shall be deemed to be exercised and surrendered by such
Warrantholder, without any further action on the part of such Warrantholder,
immediately prior to the Time of Expiry.
SECTION 3.03 - EFFECT OF EXERCISE OF WARRANTS
(1) Upon compliance by the Warrantholder with the provisions of Section 3.01 or
upon Warrants being deemed to be exercised in accordance with the provisions of
Section 3.02, the Common Shares subscribed for or deemed to be subscribed for
shall be deemed to have been issued and the person to whom such Common Shares
are to be issued (which in the case of Warrants which are deemed to be exercised
shall be the holder of such Warrants) shall be deemed to have become the holder
of record of such Common Shares on the Exercise Date unless the transfer
registers of the Corporation for the Common Shares shall be closed on such date,
in which case the Common Shares subscribed for shall be deemed to have been
issued and such person shall be deemed to have become the holder of record of
such Common Shares on the date on which such transfer registers are reopened.
(2) Forthwith following the due exercise of a Warrant pursuant to Section 3.01
and three Business Days following the day on which the Time of Expiry shall
occur, the Trustee shall deliver to the Corporation notice setting forth the
particulars of all Warrants exercised or deemed to have been exercised, if any,
and the persons in whose names the Common Shares are to be issued and the
addresses of such holders of the Common Shares.
(3) In the case of a Warrant which is exercised in accordance with the
provisions of Section 3.01, or is deemed to be exercised in accordance with the
provisions of Section 3.02, within five Business Days of receipt of the notice
referred to in Subsection 3.03(2), the Corporation shall:
(a) in the case of the exercise of the Warrant pursuant to Section
3.01, cause to be mailed to the person in whose name the Common
Shares so subscribed for are to be issued, as specified in the
subscription completed on the Warrant certificate, at the
address specified in such subscription, or, if so specified in
such subscription, cause to be delivered to such person at the
office of the Trustee where such Warrant Certificate was
surrendered; or
(b) in the case of the deemed exercise of the Warrant pursuant to
Section 3.02, cause to be mailed to the holder of the Warrants
at the address of such person last appearing on the register of
Warrantholders maintained by the Trustee pursuant to clause
2.08(l),
a certificate or certificates for the Common Shares to which the Warrantholder
is entitled.
SECTION 3.04 - CANCELLATION OF WARRANT CERTIFICATES
All Warrant Certificates surrendered to the Trustee pursuant to Section 2.06,
2.10, 2.17 or 3.01 shall be cancelled by the Trustee. All Warrant Certificates
representing Warrants deemed to have been exercised pursuant to Section 3.02
shall be deemed to have been cancelled on the Exercise Date with respect thereto
and the Trustee shall record the
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cancellation or deemed cancellation of such Warrant Certificates on the register
of holders maintained by the Trustee pursuant to clause 2.08(l). The Trustee
shall, if required by the Corporation, furnish the Corporation with a
certificate identifying the Warrant Certificates so cancelled and deemed to have
been cancelled. All Warrants represented by Warrant Certificates which have been
duly cancelled or have been deemed to have been cancelled pursuant to this
Section 3.04 shall be without further force or effect whatsoever.
SECTION 3.05 - SECURITIES RESTRICTIONS; LEGENDS
Notwithstanding any provision to the contrary contained in this Indenture, no
Common Shares will be issued pursuant to the exercise of any Warrant if the
issuance of such securities would constitute a violation of the securities laws
of any applicable jurisdiction, and, without limiting the generality of the
foregoing, the Company will legend the certificates representing the Warrants or
Common Shares if, in the opinion of counsel to the Corporation, acting
reasonably, such legend is necessary in order to avoid a violation of any
securities laws of any applicable jurisdiction or to comply with the
requirements of any stock exchange on which the Common Shares are listed,
provided that if, at any time, in the opinion of counsel to the Corporation,
such legends are no longer necessary in order to avoid a violation of any such
laws, or the holder of any such legended certificate, at his expense, provides
the Corporation with evidence satisfactory in form and substance to the
Corporation (which may include an opinion of counsel of recognized standing
satisfactory to the Corporation) to the effect that such holder is entitled to
sell or otherwise transfer such securities in a transaction in which such
legends are not required, such legended certificates may thereafter be
surrendered to the Corporation in exchange for a certificate which does not bear
such legends.
ARTICLE FOUR
COVENANTS FOR WARRANTHOLDERS' BENEFIT
SECTION 4.01 - GENERAL COVENANTS
The Corporation covenants with the Trustee for the benefit of the Trustee and
the Warrantholder that so long as any Warrants remain outstanding:
(1) It will at all times maintain its corporate existence and will carry on and
conduct its business in accordance with good business practice.
(2) It will send to each Warrantholder copies of all financial statements and
other material furnished to the holders of Common Shares after the date of this
Indenture.
(3) It will reserve and there will remain unissued out of its authorized capital
a sufficient number of Common Shares to satisfy the rights of acquisition
provided for herein.
(4) It will cause the Common Shares from time to time subscribed for pursuant to
the Warrants in the manner herein provided and the certificates representing
such Common Shares to be duly issued and delivered in accordance with the
Warrants and the terms hereof.
(5) It will use its reasonable best efforts to maintain its status, or become, a
reporting issuer (or equivalent) not in default in each of the Qualifying
Jurisdictions and maintain its status as a reporting company under the 1934 Act
for a period of not less than one year from the Closing Date, and it will make
all requisite filings under applicable Canadian securities legislation and stock
exchange rules to report the exercise of the right to acquire Common Shares
pursuant to the exercise by Special Warrants.
(6) All Common Shares which shall be issued upon exercise of the right to
acquire provided for herein shall be issued as fully paid and non-assessable and
the holders thereof shall not be liable to the Corporation or its creditors in
respect thereof.
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(7) It will use its reasonable best efforts to ensure that all Common Shares
outstanding or issuable from time to time (including, without limitation, the
Common Shares issuable on the exercise of the Warrants) continue to be or are
listed and posted for trading on The Toronto Stock Exchange and either or both
of the American Stock Exchange and NASDAQ, until the Expiry Date.
(8) It will use its reasonable best efforts to file the Preliminary Prospectus
and the Final Prospectus with, and to have receipts therefor issued by the
Securities Administrators, and to file with the United States Securities and
Exchange Commission and to have declared effective, a registration statement or
similar document in compliance with the 1933 Act to register the resale by the
Warrantholders of the Common Shares held by the Warrantholders pursuant to the
exercise of the Warrants, on or prior to the Qualification Deadline.
(9) Within two Business Days of the Qualification Date, it will deliver to the
Trustee a copy of the receipt for the Final Prospectus, a copy of the Final
Prospectus, a Prospectus Certificate, a certificate of no adjustment to the
conversion ratio (if applicable) and a statement setting out the Time of Expiry.
(10) It shall give notice to the Trustee in accordance with Section 10.01 hereof
of the occurrence of the Qualification Date and the resulting Time of Expiry,
forthwith after the occurrence of the Qualification Date.
(11) To the extent that a Warrantholder is entitled to receive on exercise or
deemed exercise of the Warrants a fraction of a Common Share such right may only
be exercised in respect of such fraction in combination with another Warrant
which in the aggregate entitles the holder to receive a whole number of Common
Shares. If a holder is not able to, or elects not to, combine Warrants so as to
be entitled to acquire a whole number of Common Shares on or before the Time of
Expiry such fractional Common Shares shall be deemed to be cancelled and the
Corporation shall have no liability or responsibility to offer any consideration
therefor. No fractional Common Shares will be issued or, except as noted in this
paragraph, be provided on the exercise or deemed exercise of the Warrants. (12)
It shall do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all other acts, deeds and assurances in law as the
Trustee may reasonably require for the better accomplishing and effecting of the
provisions and intention of this Indenture.
(13) Generally, it will well and truly perform and carry out all of the acts or
things to be done by it as provided in this Indenture.
SECTION 4.02 - SECURITIES QUALIFICATION REQUIREMENTS
(1) If, in the opinion of counsel, any instrument (other than the Final
Prospectus) is required to be filed with, or any permission, order or ruling is
required to be obtained from, any Securities Administrator or the United States
Securities and Exchange Commission or any other step is required under any
federal, state or provincial law before the Common Shares may be issued or
delivered to a Warrantholder in any of the Qualifying Jurisdictions or the
United States, the Corporation covenants that it will use its reasonable best
efforts to file such instrument, obtain such permission, order or ruling or take
all such other actions, at its expense, as is required or appropriate in the
circumstances.
(2) The Corporation will give written notice of the issue of Common Shares
pursuant to the exercise of Warrants, in such detail as may be required, to the
applicable stock exchanges and to each Securities Administrator in each
Qualifying Jurisdiction in which there is legislation requiring the giving of
any such notice.
SECTION 4.03 - TRUSTEE'S REMUNERATION AND EXPENSES
(1) The Corporation covenants that it will pay to the Trustee from time to time
reasonable remuneration for its services hereunder and will pay or reimburse the
Trustee upon its request for all reasonable expenses and disbursements of the
Trustee in the administration or execution of the trusts hereby created
(including the reasonable compensation and the disbursements of its counsel and
all other advisers, experts, accountants and
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assistants not regularly in its employ) both before any default hereunder and
thereafter until all duties of the Trustee hereunder shall be finally and fully
performed, except any such expense or disbursement in connection with or related
to or required to be made as a result of the negligence or willful misconduct of
the Trustee.
(2) Subject to Subsection 8.02(7), if the Corporation shall fail to perform any
of its covenants contained in this Indenture and the Corporation has not
rectified such failure within 15 Business Days after receiving written notice
from the Trustee of such failure, the Trustee may notify the Warrantholders of
such failure on the part of the Corporation or may itself perform any of the
said covenants capable of being performed by it, but shall be under no
obligation to perform said covenants or to notify the Warrantholders of such
performance by it. All reasonable sums expended or disbursed by the Trustee in
so doing shall be repayable as provided in Subsection 4.03(1). No such
performance, expenditure or disbursement by the Trustee shall be deemed to
relieve the Corporation of any default hereunder or of its continuing
obligations under the covenants herein contained.
ARTICLE FIVE
ENFORCEMENT
SECTION 5.01 - SUITS BY WARRANTHOLDERS
All or any of the rights conferred upon a Warrantholder by the terms of the
Warrants held by him and/or this Indenture may be enforced by such Warrantholder
by appropriate legal proceedings, but subject to the rights which are hereby
conferred upon the Trustee and subject to the provisions of Section 6.10.
SECTION 5.02 - IMMUNITY OF SHAREHOLDERS, ETC.
Subject to applicable law, the Trustee and, by the acceptance of the Warrant
Certificates and as part of the consideration for the issue of the Warrants, the
Warrantholders, hereby waive and release any right, cause of action or remedy
now or hereafter existing in any jurisdiction against any person in his capacity
as an incorporator or any past, present or future Shareholder or other security
holder, director, officer, employee or agent of the Corporation for the creation
and issue of the Common Shares pursuant to any Warrant or on any covenant,
agreement, representation or warranty by the Corporation herein or in the
Warrant Certificates contained.
SECTION 5.03 - LIMITATION OF LIABILITY
The obligations hereunder are not personally binding upon, nor shall resort
hereunder be had to, the directors or Shareholders of the Corporation or any of
the past, present or future directors or Shareholders of the Corporation or any
of the past, present or future officers, employees or agents of the Corporation,
but only the property of the Corporation shall be bound in respect hereof.
SECTION 5.04 - SEVERABILITY
Whenever possible, each provision of this Indenture shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Indenture is held to be prohibited or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Indenture.
ARTICLE SIX
MEETINGS OF WARRANTHOLDERS
SECTION 6.01 - RIGHT TO CONVENE MEETINGS
The Trustee may at any time and from time to time, and shall on receipt of a
written request of the Corporation or of a Warrantholders' Request, convene a
meeting of the Warrantholders provided that the Trustee is indemnified to its
reasonable satisfaction by the Corporation or by the Warrantholders signing such
Warrantholders' Request against the
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costs, charges, expenses and liabilities which may be incurred in connection
with the calling and holding of such meeting. If within 15 Business Days after
the receipt of a written request of the Corporation or a Warrantholders' Request
and indemnity given as aforesaid the Trustee fails to give the requisite notice
specified in Section 6.02 to convene a meeting, the Corporation or such
Warrantholders, as the case may be, may convene such meeting. Every such meeting
shall be held in the City of Vancouver or at such other place as may be approved
or determined by the Trustee.
SECTION 6.02 - NOTICE
At least 25 days' prior notice of any meeting of Warrantholders shall be given
to the Warrantholders at the expense of the Corporation in the manner provided
for in Section 10.02 and a copy of such notice shall be delivered to the Trustee
unless the meeting has been called by it, and to the Corporation unless the
meeting has been called by it. Such notice shall state the time and place of the
meeting, the general nature of the business to be transacted and shall contain
such information as is reasonably necessary to enable the Warrantholders to make
a reasoned decision on the matter, but it shall not be necessary for any such
notice to set out the terms of any resolution to be proposed or any of the
provisions of this Article Six. The notice convening any such meeting may be
signed by an appropriate officer of the Trustee or of the Corporation or the
person designated by such Warrantholders, as the case may be.
SECTION 6.03 - CHAIRMAN
The Trustee may nominate in writing an individual to be chairman of the meeting
and if no individual is so nominated, or if the individual so nominated is not
present within 15 minutes after the time fixed for the holding of the meeting,
the Warrantholders present in person or by proxy shall appoint an individual
present to be chairman of the meeting. The chairman of the meeting need not be a
Warrantholder.
SECTION 6.04 - QUORUM
Subject to the provisions of Section 6.11, at any meeting of the Warrantholders
a quorum shall consist of Warrantholders present in person or represented by
proxy and entitled to acquire at least 10% of the aggregate number of Common
Shares which could be acquired upon the exercise of all Warrants then
outstanding, provided that at least two persons entitled to vote thereat are
personally present. If a quorum of the Warrantholders shall not be present
within one half-hour from the time fixed for holding any meeting, the meeting,
if convened by the Warrantholders or on a Warrantholders' Request, shall be
dissolved; but in any other case the meeting shall be adjourned to the same day
in the next week (unless such day is not a Business Day in which case it shall
be adjourned to the next following Business Day) at the same time and place to
the extent possible and, subject to the provisions of Section 6.11, no notice of
the adjournment need be given. Any business may be brought before or dealt with
at an adjourned meeting which might have been dealt with at the original meeting
in accordance with the notice calling the same. At the adjourned meeting the
Warrantholders present in person or represented by proxy shall form a quorum and
may transact the business for which the meeting was originally convened,
notwithstanding that they may not be entitled to acquire at least 10% of the
aggregate number of Common Shares which could be acquired upon the exercise of
all Warrants then unexercised and outstanding. No business shall be transacted
at any meeting unless a quorum is present at the commencement of business.
SECTION 6.05 - POWER TO ADJOURN
The chairman of any meeting at which a quorum of the Warrantholders is present
may, with the consent of the meeting, adjourn any such meeting, and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
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SECTION 6.06 - SHOW OF HANDS
Every question submitted to a meeting shall be decided in the first place by a
majority of the votes given on a show of hands except that votes on an
extraordinary resolution shall be given in the manner hereinafter provided. At
any such meeting, unless a poll is duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
SECTION 6.07 - POLL AND VOTING
On every extraordinary resolution, and when demanded by the chairman or by one
or more of the Warrantholders acting in person or by proxy on any other question
submitted to a meeting and after a vote by show of hands, a poll shall be taken
in such manner as the chairman shall direct. Questions other than those required
to be determined by extraordinary resolution shall be decided by a majority of
the votes cast on the poll. On a show of hands, every person who is present and
entitled to vote, whether as a Warrantholder or as proxy for one or more absent
Warrantholders, or both, shall have one vote. On a poll, each Warrantholder
present in person or represented by a proxy duly appointed by instrument in
writing shall be entitled to one vote in respect of each whole Common Share
which he (or the Warrantholder appointing him as proxy) is entitled to acquire
upon the exercise of the Warrants then held by him. A proxy need not be a
Warrantholder. The chairman of any meeting shall be entitled, both on a show of
hands and on a poll, to vote in respect of the Warrants, if any, held or
represented by him.
SECTION 6.08 - REGULATIONS
Subject to the provisions of this Indenture, the Trustee or the Corporation with
the approval of the Trustee may from time to time make and from time to time
vary such regulations as it shall consider necessary or appropriate:
(a) for the setting of a record date;
(b) for the deposit of instruments appointing proxies at such place
and time as the Trustee, the Corporation or the Warrantholders
convening the meeting, as the case may be, may in the notice
convening the meeting direct;
(c) for the deposit of instruments appointing proxies at some
approved place other than the place at which the meeting is to
be held and enabling particulars of such instruments appointing
proxies to be mailed, cabled or telegraphed before the meeting
to the Corporation or to the Trustee at the place where the same
is to be held and for the voting of proxies so deposited as
though the instruments themselves were produced at the meeting;
(d) for the form of the instrument of proxy; and
(e) generally for the calling of meetings of Warrantholders and the
conduct of business thereat including setting a record date for
Warrantholders entitled to receive notice of or to vote at such
meeting.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as Warrantholders, or be entitled to vote or be present at the meeting in
respect thereof (subject to Section 6.09), shall be Warrantholders or persons
holding proxies of Warrantholders.
SECTION 6.09 - CORPORATION, TRUSTEE AND COUNSEL MAY BE REPRESENTED
The Corporation and the Trustee, their respective directors and officers, and
the counsel for each of the Corporation, the Warrantholders, the Trustee and the
Agent or its representative may attend any meeting of the Warrantholders and
speak thereat but shall have no vote as such.
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SECTION 6.10 - POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION
In addition to all other powers conferred upon them by any other provisions of
this Indenture or by law, the Warrantholders at a meeting shall have the power,
exercisable from time to time by extraordinary resolution:
(a) to agree with the Corporation to any modification, alteration,
compromise or arrangement of the rights of Warrantholders and/or
the Trustee in its capacity as trustee hereunder or on behalf of
the Warrantholders against the Corporation, whether such rights
arise under this Indenture or the Warrants or otherwise;
(b) to amend or repeal any extraordinary resolution previously
passed or sanctioned by the Warrantholders;
(c) to direct or authorize the Trustee to enforce any of the
covenants on the part of the Corporation contained in this
Indenture or the Warrants or to enforce any of the rights of the
Warrantholders in any manner specified in such extraordinary
resolution or to refrain from enforcing any such covenant or
right;
(d) to waive and direct the Trustee to waive any default on the part
of the Corporation in complying with any provisions of this
Indenture or the Warrants either unconditionally or upon any
conditions specified in such extraordinary resolution;
(e) to restrain any Warrantholder from taking or instituting any
suit, action or proceeding against the Corporation for the
enforcement of any of the covenants on the part of the
Corporation contained in this Indenture or the Warrants or to
enforce any of the rights of the Warrantholders; and
(f) to direct any Warrantholder who, as such, has brought any suit,
action or proceeding to stay or discontinue or otherwise deal
with any such suit, action or proceeding, upon payment of the
costs, charges and expenses reasonably and properly incurred by
such Warrantholder in connection therewith.
SECTION 6.11 - MEANING OF EXTRAORDINARY RESOLUTION
(1) The expression "extraordinary resolution" when used in this Indenture means,
subject as hereinafter in this Section 6.11 and in Section 6.14 provided, a
resolution proposed at a meeting of Warrantholders duly convened for that
purpose and held in accordance with the provisions of this Article Six at which
there are present in person or represented by proxy Warrantholders entitled to
acquire at least 25% of the aggregate number of Common Shares which may be
acquired upon the exercise of all the then outstanding Warrants and passed by
the affirmative votes of Warrantholders entitled to acquire not less than 75% of
the aggregate number of Common Shares which may be acquired upon the exercise of
all the then outstanding Warrants represented at the meeting and voted on the
poll upon such resolution.
(2) If, at any meeting called for the purpose of passing an extraordinary
resolution, Warrantholders entitled to acquire at least 25% of the aggregate
number of Common Shares which may be acquired upon the exercise of all the then
outstanding Warrants are not present in person or by proxy within one half-hour
after the time appointed for the meeting, then the meeting, if convened by
Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any
other case it shall stand adjourned to such day, being not less than four or
more than ten Business Days later, and to such place and time as may be
appointed by the chairman. Not less than three Business Days' prior notice shall
be given of the time and place of such adjourned meeting. Such notice shall
state that at the adjourned meeting the Warrantholders present in person or
represented by proxy shall form a quorum but it shall not be necessary to set
forth the purposes for which the meeting was originally called or any other
particulars. At the adjourned meeting the Warrantholders present in person or
represented by proxy shall form a quorum and may transact the business for which
the meeting was originally convened and a resolution proposed at such adjourned
meeting and passed by the requisite vote as provided in Subsection 6.11(1) shall
be an extraordinary resolution
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within the meaning of this Indenture notwithstanding that Warrantholders
entitled to acquire at least 25% of the aggregate number of Common Shares which
may be issuable upon the exercise of all the then outstanding Warrants are not
present in person or represented by proxy at such adjourned meeting.
(3) Votes on an extraordinary resolution shall always be given on a poll and no
demand for a poll on an extraordinary resolution shall be necessary.
SECTION 6.12 - POWERS CUMULATIVE
It is hereby declared and agreed that any one or more of the powers or any
combination of the powers in this Indenture stated to be exercisable by the
Warrantholders by extraordinary resolution or otherwise may be exercised from
time to time and the exercise of any one or more of such powers or any
combination of powers from time to time shall not be deemed to exhaust the right
of the Warrantholders to exercise such powers or combination of powers then or
thereafter from time to time.
SECTION 6.13 - MINUTES
Minutes of all resolutions and proceedings at every meeting of Warrantholders
shall be made and duly entered in books to be from time to time provided for
that purpose by the Trustee at the reasonable expense of the Corporation, and
any such minutes as aforesaid, if signed by the chairman of the meeting at which
such resolutions were passed or proceedings held, or by the chairman of the next
succeeding meeting of the Warrantholders, shall be prima facie evidence of the
matters therein stated and, until the contrary is proved, every such meeting in
respect of the proceedings of which minutes shall have been made shall be deemed
to have been duly, convened and held, and all resolutions passed thereat or
proceedings taken shall be deemed to have been duly passed and taken.
SECTION 6.14 - INSTRUMENTS IN WRITING
All actions which may be taken and all powers that may be exercised by the
Warrantholders at a meeting held as provided in this Article Six also may be
taken and exercised by Warrantholders entitled to acquire at least 75% of the
aggregate number of Common Shares issuable upon the exercise of all the then
outstanding Warrants by an instrument in writing signed in one or more
counterparts by such Warrantholders in person or by attorney duly appointed in
writing, and the expression "extraordinary resolution" when used in this
Indenture shall include an instrument so signed.
SECTION 6.15 - BINDING EFFECT OF RESOLUTIONS
Every resolution and every extraordinary resolution passed in accordance with
the provisions of this Article Six at a meeting of Warrantholders shall be
binding upon all the Warrantholders, whether present at or absent from such
meeting, and every instrument in writing signed by Warrantholders in accordance
with Section 6.14 shall be binding upon all the Warrantholders, whether
signatories thereto or not, and each and every Warrantholder and the Trustee
(subject to the provisions for indemnity herein contained) shall be bound to
give effect accordingly to every such resolution and instrument in writing. In
the case of an instrument in writing the Trustee shall give notice of the effect
of the instrument in writing to all Warrantholders and the Corporation as soon
as is reasonably practicable.
SECTION 6.16 - HOLDINGS BY THE CORPORATION OR SUBSIDIARIES OF THE CORPORATION
DISREGARDED
In determining whether Warrantholders holding Warrants evidencing the right to
acquire the required number of Common Shares are present at a meeting of
Warrantholders for the purpose of determining a quorum or have concurred in any
consent, waiver, extraordinary resolution, Warrantholders' Request or other
action under this Indenture, Warrants owned legally or beneficially by the
Corporation or any associate or affiliate (as those terms are defined in the
Company Act (British Columbia)) of the Corporation shall be disregarded.
<PAGE> 24
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ARTICLE SEVEN
SUPPLEMENTAL INDENTURES
SECTION 7.01 - SUPPLEMENTAL INDENTURES
From time to time the Corporation and the Trustee may, subject to the provisions
of this Indenture, and they shall, when so directed by this Indenture, execute
and deliver by their proper officers, indentures or instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more or all of
the following purposes:
(a) setting forth adjustments resulting from the application of
Article Two;
(b) adding to the provisions hereof such additional covenants and
enforcement provisions as in the opinion of counsel are
necessary or advisable, provided that the same are not in the
opinion of the Trustee, based on advice of counsel, prejudicial
to the interests of the Warrantholders as a group;
(c) giving effect to any extraordinary resolution passed as provided
in Article Six;
(d) making such provisions not inconsistent with this Indenture as
may be necessary or desirable with respect to matters or
questions arising hereunder provided that such provisions are
not, in the opinion of the Trustee based on advice of counsel,
prejudicial to the interests of the Warrantholders as a group;
(e) adding to or amending the provisions hereof in respect of the
transfer of Warrants, making provision for the exercise of
Warrants, and making any modification in the forms of the
certificates for the Warrants which does not affect the
substance thereof;
(f) amending any of the provisions of this Indenture or relieving
the Corporation from any of the obligations, conditions or
restrictions herein contained, provided that no such amendment
or relief shall be or become operative or effective if, in the
opinion of the Trustee, such amendment or relief impairs any of
the rights of the Warrantholders as a group or of the Trustee,
and provided further that the Trustee may in its sole discretion
decline to enter into any such supplemental indenture which in
its opinion based on advice of counsel may not afford adequate
protection to the Trustee when the same shall become operative;
and
(g) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective or inconsistent provisions, errors or
omissions herein, provided that, in the opinion of the Trustee,
based on advice of counsel, the rights of the Trustee and of the
Warrantholders as a group are not prejudiced thereby.
SECTION 7.02 - SUCCESSOR CORPORATIONS
In the case of the consolidation, amalgamation, arrangement, merger or transfer
of the undertaking or assets of the Corporation as an entirety or substantially
as an entirety to another corporation (a "successor corporation"), forthwith
following the occurrence of such event the successor corporation resulting from
such consolidation, amalgamation, arrangement, merger or transfer (if not the
Corporation) shall expressly assume, by supplemental indenture satisfactory in
form to the Trustee and executed and delivered to the Trustee, the due and
punctual performance and observance of each and every covenant and condition of
this Indenture to be performed and observed by the Corporation.
<PAGE> 25
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ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01 - TRUST INDENTURE LEGISLATION
(1) If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with a mandatory requirement of Applicable Legislation, such
mandatory requirement shall prevail.
(2) Subject to the fact that the Trustee shall not be bound to take any act or
action hereunder, the Corporation and the Trustee agree that each will at all
times in relation to this Indenture and any action to be taken hereunder observe
and comply with and be entitled to the benefit of Applicable Legislation.
SECTION 8.02 - RIGHTS AND DUTIES OF TRUSTEE
(1) In the exercise of the rights and duties prescribed or conferred by the
terms of this Indenture, the Trustee shall act honestly and in good faith with a
view to the best interests of the Warrantholders and shall exercise the degree
of care, diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. No provision of this Indenture shall be construed to
relieve the Trustee from, or require any other person to indemnify the Trustee
against liability for its own negligence or willful misconduct.
(2) Subject only to Subsection 8.02(1), the Trustee shall not be bound to do or
take any act, action or proceeding for the enforcement of any of the obligations
of the Corporation under this Indenture unless and until it shall have received
a Warrantholders' Request specifying the act, action or proceeding which the
Trustee is requested to take. The obligation of the Trustee to commence or
continue any act, action or proceeding for the purpose of enforcing any rights
of the Trustee or the Warrantholders hereunder shall be conditional upon the
Warrantholders furnishing, when required by notice in writing by the Trustee,
sufficient funds to commence or continue such act, action or proceeding and an
indemnity reasonably satisfactory to the Trustee and its counsel to protect and
hold harmless the Trustee and its officers, directors, employees and agents
against the costs, charges and expenses and liabilities to be incurred thereby
and any loss and damage it may suffer by reason thereof. None of the provisions
contained in this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers unless funded and
indemnified as aforesaid.
(3) The Trustee may, before commencing or at any time during the continuance of
any such act, action or proceeding, require the Warrantholders, at whose
instance it is acting, to deposit with the Trustee the Warrants held by them,
for which Warrants the Trustee shall issue receipts.
(4) Every provision of this Indenture that by its terms relieves the Trustee of
liability or entitles it to rely upon any evidence submitted to it is subject to
the provisions of Applicable Legislation, of this Section 8.02 and of Section
8.03.
(5) The Trustee shall retain the right not to act and shall not be held liable
for refusing to act unless it has received clear and reasonable documentation
which complies with the terms of this Indenture. Such documentation must not
require the exercise of any discretion or independent judgment.
(6) In the event of any disagreement arising regarding the terms of this
Indenture, the Trustee shall be entitled, at its option, to refuse to comply
with any demands whatsoever until the dispute is settled either by agreement
amongst the various parties or by a court of competent jurisdiction.
(7) The Trustee shall not be bound to give any notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereunder unless
and until it shall have been required to do so under the terms hereof; nor shall
the Trustee be required to take notice of any default hereunder, unless and
until notified in writing of such default, which notice shall specifically set
out the default desired to be brought to the attention of the Trustee and in
<PAGE> 26
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the absence of such notice the Trustee may for all purposes of this Indenture
conclusively assume that no default has occurred or been made in the performance
or observance of the representations, warranties and covenants, agreements or
conditions herein contained. Any such notice shall in no way limit any
discretion herein given to the Trustee to determine whether or not the Trustee
shall take action with respect to any default.
(8) In this Indenture, whenever confirmations or instructions are required to be
given to the Trustee, in order to be valid, such confirmations and instructions
shall be in writing.
SECTION 8.03 - EVIDENCE, EXPERTS AND ADVISERS
(1) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Corporation shall furnish to the Trustee such
additional evidence of compliance with any provision hereof in such form as may
be prescribed by Applicable Legislation, or as the Trustee may reasonably
require by written notice to the Corporation.
(2) In the exercise of its rights and duties hereunder, the Trustee shall be
protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, statutory declaration or other paper or document furnished
to it, not only as to its due execution and the validity and the effectiveness
of its provisions but also as to the truth and acceptability of any information
therein contained which it in good faith believes to be genuine and what it
purports to be.
(3) Whenever Applicable Legislation requires that evidence referred to in
Subsection 8.03(1) be in the form of a statutory declaration, the Trustee may
accept such statutory declaration in lieu of a certificate of the Corporation
required by any provision hereof. Any such statutory declaration may be made by
one or more of the chairman, vice-chairman, president, vice-president, secretary
or any one director of the Corporation.
(4) The Trustee may employ or retain such counsel, accountants or other experts
or advisers as it may reasonably require for the purpose of discharging its
duties hereunder, may act on and rely upon the advice or opinions so obtained
and may pay reasonable remuneration for all services so performed by any of
them, without taxation of costs of any counsel, and shall not be responsible for
any misconduct on the part of any of them.
SECTION 8.04 - DOCUMENTS, MONIES, ETC. HELD BY TRUSTEE
Any securities, documents of title or other instruments that may at any time be
held by the Trustee subject to the trusts hereof may be placed in the deposit
vaults of the Trustee or of any Canadian chartered bank or trust company or
deposited for safekeeping with any such bank or trust company. Unless herein
otherwise expressly provided, any monies so held, pending the application or
withdrawal thereof under any provisions of this Indenture, may be deposited in
the name of the Trustee in any Canadian chartered bank or Canadian trust
company, including the Trustee's deposit department, at the rate of interest (if
any) then current on similar deposits or may be deposited in such institutions
or invested in such securities as the Corporation may consent to. All interest
or other income received by the Trustee in respect of such deposits and
investments shall belong to the Warrantholders or the Corporation, as provided
for herein.
SECTION 8.05 - ACTIONS BY TRUSTEE TO PROTECT INTERESTS
Subject to the provisions of this Indenture and applicable legislation, the
Trustee shall have the power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Warrantholders.
SECTION 8.06 - TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect of the
execution of the trusts and powers of this Indenture or otherwise.
<PAGE> 27
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SECTION 8.07 - PROTECTION OF TRUSTEE
By way of supplement to the provisions of any law for the time being relating to
trustees, it is expressly declared and agreed as follows:
(1) The Trustee shall not be liable for or by reason of any statements of fact
or recitals in this Indenture or in the Warrants (except the representation
contained in Sections 8.09 and 8.12 or in the certificate of the Trustee on the
Warrants) or be required to verify the same.
(2) Nothing herein contained shall impose any obligation on the Trustee to see
to or to require evidence of the registration or filing (or renewal thereof) of
this Indenture or any instrument ancillary or supplemental hereto.
(3) The Trustee shall not be bound to give notice to any person of the execution
hereof.
(4) The Trustee shall not incur any liability or responsibility whatsoever or be
in any way responsible for the consequence of any breach on the part of the
Corporation of any of the covenants herein contained or of any acts of any
directors, officers, employees, agents or servants of the Corporation.
(5) The Corporation hereby indemnifies and saves harmless the Trustee and its
officers, directors, employees or agents from and against any and all
liabilities, losses, costs, claims, actions or demands whatsoever which may be
brought against the Trustee or which it may suffer or incur as a result or
arising out of the performance of its duties and obligations under this
Indenture, save only in the event of negligence or willful misconduct of the
Trustee. It is understood and agreed that this indemnification shall survive the
termination of this Indenture.
SECTION 8.08 - REPLACEMENT OF TRUSTEE
(1) The Trustee may resign its trust and be discharged from all further duties
and liabilities hereunder by giving to the Corporation not less than 45 days'
prior notice in writing or such shorter prior notice as the Corporation may
accept as sufficient. The Warrantholders by extraordinary resolution shall have
the power at any time to remove the existing Trustee and to appoint a new
trustee. In the event of the Trustee resigning or being removed as aforesaid or
being dissolved, becoming bankrupt, going into liquidation or otherwise becoming
incapable of acting hereunder, the Corporation shall forthwith appoint a new
trustee unless a new trustee has already been appointed by the Warrantholders;
failing such appointment by the Corporation, the retiring Trustee or any
Warrantholder may apply to a justice of the British Columbia Supreme Court at
the Corporation's expense, on such notice as such justice may direct, for the
appointment of a new trustee; but any new trustee so appointed by the
Corporation or by the Court shall be subject to removal as aforesaid by the
Warrantholders. Any new trustee appointed under any provision of this Section
8.08 shall be a corporation authorized to carry on the business of a trust
company in the Provinces of British Columbia and Ontario and, if required by
Applicable Legislation of any other province, in such other province. On any
such appointment the new trustee shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as Trustee
without any further assurance, conveyance, act or deed; but there shall be
immediately executed, at the expense of the Corporation, all such conveyances or
other instruments as may, in the opinion of counsel, be necessary or advisable
for the purpose of assuring the same to the new trustee, provided that any
resignation or removal of the Trustee and appointment of a successor trustee
shall not become effective until the successor trustee shall have executed an
appropriate instrument accepting such appointment and, at the request of the
Corporation, the predecessor Trustee, upon payment of its outstanding
remuneration and expenses, shall execute and deliver to the successor trustee an
appropriate instrument transferring to such successor trustee all rights and
powers of the Trustee hereunder and all securities, documents of title and other
instruments and all monies and properties held by the Trustee hereunder.
(2) Upon the appointment of a successor trustee, the Corporation shall promptly
notify the Warrantholders thereof.
(3) Any corporation into or with which the Trustee may be merged or consolidated
or amalgamated, or any corporation succeeding to the trust business of the
Trustee, shall be the successor to the Trustee hereunder without
<PAGE> 28
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any further act on its part or of any of the parties hereto, provided that such
corporation would be eligible for appointment as a new trustee under Subsection
8.08(1).
(4) Any Warrants certified but not delivered by a predecessor trustee may be
certified by the successor trustee in the name of the predecessor or successor
trustee.
SECTION 8.09 - CONFLICT OF INTEREST
(1) The Trustee represents to the Corporation that at the time of execution and
delivery hereof no material conflict of interest exists in the Trustee's role as
a fiduciary hereunder and agrees that in the event of a material conflict of
interest arising hereafter it will, within 30 days after ascertaining that it
has such a material conflict of interest, either eliminate the same or resign
its trust hereunder to a successor trustee approved by the Corporation. If any
such material conflict of interest exists or hereafter shall exist, the validity
and enforceability of this Indenture and the Warrants shall not be affected in
any manner whatsoever by reason thereof.
(2) Subject to Subsection 8.09(1), the Trustee, in its personal or any other
capacity, may buy, lend upon and deal in securities of the Corporation and
generally may contract and enter into financial transactions with the
Corporation or any subsidiary of the Corporation without being liable to account
for any profit made thereby.
SECTION 8.10 - ACCEPTANCE OF TRUSTS
The Trustee hereby accepts the trusts in this Indenture declared and provided
for and agrees to perform the same upon the terms and conditions herein set
forth.
SECTION 8.11 - TRUSTEE NOT TO BE APPOINTED RECEIVER
The Trustee and any person related to the Trustee shall not be appointed a
receiver or receiver and manager or liquidator of all or any part of the assets
or undertaking of the Corporation.
SECTION 8.12 - AUTHORIZATION TO CARRY ON BUSINESS
The Trustee represents to the Corporation that it is duly authorized and
qualified to carry on the business of a trust company in each of the provinces
of Canada.
ARTICLE NINE
FORM OF WARRANT
SECTION 9.01 - FORM OF WARRANT CERTIFICATE
Warrant Certificate
The following is the form of Warrant referred to in Section 2.02:
The following legend will be borne by certificates representing Warrants
purchased by U.S. persons:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
EXCEPT: (I) IN COMPLIANCE WITH RULE 144 OR ANOTHER APPLICABLE EXEMPTION FROM
REGISTRATION UNDER SAID ACT; AND (II) IF REQUESTED BY THE CORPORATION, THE
CORPORATION HAS RECEIVED AN OPINION OF ITS COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE> 29
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND
MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL OCTOBER 16, 1999 EXCEPT AS PERMITTED
BY THE APPLICABLE SECURITIES LEGISLATION IN THAT JURISDICTION.
THE SPECIAL WARRANTS EVIDENCED HEREBY ARE EXERCISABLE ON OR BEFORE THE TIME OF
EXPIRY ON THE EARLIER OF (A) THE DAY WHICH IS THE FIFTH BUSINESS DAY AFTER THE
DATE OF ISSUANCE OF A RECEIPT BY THE LAST OF THE SECURITIES REGULATORS OF
BRITISH COLUMBIA AND ONTARIO FOR A (FINAL) PROSPECTUS RELATING TO THE
DISTRIBUTION OF THE CORPORATION'S COMMON SHARES ON EXERCISE OF THE SPECIAL
WARRANTS, AND (B) JUNE 16, 2000, AFTER WHICH TIME THE SPECIAL WARRANTS EVIDENCED
HEREBY SHALL BE DEEMED TO HAVE BEEN EXERCISED.
The following legend will be borne by certificates representing Warrants
purchased by persons who are not U.S. persons:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND
MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL OCTOBER 16, 1999 EXCEPT AS PERMITTED
BY THE APPLICABLE SECURITIES LEGISLATION IN THAT JURISDICTION.
THE SPECIAL WARRANTS EVIDENCED HEREBY ARE EXERCISABLE ON OR BEFORE THE TIME OF
EXPIRY ON THE EARLIER OF (A) THE DAY WHICH IS THE FIFTH BUSINESS DAY AFTER THE
DATE OF ISSUANCE OF A RECEIPT BY THE LAST OF THE SECURITIES REGULATORS OF
BRITISH COLUMBIA AND ONTARIO FOR A (FINAL) PROSPECTUS RELATING TO THE
DISTRIBUTION OF THE CORPORATION'S COMMON SHARES ON EXERCISE OF THE SPECIAL
WARRANTS, AND (B) JUNE 16, 2000, AFTER WHICH TIME THE SPECIAL WARRANTS EVIDENCED
HEREBY SHALL BE DEEMED TO HAVE BEEN EXERCISED.
NUMBER OF SPECIAL WARRANTS________________ CERTIFICATE NO._____________
SPECIAL WARRANT
OF
GENETRONICS BIOMEDICAL LTD.
THIS CERTIFIES THAT:
_______________________________ (the "Holder") is the registered holder of the
number of Special Warrants specified above and is thereby entitled to be issued,
without further payment (other than taxes payable in certain circumstances), the
number of common shares ("Common Shares") of Genetronics Biomedical Ltd. (the
"Corporation"), as currently constituted, as set out herein by surrendering to
Montreal Trust Company of Canada (the "Trustee") at 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9, or at 151 Front Street West, Toronto,
Ontario, M5J 2N1, Stock and Bond Transfer Department, during normal business
hours on a business day, this Special Warrant Certificate with a subscription in
the form of the attached Subscription Form duly completed and executed on or
before the Expiry Date (as hereinafter defined).
<PAGE> 30
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Surrender of this Special Warrant Certificate will be deemed to have been
effected only on personal delivery thereof to, or, if sent by mail or other
means of transmission, on actual receipt thereof by, the Trustee at the office
specified above.
This Special Warrant Certificate represents Special Warrants of the Corporation
issued or issuable under the provisions of a Special Warrant Indenture (which
indenture together with all other instruments supplemental or ancillary thereto
is herein referred to as the "Warrant Indenture") dated as of June 16, 1999
between the Corporation and the Trustee, as trustee, which contains particulars
of the rights of the holders of the Special Warrants and the Corporation and of
the Trustee in respect thereof and the terms and conditions upon which the
Special Warrants are issued and held, all to the same effect as if the
provisions of the Warrant Indenture were herein set forth, to all of which the
holder of this Special Warrant by acceptance hereof assents. A copy of the
Warrant Indenture will be available for inspection at 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9, Corporate Trust Department. All
capitalized terms not otherwise defined herein shall have the respective
meanings ascribed thereto in the Warrant Indenture.
Special Warrants that have not been previously exercised will be deemed to have
been exercised immediately prior to 5:00 p.m. (Vancouver time) (the "Time of
Expiry") on the earlier of (the "Expiry Date"): (i) the day which is the fifth
Business Day after the date (the "Qualification Date") of issuance of a receipt
by the last of the securities regulators (the "Securities Administrators") of
Ontario and British Columbia for a (final) prospectus (the "Final Prospectus")
relating to the distribution of the Common Shares on the exercise of the Special
Warrants; and (ii) June 16, 2000. Unless the Holder has surrendered this Special
Warrant Certificate for exercise pursuant to the provisions hereof and of the
Warrant Indenture prior to the Time of Expiry, the Special Warrants represented
by this certificate shall be deemed to have been exercised and surrendered by
the Holder, immediately prior to such time, without further notice to or action
on the part of the Holder as specified above.
This Special Warrant Certificate represents the right to receive one Common
Share for each Special Warrant. The Warrant Indenture provides for adjustments
to the rights of the holders of Special Warrants, including the number of Common
Shares issuable upon the exercise or deemed exercise thereof, on the happening
of certain stated events, including the subdivision or consolidation of the
outstanding Common Shares, certain distributions of Common Shares, or of
securities convertible into or exchangeable for Commons Shares or of other
securities or assets of the Corporation, certain offerings of rights, warrants
or options and certain capital reorganizations.
Upon due exercise of the Special Warrants represented by this certificate, the
Corporation shall cause to be issued to the person(s) in whose name(s) the
Common Shares so subscribed for are to be issued (provided that if the
securities are to be issued to a person other than the Holder, the Holder's
signature on the Subscription Form herein shall be guaranteed by a Schedule A
bank or trust company or a member of an acceptable medallion guarantee program)
the number of securities to be issued to such person(s) and such person(s) shall
become a holder in respect of such securities with effect from the date of such
exercise and upon due surrender of this Special Warrant Certificate and the
Corporation will cause a certificate(s) representing such securities to be made
available for pick-up by such person(s) at 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9, or at 151 Front Street West, Toronto, Ontario, M5J
2N1, Stock and Bond Transfer Department, or mailed to such person(s) at the
address(es) specified in such subscription, or in the case of the deemed
exercise of the Special Warrants represented by this certificate, to the address
of the Holder appearing in the register of Special Warrants maintained by the
Trustee, within five Business Days after receipt of notice from the Trustee of
the exercise or deemed exercise of the Special Warrants represented by this
certificate.
No Common Share will be issued pursuant to any Special Warrant if the issuance
of such securities would constitute a violation of the securities laws of any
applicable jurisdiction. The Corporation shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof who is a U.S.
person if the Corporation shall have obtained an opinion of its counsel to the
effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend. The Corporation
agrees to use its best efforts to obtain such opinion.
Upon presentation at 510 Burrard Street, Vancouver, British Columbia, V6C 3B9,
or at 151 Front Street West, Toronto, Ontario, M5J 2N1, Stock and Bond Transfer
Department, subject to the provisions of the Warrant Indenture and upon
compliance with the reasonable requirements of the Trustee, Special Warrant
Certificates may be exchanged for Special Warrant Certificates entitling the
holder thereof to acquire an equal aggregate number of Common Shares,
<PAGE> 31
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subject to adjustment as provided for in the Warrant Indenture. The Corporation
and the Trustee may treat the registered holder of this Special Warrant
Certificate for all purposes as the absolute owner hereof. The holding of the
Special Warrants represented by this certificate shall not constitute the Holder
a holder of Common Shares nor entitle the Holder to any right or interest in
respect thereof except as herein and in the Warrant Indenture expressly
provided.
Special Warrants may only be transferred, upon compliance with the conditions
prescribed in the Warrant Indenture, on the register to be kept at the offices
of the Trustee in the City of Vancouver and the City of Toronto, by the
registered holder thereof or his executors or administrators or other legal
representatives, or his or their attorney duly appointed by an instrument in
writing in form and execution satisfactory to the Trustee with signature
guaranteed by a Schedule A bank or trust company or a member of an acceptable
medallion guarantee program and upon compliance with such reasonable
requirements as the Trustee may prescribe. Such transfers may be subject to
restrictions imposed by applicable securities laws and stock exchange
requirements.
The Warrant Indenture contains provisions making binding upon all holders of
Special Warrants outstanding thereunder resolutions passed at meetings of such
holders held in accordance with such provisions and instruments in writing
signed by the holders of Special Warrants entitled to acquire upon the exercise
of the Special Warrants a specified percentage of the Common Shares.
The Holder is hereby notified that if the rights set out hereunder are exercised
or deemed to have been exercised before the Qualification Date, the Common
Shares issuable upon exercise of the Special Warrants represented by the Special
Warrants Certificate may be subject to restrictions on resale under applicable
securities legislation.
The Special Warrants and the Warrant Indenture shall be governed by and
performed, construed and enforced in accordance with the laws of the Province of
British Columbia and shall be treated in all respects as British Columbia
contracts. Time shall be of the essence hereof and of the Warrant Indenture.
This Special Warrant Certificate shall not be valid for any purpose until it has
been certified by or on behalf of the Trustee for the time being under the
Warrant Indenture.
IN WITNESS WHEREOF the Corporation has caused this Special Warrant Certificate
to be signed by its duly authorized officer as of the day of June, 1999.
GENETRONICS BIOMEDICAL LTD.
BY:
------------------------------------
AUTHORIZED SIGNING OFFICER
THIS SPECIAL WARRANT CERTIFICATE REPRESENTS
SPECIAL WARRANTS REFERRED TO IN THE WARRANT
INDENTURE WITHIN MENTIONED.
MONTREAL TRUST COMPANY OF CANADA
BY:
------------------------------------
AUTHORIZED SIGNING OFFICER
<PAGE> 32
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SECTION 9.02 - SUBSCRIPTION FORM
There shall be attached to the Warrant Certificates a subscription form
substantially as follows:
TO: GENETRONICS BIOMEDICAL LTD.
c/o Montreal Trust Company of Canada
510 Burrard Street
Vancouver, BC
V6C 3B9
The undersigned holder of the Special Warrants evidenced by the attached Special
Warrant Certificate hereby irrevocably subscribes for _______ Common Shares of
Genetronics Biomedical Ltd. issuable pursuant to the exercise of _______ Special
Warrants on the terms specified in the Special Warrant Certificate and Warrant
Indenture.
The undersigned hereby irrevocably directs that the said Common Shares be issued
and delivered as follows:
<TABLE>
<CAPTION>
NAME(S) IN FULL ADDRESS(ES) NUMBER OF COMMON SHARES
- --------------- ----------- -----------------------
<S> <C> <C>
</TABLE>
(Please print. If securities are issued to a person other than the Special
Warrantholder, the holder must pay to the Trustee all eligible taxes and the
signature of the holder must be guaranteed by a Schedule A bank or trust company
or member of an acceptable medallion guarantee program).
DATED this ______ day of ______________________ , 1999.
) -------------------------------
- ---------------------------------------- ) SIGNATURE OF HOLDER
SIGNATURE OF GUARANTOR (Guarantor must )
be a Schedule A bank or a trust company ) -------------------------------
or member of an acceptable medallion ) NAME OF HOLDER
guarantee program) )
) -------------------------------
) ADDRESS OF HOLDER
)
) -------------------------------
[ ] Please check this box if the securities are to be delivered at the office
where these Special Warrants are surrendered, failing which the securities will
be mailed. Certificates will be delivered or mailed as soon as practicable after
the due surrender of the Special Warrant Certificate.
<PAGE> 33
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SECTION 9.03 - TRANSFER FORM
There shall be attached to the Warrant Certificate a transfer form substantially
as follows:
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned holder of Special Warrants of Genetronics
Biomedical Ltd. hereby sells, assigns and transfers unto
_______________________________________ of _______________________________
Special Warrants represented by the attached Special Warrant Certificate and
does hereby irrevocably constitute and appoint Montreal Trust Company of Canada
(the "Trustee") attorney to transfer the said Special Warrants on the books of
the Trustee with full power of substitution in the premises.
DATED the _________________, 199 .
) -------------------------------
- ---------------------------------------- ) SIGNATURE OF HOLDER
SIGNATURE OF GUARANTOR (Guarantor must )
be a Schedule A bank or a trust company ) -------------------------------
or member of an acceptable medallion ) NAME OF HOLDER
guarantee program) )
) -------------------------------
) ADDRESS OF HOLDER
)
) -------------------------------
ARTICLE TEN
GENERAL
SECTION 10.01 - NOTICE TO THE CORPORATION AND THE TRUSTEE
(1) Unless herein otherwise expressly provided, any notice to be given hereunder
to the Corporation or the Trustee shall be deemed to be validly given if
delivered or if sent by registered letter, postage prepaid:
(a) if to the Corporation:
Genetronics Biomedical Ltd.
11199 Sorrento Valley Road
San Diego, CA USA
92121-1334
Attention: President and Chief Executive Officer
with a copy to:
Catalyst Corporate Finance Lawyers
1100 - 1055 West Hastings Street
Vancouver, British Columbia
V6E 2E9
Attention: James L. Heppell
<PAGE> 34
-34-
(b) if to the Trustee:
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, BC
V6C 3B9
Attention: Corporate Trust Department
Fax: (604) 685-4079
and any such notice delivered in accordance with the foregoing shall be deemed
to have been received on the date of delivery if that date is a Business Day or
the Business Day following the date of delivery if such date is not a Business
Day or, if mailed, on the third Business Day following the date of the postmark
on such notice.
(2) The Corporation or the Trustee, as the case may be, may from time to time
notify the other in the manner provided in Subsection 10.01(l) of a change of
address which, from the effective date of such notice and until changed by like
notice, shall be the address of the Corporation or the Trustee, as the case may
be, for all purposes of this Indenture. A copy of any notice of change of
address given pursuant to this Subsection 10.01(2) shall be available for
inspection at the principal corporate trust office of the Trustee in the City of
Vancouver by Warrantholders during normal business hours.
SECTION 10.02 - NOTICE TO THE WARRANTHOLDERS
Unless otherwise provided herein, any notice to the Warrantholders under the
provisions of this Indenture shall be deemed to be validly given, if delivered
by registered letter, postage prepaid, to the holders at their addresses
appearing in the register of holders. Any notice so delivered shall be deemed to
have been received on the date of delivery if that date is a Business Day or the
Business Day following the date of delivery if such date is not a Business Day.
Accidental error or omission in giving notice or accidental failure to give
notice to any Warrantholder shall not invalidate any action or proceeding
founded thereon.
SECTION 10.03 - MAIL SERVICE INTERRUPTION
(1) If by reason of any interruption of mail service, actual or threatened, any
notice to be given to the Trustee, the Corporation or the Warrantholders would
reasonably be unlikely to reach its destination in the ordinary course of mail,
such notice shall be valid and effective only if delivered by courier to the
party to which it is addressed or if sent to such party, at the appropriate
address in accordance with Section 10.01, by facsimile transmission, telex or
other means of prepaid transmitted or recorded communication.
SECTION 10.04 - COUNTERPARTS AND FORMAL DATE
This Indenture may be executed in several counterparts, each of which when so
executed shall be deemed to be an original and such counterparts together shall
constitute one and the same instrument and notwithstanding their date of
execution shall be deemed to be dated as of the date set out on the first page
hereof.
SECTION 10.05 - SATISFACTION AND DISCHARGE OF INDENTURE
Upon the date by which there shall have been delivered to the Trustee for
exercise or destruction or the deemed exercise in accordance with the provisions
hereof of all Warrants theretofore certified hereunder, this Indenture, except
to the extent that Common Shares and certificates therefor have not been issued
and delivered hereunder or the Corporation has not performed any of its
obligations hereunder, shall cease to be of further effect in respect of the
Corporation, and the Trustee, on written demand of and at the cost and expense
of the Corporation, and upon delivery to the Trustee of a certificate of the
Corporation stating that all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with and upon payment to the
Trustee of the expenses, fees and other remuneration payable to the Trustee,
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture; provided that if
<PAGE> 35
-35-
the Trustee has not then performed any of its obligations hereunder any such
satisfaction and discharge of the Corporation's obligations hereunder shall not
affect or diminish the rights of any Warrantholder or the Corporation against
the Trustee.
SECTION 10.06 - PROVISIONS OF INDENTURE AND WARRANTS FOR THE SOLE BENEFIT OF
PARTIES AND WARRANTHOLDERS
Except as provided in Sections 5.02 and 5.03, nothing in this Indenture or the
Warrants, expressed or implied, shall give or be construed to give to any person
other than the parties hereto and the holders from time to time of the Warrants
any legal or equitable right, remedy or claim under this Indenture, or under any
covenant or provision therein contained, all such covenants and provisions being
for the sole benefit of the parties hereto and the Warrantholders.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under the
hands of their proper officers in that behalf.
GENETRONICS BIOMEDICAL LTD.
By:
/s/ James L. Heppell
------------------------------------
Authorized Signatory
MONTREAL TRUST COMPANY OF CANADA
By:
/s/ Nicole Clement
------------------------------------
Authorized Signatory
By:
/s/ Megan Ballard
------------------------------------
Authorized Signatory
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 14,487,034
<SECURITIES> 0
<RECEIVABLES> 635,521
<ALLOWANCES> 19,685
<INVENTORY> 754,809
<CURRENT-ASSETS> 15,937,195
<PP&E> 1,937,195
<DEPRECIATION> 843,824
<TOTAL-ASSETS> 18,162,857
<CURRENT-LIABILITIES> 1,228,254
<BONDS> 0
0
0
<COMMON> 28,540,182
<OTHER-SE> (23,048,550)
<TOTAL-LIABILITY-AND-EQUITY> 18,162,857
<SALES> 699,078
<TOTAL-REVENUES> 965,746
<CGS> 326,737
<TOTAL-COSTS> 326,737
<OTHER-EXPENSES> 3,576,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,711
<INCOME-PRETAX> (2,944,228)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,944,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,944,228)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
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