**Execution
      Version**




**A** **GREEMENT
      AND PLAN OF MERGER**




**BY
      AND AMONG**




**YM
      BIOSCIENCES INC.,**




**YM
      BIOSCIENCES USA INC.,**




**YM** **BIOSCIENCES
      U.S. OPERATIONS** **INC.,**




**EXIMIAS
      PHARMACEUTICAL CORPORATION**




**AND**




**ORBIMED
      ADVISORS, LLC, AS STOCKHOLDER REPRESENTATIVE**




**April 13,
      2006**









**TABLE
      OF CONTENTS**




**Page****ARTICLE
                1 THE MERGER**
            **1**1.1
            **The
                Merger**.
            11.2
            **Closing**.
            21.3
            **Effective
                Time**.
            2**ARTICLE
                2 THE SURVIVING CORPORATION**
            **2**2.1
            **Certificate
                of Incorporation**.
            22.2
            **Bylaws**.
            22.3
            **Directors
                and Officers**.
            2**ARTICLE
                3 EFFECT ON CAPITAL STOCK**
            **3**3.1
            **Conversion
                of Target Series D Preferred Stock**.
            33.2
            **Cancellation
                of Target Common Stock, Series A, B and C Preferred Stock, Stock
                Options
                and Warrants**.
            53.3
            **Capital
                Stock of Merger Sub**.
            53.4
            **Fractional
                Shares**.
            53.5
            **Surrender
                of Certificates**.
            53.6
            **No
                Further Ownership Rights in Target Series D Preferred
                Stock**.
            73.7
            **Dissenting
                Stockholders**.
            73.8
            **Further
                Action**.
            7**ARTICLE
                4 REPRESENTATIONS AND WARRANTIES OF TARGET**
            **7**4.1
            **Corporate
                Existence**.
            84.2
            **Authorization**.
            84.3
            **No
                Violations; Required Consents**.
            84.4
            **Governmental
                Approvals**.
            94.5
            **Capitalization**.
            94.6
            **Financial
                Statements**.
            94.7
            **Title
                to Assets**.
            94.8
            **Real
                Property**.
            104.9
            **Absence
                of Undisclosed Liabilities**.
            104.10
            **Absence
                of Changes or Events**.
            104.11
            **Compliance
                with Laws**.
            114.12
            **Litigation**.
            114.13
            **Relevant
                Contracts**.
            114.14
            **Taxes****.**
            124.15
            **Employee
                Benefit Matters**.
            144.16
            **Labor
                Relations**.
            174.17
            **Intellectual
                Property**.
            174.18
            **Insurance**.
            194.19
            **No
                Broker**.
            194.20
            **Books
                and Records**.
            19




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**TABLE
        OF CONTENTS**




**Page**4.21
            **U.S.
                Securities Law Matters**.
            204.22
            **No
                Other Representations or Warranties**.
            204.23
            **Stockholders**.
            214.24
            **Bank
                Accounts etc.**
            21**ARTICLE
                5 REPRESENTATIONS AND WARRANTIES OF ACQUIROR, YM BIOSCIENCES USA
                INC. AND
                MERGER SUB**
            **21**5.1
            **Corporate
                Existence**.
            215.2
            **Authorization**.
            215.3
            **No
                Violation; Required Consents**.
            225.4
            **Governmental
                Approvals**.
            225.5
            **Capitalization**.
            225.6
            **Financial
                Statements**.
            225.7
            **No
                Broker**.
            235.8
            **Absence
                of Claims; Compliance with Laws**.
            235.9
            **Merger
                Shares**.
            235.10
            **Compliance
                with Securities Laws**.
            245.11
            **Disclosure**.
            245.12
            **No
                Plan to Liquidate YM BioSciences USA**.
            245.13
            **No
                Active Business in Merger Sub**.
            24**ARTICLE
                6 COVENANTS**
            **24**6.1
            **Confidentiality
                and Announcements**.
            246.2
            **Filings;
                Third Party Consents**.
            266.3
            **Expenses**.
            266.4
            **Further
                Assurances**.
            266.5
            **Access**.
            266.6
            **Preservation
                of Business**.
            266.7
            **Supplemental
                Disclosure**.
            286.8
            **Stockholder
                Approval**.
            286.9
            **Employment
                Agreements**.
            286.10
            **Directors
                and Officers Insurance**.
            296.11
            **Tax
                Returns, Payments and Related Matters**.
            296.12
            **Listing
                of Additional Shares**.
            29**ARTICLE
                7 CONDITIONS TO CLOSING**
            **29**7.1
            **Conditions
                to Acquiror’s Obligations**.
            297.2
            **Conditions
                to Target’s Obligations**.
            317.3
            **Mutual
                Conditions**.
            32**ARTICLE
                8 TERMINATION**
            **33**8.1
            **Termination**.
            338.2
            **Obligations
                upon Termination**.
            34




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**TABLE
        OF CONTENTS**




**Page****ARTICLE
                9 REMEDIES FOR BREACHES OF THIS AGREEMENT**
            **34**9.1
            **Limited
                Recourse Indemnity**.
            349.2
            **Matters
                Involving Third Parties**.
            359.3
            **Determination
                of Adverse Consequences**.
            369.4
            **Exclusive
                Remedy**.
            369.5
            **Release
                of Hold Back Consideration**.
            36**ARTICLE
                10 GENERAL**
            **36**10.1
            **Amendments;
                Extension; Waiver**.
            3610.2
            **Entire
                Agreement**.
            3610.3
            **Interpretation**.
            3610.4
            **Severability**.
            3710.5
            **Notices**.
            3710.6
            **Binding
                Effect; Persons Benefiting; No Assignment**.
            3810.7
            **Counterparts**.
            3810.8
            **No
                Prejudice**.
            3810.9
            **Governing
                Law**.
            3910.10
            **Stockholder
                Representative**.
            3910.11
            **Arbitration**.
            40





-iii-




**TABLE
      OF EXHIBITS AND SCHEDULES**




**EXHIBITS**Exhibit
                A
            
            DefinitionsExhibit
                B
            
            Certificate
                of MergerExhibit
                C
            
            Initial
                Directors and OfficersExhibit
                D
            
            Form
                of Escrow AgreementExhibit
                E
            
            Form
                of Target Legal OpinionExhibit
                F
            
            Form
                of Acquiror Legal Opinion**SCHEDULES**Schedule 3.1
            
            Definition
                of Net Cash at Closing





-iv-




**AGREEMENT
      AND PLAN OF MERGER**




**THIS
      AGREEMENT AND PLAN OF MERGER** (this
“ ***Agreement*** ”)
      is
      entered into on April 13, 2006, by and among YM BioSciences Inc., a
      corporation existing under the laws of Nova Scotia, Canada (“ ***Acquiror*** ”),
      YM
      BioSciences USA Inc., a Delaware corporation and wholly-owned subsidiary of
      Acquiror, (“ ***YM
      BioSciences USA*** ”),
      YM
      BioSciences U.S. Operations Inc., a Delaware corporation and wholly-owned
      subsidiary of YM BioSciences USA (“ ***Merger
      Sub*** ”),
      Eximias Pharmaceutical Corporation, a Delaware corporation (“ ***Target*** ”),
      and
      OrbiMed Advisors, LLC on behalf of the Series D Stockholders (in such capacity
      referred to as the “ ***Stockholder
      Representative*** ”).
      Certain capitalized terms used in this Agreement are defined in **Exhibit A** hereto.




**RECITALS**




**WHEREAS,** the
      respective Boards of Directors of Acquiror, YM BioSciences USA, Merger Sub
      and
      Target have approved and adopted this Agreement and the transactions
      contemplated herein and declared it advisable and in the best interests of
      their
      respective companies and stockholders to consummate the acquisition of Target
      by
      Acquiror through the statutory merger of Merger Sub with and into Target subject
      to the terms and conditions of this Agreement (the “ ***Merger*** ”);




**WHEREAS,** the
      Boards of Directors of Acquiror, YM BioSciences USA, Merger Sub and Target
      have
      determined to recommend that the stockholder of Merger Sub and the Stockholders
      of Target adopt and approve the Merger, this Agreement and the transactions
      contemplated herein; and




**WHEREAS,** the
      parties hereto desire to make certain covenants, representations, warranties
      and
      agreements in connection with the Merger.




**AGREEMENT**




**NOW
      THEREFORE,** in
      consideration of the foregoing and the mutual covenants, representations,
      warranties and agreements contained herein, and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      and
      intending to be legally bound hereby, the parties agree as follows:




**ARTICLE
      1**


**THE
      MERGER**




1.1  **The
      Merger** .  Subject
      to and upon the terms and conditions of this Agreement and the applicable
      provisions of the Delaware General Corporation Law (the “ ***DGCL*** ”),
      at
      the Effective Time, Merger Sub shall be merged with and into Target, which
      shall
      be the surviving corporation (the “ ***Surviving
      Corporation*** ”)
      in the
      Merger, and the separate corporate existence of Merger Sub shall thereupon
      cease. The name of the Surviving Corporation shall be “YM BioSciences U.S.
      Operations Inc.” Without limiting the generality of the foregoing, at the
      Effective Time, the identity, existence, approvals, immunities, assets,
      property, rights, powers, privileges and franchises of Target, as the Surviving
      Corporation, shall continue unaffected and unimpaired, except as specifically
      provided herein. The identity and separate existence of Merger Sub shall cease
      and all of the approvals, immunities, assets, property, rights, powers,
      privileges and franchises of Merger Sub shall vest in the Surviving Corporation,
      all in accordance with the provisions of this Agreement and the applicable
      provisions of the DGCL. All shares of capital stock of Merger Sub and Target
      shall be converted or cancelled in the manner provided in **Article 3** .
      Immediately following the Effective Time, the Surviving Corporation shall be
      an
      indirect wholly-owned subsidiary of Acquiror.









1.2  **Closing** .  The
      closing ( the “ ***Closing*** ”)
      of the
      Merger shall take place at the offices of Pepper Hamilton LLP located at 899
      Cassatt Road, Berwyn, Pennsylvania, commencing at 10:00 a.m. local time, on
      the
      third Business Day after the date on which all of the conditions set forth
      in **Article 7** (other
      than those conditions that by their nature are to be satisfied at the Closing,
      but subject to the satisfaction or waiver of those conditions) shall have been
      satisfied or waived or such other location, date and time as Acquiror and Target
      may agree upon in writing.




1.3  **Effective
      Time** .  In
      connection with the Closing, Acquiror shall cause the Merger to be consummated
      by duly filing on the Closing Date a properly executed certificate of merger
      in
      substantially the form attached hereto as **Exhibit B** (the
“ ***Certificate
      of Merger*** ”)
      with
      the Secretary of State of the State of Delaware in accordance with the relevant
      provisions of the DGCL. The date of the effectiveness of such filing shall
      be
      the date on which it is filed (the “ ***Effective
      Date*** ”)
      and
      5:00 p.m., Eastern time, on the Effective Date shall be the effective time
      of
      the Merger (the “ ***Effective
      Time*** ”).




**ARTICLE
      2**


**THE
      SURVIVING CORPORATION**




2.1  **Certificate
      of Incorporation** .  At
      the
      Effective Time, the Restated Certificate of Incorporation of Target shall be
      amended and restated in its entirety by reason of the Merger, and thereafter
      be
      the Restated Certificate of Incorporation of the Surviving Corporation. Such
      Restated Certificate of Incorporation shall be in the form attached as an
      exhibit to the Certificate of Merger.




2.2  **Bylaws** .  From
      and
      after the Effective Time, the Bylaws of Merger Sub, as in effect immediately
      prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
      as
      of the Effective Time until thereafter amended.




2.3  **Directors
      and Officers** .  At
      the
      Effective Time, the initial directors and officers of the Surviving Corporation,
      as set forth on **Exhibit C** hereto,
      shall be elected or appointed, as the case may be, by Acquiror.




-2-




**ARTICLE
      3**


**EFFECT
      ON CAPITAL STOCK**




3.1  **Conversion
      of Target Series D Preferred Stock** .




(a)  Subject
      to the terms and conditions of this Agreement, at the Effective Time by virtue
      of the Merger and without any action on the part of Merger Sub, Target,
      Acquiror, YM BioSciences USA or the holders of any securities of Target, each
      share of Target Series D Preferred Stock issued and outstanding immediately
      prior to the Effective Time (“ ***Target
      Series D Preferred Stock*** ”),
      other
      than any Dissenting Shares, shall be converted into the right to receive, at
      the
      election of the holder of each share of Target Series D Preferred Stock (each,
      a
“ ***Series
      D Stockholder*** ”
and
      collectively, the “ ***Series
      D Stockholders*** ”),
      either of the following (the “ ***Merger
      Consideration*** ”):




(i)  that
      number (subject to **Section 3.4** )
      of
      validly issued, fully paid and nonassessable shares of the common stock, without
      par value, of Acquiror (“ ***Acquiror
      Common Stock*** ”)
      which
      equals the quotient of:




(A)  an
      amount
      equal to the quotient of:




(1)  the
      Net
      Cash at Closing as of the Effective Date multiplied by 1.106; divided
      by




(2)  the
      number of shares of Target Series D Preferred Stock issued and outstanding
      immediately prior to the Effective Time; divided by




(B)  the
      Acquiror Stock Value as of the Effective Date (the “ ***Exchange
      Ratio*** ”);
      or




(ii)  subject
      to **Section 3.1(d)** ,
      an
      amount of cash (the “ ***Cash
      Proceeds*** ”)
      equal
      to the quotient of (A) the Net Cash at Closing as of the Effective Date, divided
      by (B) the number of shares of Target Series D Preferred Stock issued and
      outstanding immediately prior to the Effective Time.




(b)  Notwithstanding
      anything to the contrary contained herein, for purposes of this Agreement,
      in no
      event shall the Acquiror Stock Value at the Effective Date be deemed to be
      greater than an amount equal to 115% **** of
      the
      Acquiror Stock Value on the date hereof or less than an amount equal to 85%
      of
      the Acquiror Stock Value on the date hereof.




(c)  Concurrently
      with the execution and delivery of this Agreement, Target will deliver to each
      Series D Stockholder an election form (the “ ***Election
      Form*** ”),
      whereby each Series D Stockholder will elect to receive such Series D
      Stockholder’s Merger Consideration either in shares of Acquiror Common Stock or
      Cash Proceeds. In addition, prior to the date hereof, Target shall have
      delivered to each Series D Stockholder a security holder questionnaire.
      Notwithstanding anything to the contrary contained herein, in the event that
      a
      Series D Stockholder does not certify in a security holder questionnaire that
      has been executed by such Series D Stockholder and received by Target prior
      to
      the execution hereof that such Series D Stockholder is an Accredited Investor
      or
      a Sophisticated Investor, then such Series D Stockholder shall only have the
      right to receive the Merger Consideration in cash pursuant to **Section 3.1(a)(ii)** **** and
      any
      election to receive Acquiror Common Stock under **Section 3.1(c)** by any
      such Series D Shareholder shall not be valid.




-3-




(d)  Notwithstanding
      anything to the contrary contained herein, not less than $25,000,000 of the
      Merger Consideration shall be paid in Acquiror Common Stock under **Section 3.1(a)(i)** (the
“ ***Stock
      Threshold*** ”).
      The
      determination of whether the Stock Threshold has been reached will be made
      at
      Closing by multiplying the aggregate number of shares of Acquiror Common Stock
      issuable based on the Series D Stockholders’ valid elections by the Acquiror
      Stock Value as of the Effective Date. In the event that the Series D
      Stockholders elect to receive an amount of cash such that the Stock Threshold
      is
      not reached, then each Series D Stockholder, other than any Series D Stockholder
      who has not certified in a security holder questionnaire that has been executed
      by such Series D Stockholder and received by Target prior to the execution
      hereof that such Series D Stockholder is an Accredited Investor or a
      Sophisticated Investor, who elects to receive cash shall receive a reduced
      amount thereof (the “ ***Reduced
      Cash Consideration*** ”)
      equal
      to the product of:




(i)  the
      maximum aggregate Cash Proceeds payable that would allow the Stock Threshold
      to
      be reached, multiplied by




(ii)  the
      number of shares of Target Series D Preferred Stock held by such Series D
      Stockholder immediately prior to the Effective Time divided by the aggregate
      number of shares of Target Series D Preferred Stock held by all the Series
      D
      Stockholders who elect to receive cash pursuant to **Section 3.1(a)(ii)** and any
      Series D Stockholder who has certified in a security holder questionnaire that
      has been executed by such Series D Stockholder and received by Target prior
      to
      the execution hereof that such Series D Stockholder is an Accredited Investor
      or
      a Sophisticated Investor.




The
      difference between the amount of the Reduced Cash Consideration and the amount
      of Cash Proceeds that a Series D Stockholder would have been entitled to receive
      pursuant to **Section 3.1(a)(ii)** will be
      paid in Acquiror Common Stock under **Section 3.1(a)(i)** .




(e)  The
      Exchange Ratio shall be adjusted to reflect fully the effect of any stock split,
      reverse split, stock dividend (including any divided or distribution of
      securities convertible into Acquiror Common Stock or Target Series D Preferred
      Stock), reorganization, recapitalization or other like change with respect
      to
      Acquiror Common Stock or Target Series D Preferred Stock occurring after the
      date hereof and prior to the Effective Time.




(f)  At
      the
      Effective Time, Acquiror shall cause to be delivered to the Escrow Agent an
      amount of the aggregate Cash Proceeds and certificates representing the number
      of shares of Acquiror Common Stock (based on the Acquiror Stock Value as of
      the
      Effective Date) equal to $3,000,000 (the “ ***Hold
      Back Consideration*** ”)
      in
      accordance with, and subject to, the terms of the Escrow Agreement attached
      as **Exhibit D** hereto.
      The Hold Back Consideration shall be comprised of the same proportion of
      Acquiror Common Stock and Cash Proceeds as the aggregate amount of the Merger
      Consideration.




-4-




(g)  Copies
      of
      all executed security holder questionnaires received by Target as of the date
      hereof shall be delivered to Acquiror concurrently with the execution
      hereof.




3.2  **Cancellation
      of Target Common Stock, Series A, B and C Preferred Stock, Stock Options and
      Warrants** .  At
      the
      Effective Time, apart from Target Series D Preferred Stock, all Target
      Capital Stock and all options, warrants and other rights related thereto,
      including, without limitation, each share of Target Capital Stock issued and
      outstanding immediately prior to the Effective Time, shall be canceled and
      extinguished without any conversion thereof, and no Merger Consideration or
      other consideration shall be paid in exchange therefor or in relation thereto.
      Without limiting the generality of the foregoing, at the Effective Time, all
      options to purchase Target Capital Stock then outstanding, under the Target’s
      Amended and Restated 2000 Stock Option Plan dated March 30, 2004 or
      otherwise, at the Effective Time shall be cancelled, and no Merger Consideration
      or other consideration shall be paid in exchange therefor or in relation thereto
      in accordance with the terms of any such option or otherwise. Without limiting
      the generality of the foregoing, at the Effective Time, all warrants to purchase
      Target Capital Stock then outstanding shall be cancelled, and no Merger
      Consideration or other consideration shall be paid in exchange therefor or
      in
      relation thereto in accordance with the terms of each such warrant.




3.3  **Capital
      Stock of Merger Sub** .  At
      the
      Effective Time, each share of common stock of Merger Sub issued and outstanding
      immediately prior to the Effective Time shall be converted into and exchangeable
      for one validly issued, fully paid and non-assessable share of common stock
      of
      the Surviving Corporation. Each stock certificate of Merger Sub evidencing
      ownership of any such shares shall continue to evidence ownership of such shares
      of capital stock of the Surviving Corporation.




3.4  **Fractional
      Shares** .  No
      fraction of a share of Acquiror Common Stock will be issued, and no cash shall
      be paid in lieu thereof.




3.5  **Surrender
      of Certificates** .




(a)  **Acquiror
      to Provide Common Stock and Cash** .
      Immediately prior to the Effective Time, Acquiror shall cause to be supplied
      to
      the Merger Sub (i) certificates evidencing the shares of Acquiror Common Stock
      issuable pursuant to **Section 3.1** in
      exchange for shares of Target Series D Preferred Stock outstanding immediately
      prior to the Effective Time; and (ii) cash in the amount of the Cash Proceeds
      in
      either the manner set forth immediately below or any other manner selected
      by
      Acquiror, provided that it is at least as favorable from a Tax perspective:
      Acquiror shall transfer, as a contribution to capital under Section 351 of
      the
      Code, such certificates (and, consequently, the stock of Acquiror that they
      represent) and cash to YM Biosciences USA in exchange for stock of YM
      Biosciences USA of equal value. YM Biosciences USA shall credit to the stated
      capital account maintained in respect of the stock so issued by it an amount
      equal to the total fair market value of the certificates and cash so transferred
      to it by Acquiror. YM Biosciences USA shall, immediately after receiving the
      certificates and cash from Acquiror, transfer, as a contribution to capital
      under Section 351 of the Code, such certificates and cash to Merger Sub in
      exchange for stock of Merger Sub of equal value. Merger Sub shall credit to
      the
      stated capital account maintained in respect of the stock so issued by it an
      amount equal to the total fair market value of the certificates and cash so
      transferred to it by YM Biosciences USA.




-5-




(b)  **Exchange
      Procedures** .
      Promptly after the Effective Time, the Surviving Corporation shall cause to
      be
      mailed to each Series D Stockholder of record of a certificate or certificates
      (the “ ***Certificates*** ”)
      that
      immediately prior to the Effective Time represented outstanding shares of Target
      Series D Preferred Stock, whose shares were converted into the right to exchange
      them for and receive shares of Acquiror Common Stock or Cash Proceeds pursuant
      to **Section 3.1** ,
      (i) a
      letter of transmittal in the form attached hereto as **Exhibit E** (the
“ ***Letter
      of Transmittal*** ”),
      which
      shall specify that delivery shall be effected, and risk of loss and title to
      the
      Certificates shall pass, only upon receipt of the Certificates by the Merger
      Sub; (ii) such other customary documents as may be required pursuant to such
      instructions; and (iii) instructions for use in effecting the surrender of
      the
      Certificates in exchange for certificates representing shares of Acquiror Common
      Stock or Cash Proceeds if such holder elected on the Election Form to receive
      the Merger Consideration in cash. Upon surrender of a Certificate for
      cancellation to the Merger Sub, together with a Letter of Transmittal and other
      documents, duly completed and validly executed in accordance with the
      instructions thereto, the holder of such Certificate shall be entitled to
      receive in exchange therefor a certificate representing the number of whole
      shares of Acquiror Common Stock or Cash Proceeds, as the case may be, determined
      under **Section 3.1** (and
      subject always to the portion thereof provided to the escrow Agent as part
      of
      the Hold Back Consideration), and the Certificates so surrendered shall
      forthwith be canceled. Until so surrendered, each outstanding Certificate that
      prior to the Effective Time represented shares of Target Series D Preferred
      Stock will be deemed from the Effective Time, for all corporate purposes, to
      evidence the right to exchange the same for the number of full shares of
      Acquiror Common Stock or a right to the amount of Cash Proceeds into which
      such
      shares of Target Series D Preferred Stock shall have been so converted under **Section 3.1** (and
      subject always to the portion thereof provided to the Escrow Agent as part
      of
      the Hold Back Consideration).




(c)  **Lost,
      Stolen or Destroyed Certificates** .
      In the
      event any Certificates shall have been lost, stolen or destroyed, Merger Sub
      shall issue in exchange for such lost, stolen or destroyed Certificates, upon
      the making of an affidavit of that fact by the holder thereof such Merger
      Consideration as may be required pursuant to **Section 3.1** **;** provided , however ,
      that
      Acquiror may, in its discretion and as a condition precedent to the issuance
      thereof, require the registered owner of such lost, stolen or destroyed
      Certificates to indemnify Acquiror and the Surviving Corporation against any
      claim that may be made with respect to the Certificates alleged to have been
      lost, stolen or destroyed.




(d)  **Transfers
      of Ownership** .
      At the
      Effective Time, the stock transfer books of Target shall be closed, and there
      shall be no further registration of transfers of Target Series D Preferred
      Stock
      thereafter on the records of Target. If any certificate for shares of Acquiror
      Common Stock is to be issued in a name other than that in which the Certificate
      surrendered in exchange therefor is registered, it will be a condition of the
      issuance thereof that the Certificate so surrendered will be properly endorsed
      and otherwise in proper form for transfer and that the person requesting such
      exchange will have paid to Acquiror any transfer or other Taxes required by
      reason of the issuance of a certificate of shares of Acquiror Common Stock
      in
      any name other than that of the registered holder of the Certificate
      surrendered, or established to the satisfaction of Acquiror that such Tax has
      been paid or is not payable.




-6-




(e)  **No
      Liability** .
      Notwithstanding anything to the contrary in this **Section 3.5** ,
      neither
      the Surviving Corporation nor any party hereto shall be liable to any person
      for
      any amount properly paid to a public official pursuant to any applicable
      abandoned property, escheat or similar law.




3.6  **No
      Further Ownership Rights in Target Series D Preferred
      Stock** .  The
      Merger Consideration delivered upon the surrender for exchange of shares of
      Target Series D Preferred Stock in accordance with the terms hereof shall be
      deemed to have been issued in full satisfaction of all rights pertaining to
      such
      shares of Target Series D Preferred Stock, and there shall be no further
      registration of transfers on the records of the Surviving Corporation of shares
      of Target Series D Preferred Stock which were outstanding immediately prior
      to
      the Effective Time. If, after the Effective Time, Certificates are presented
      to
      the Surviving Corporation for any reason, they shall be canceled and exchanged
      as provided in this **Article 3** .




3.7  **Dissenting
      Stockholders** .  Notwithstanding
      anything to the contrary contained herein, any shares of Target Capital Stock
      held by the Stockholders who shall not have voted in favor of the Merger or
      consented thereto in writing and who shall have demanded properly in writing
      appraisal of such shares of Target Capital Stock in accordance with Section
      262
      of the DGCL and who shall not withdraw or otherwise lose the right to appraisal
      and payment for such shares under the DGCL (collectively, the “ ***Dissenting
      Shares*** ”),
      shall
      not be converted into the Merger Consideration as set forth in **Section 3.1** ,
      but
      shall instead be converted into the right to receive such consideration as
      provided by Subchapter XIII of the DGCL. Notwithstanding the foregoing, if
      any holder of Dissenting Shares (a “ ***Dissenting
      Stockholder*** ”)
      shall
      effectively withdraw or lose (through failure to perfect or otherwise) such
      dissenters’ appraisal rights under the DGCL, then, as of the later of the
      Effective Time and the occurrence of such event, such Dissenting Stockholder’s
      shares shall automatically be cancelled, extinguished and represent only the
      right to receive that portion of the Merger Consideration as set forth in **Section 3.1(a)(i)** ,
      without
      interest or dividends thereon, upon surrender of the Certificate representing
      such Dissenting Shares. Target shall give Acquiror prompt written notice of
      any
      written demand for appraisal received by Target pursuant to Section 262 of
      the
      DGCL and any other notice or instrument served in connection with such
      dissenters’ rights.




3.8  **Further
      Action** .  If
      at any
      time after the Effective Time, any further action is necessary or desirable
      to
      carry out the purposes of this Agreement and to vest the Surviving Corporation
      with full right, title, interest and possession to all assets, property, rights,
      privileges, powers and franchises of Target, the directors and officers of
      Target and Acquiror are fully authorized in the name of their respective
      corporations or otherwise to take, and shall take, all such lawful and necessary
      or appropriate action.




**ARTICLE
      4**


**REPRESENTATIONS
      AND WARRANTIES OF TARGET**




Except
      as
      otherwise disclosed in a schedule delivered to Acquiror by Target on the date
      hereof in connection with the execution of this Agreement (the “ ***Disclosure
      Schedule*** ”),
      Target hereby represents and warrants to Acquiror, YM BioSciences USA and Merger
      Sub as follows:




-7-




4.1  **Corporate
      Existence** .  Target
      is
      a corporation, duly organized, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation. Target has all requisite
      corporate power and authority necessary to enable it to own, operate, lease
      or
      otherwise hold its Assets and to carry on its business in the places and in
      the
      manner as presently conducted. Target is duly qualified or licensed to do
      business and is in good standing (with respect to jurisdictions which recognize
      such concept or in otherwise equivalent standing with respect to other
      jurisdictions) as a foreign corporation or other legal entity in each
      jurisdiction where the character of the properties owned or leased by it or
      the
      nature of the business transacted by it requires it to be so qualified, except
      where the failure to be so qualified would not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse
      Effect.




4.2  **Authorization** .  Target
      has all requisite corporate power and authority, and has taken all corporate
      action necessary, to execute, deliver and perform this Agreement, to consummate
      the transactions contemplated hereby and thereby and to perform its obligations
      hereunder and thereunder. The execution and delivery of this Agreement by Target
      and the consummation by Target of the transactions contemplated hereby have
      been
      duly approved by the Target Board. Other than the approval of this Agreement
      and
      the Merger by the Stockholders, including any class or series vote required
      under Target’s Restated Certificate of Incorporation, no other corporate
      proceedings on the part of Target are necessary to authorize this Agreement
      and
      the Merger and the other transactions contemplated hereby and thereby. This
      Agreement has been duly executed and delivered by Target and is the valid and
      binding obligation of Target enforceable against it in accordance with its
      terms, except as enforcement may be limited by applicable bankruptcy,
      insolvency, reorganization, moratorium and other laws affecting creditors’
rights generally and except insofar as the availability of equitable remedies
      may be limited by Applicable Law.




4.3  **No
      Violations; Required Consents** .  Except
      as
      set forth on **Schedule 4.3** of the
      Disclosure Schedule, neither the execution, delivery, and performance of this
      Agreement by Target, nor the consummation of the transactions contemplated
      hereby or thereby, will contravene or violate (a) any Applicable Law to which
      Target is subject, (b) any judgment, order, writ, injunction, or decree of
      any
      court, arbitrator, or Governmental Authority or agency that is applicable to
      Target, or (c) the charter or organizational documents of Target; nor will
      such
      execution, delivery, or performance (i) constitute a Default under, or give
      rise
      to a loss of any benefit to which Target is entitled or require the consent
      of
      any other party to, any Contract or give any party with rights thereunder the
      right to terminate, cancel, or accelerate the rights or obligations of Target
      thereunder, (ii) cause any acceleration of any Liability or Indebtedness of
      Target or with respect to any instrument or document in which Target is an
      obligor or guarantor or (iii) result in the creation or imposition of any
      Encumbrance (other than any Permitted Encumbrance) of any kind whatsoever upon
      or give to any other Person any interest or right (including any right of
      termination or cancellation) in or with respect to any of the Assets or
      Contracts of Target.




-8-




4.4  **Governmental
      Approvals** .  Except
      (a) the filing of the Certificate of Merger with the Secretary of State of
      the
      State of Delaware or (b) as set forth on **Schedule 4.4** of the
      Disclosure Schedule, no authorization, approval, or consent of, and no
      registration or filing with, any Governmental Authority is required to be made
      or obtained by Target in connection with the execution, delivery, and
      performance of this Agreement by Target, including without limitation under
      the
      Antitrust Laws.




4.5  **Capitalization** .  **Schedule 4.5** **** sets
      forth the authorized capital stock of Target and other equity interests, the
      amount as of the date of this Agreement of Target’s issued and outstanding
      capital stock or other securities convertible into or exchangeable or
      exercisable for, capital stock and the record owner(s) of Target’s outstanding
      capital stock or such other securities. All of the shares of capital stock
      of
      Target that are issued and outstanding as of the date hereof have been duly
      authorized and validly issued and are fully paid and nonassessable and held
      of
      record by the Persons set forth on **Schedule 4.5** .
      Except
      as set forth on **Schedule 4.5** ,
      no
      shares of capital stock of Target that are issued and outstanding as of the
      date
      hereof are subject to any restriction on transfer or voting agreement or
      arrangement pursuant to a Contract to which Target or, to Target’s Knowledge,
      any Series D Stockholder is a party. Except as set forth on **Schedule 4.5** ,
      (i)
      there are no outstanding options, warrants, rights, calls or other securities
      convertible into, or exchangeable or exercisable for, shares of Target Capital
      Stock, (ii) there are no other commitments on the part of Target providing
      for
      the issuance of additional shares of, or the repurchase or redemption of, shares
      of Target Capital Stock, and (iii) there are no outstanding stock appreciation
      rights, phantom stock or similar plans or rights pursuant to which Target has
      any obligations.




4.6  **Financial
      Statements** .  **Schedule 4.6** sets
      forth (i) the audited balance sheets as of December 31, 2003, 2004 and 2005
      of
      Target (the December 31, 2005 balance sheet being the “ ***Balance
      Sheet*** ”
and
      December 31, 2005 being the “ ***Balance
      Sheet Date*** ”)
      and
      the audited consolidated statements of income and cash flows of Target for
      the
      fiscal years ended December 31, 2003, 2004 and 2005, (collectively, the
“ ***Audited
      Financial Statements*** ”),
      in
      each case together with the related notes and schedules thereto, and (ii) the
      unaudited consolidated balance sheet of Target as of February 28, 2006 and
      the
      consolidated statements of income and cash flows of Target for the two-month
      period then ended (the “ ***Unaudited
      Financial Statements*** ”)
      ((i)
      and (ii) collectively, the “ ***Financial
      Statements*** ”).
      The
      Financial Statements (A) have been prepared from and are consistent with the
      books and records of Target, () have been prepared in conformity with U.S.
      GAAP
      applied on a consistent basis during the periods covered thereby (subject to
      normal year-end adjustments and, in the case of the Unaudited Financial
      Statements, the lack of footnotes), and (C) present fairly, in all material
      respects, the consolidated financial condition and consolidated results of
      operations and cash flows as at the dates thereof, and for the periods
      indicated, of Target.




4.7  **Title
      to Assets** .  Except
      as
      set forth on **Schedule 4.7** ,
      Target
      has good and valid title to all of its tangible assets and properties, real,
      personal, and mixed, in each case free and clear of all Encumbrances, except
      for
      (a) liens for Taxes and assessments not yet due and payable, (b) liens for
      Taxes, assessments, and other charges, if any, the validity of which is being
      contested in good faith by appropriate action (all of which are identified
      on **Schedule 4.7** hereto),
      (c) liens of employees for current wages not yet due, and (d) all other matters
      specifically identified and quantified on **Schedule 4.7** hereto
      (collectively, the “ ***Permitted
      Encumbrances*** ”).




-9-




4.8  **Real
      Property** .




(a)  Target
      does not own any Real Property.




(b)  **Schedule 4.8(b)** of the
      Disclosure Schedule sets forth all leases of Real Property, occupancy agreements
      or similar agreements (the “ ***Real
      Property Leases*** ”)
      under
      which Target is a lessee, sub-lessee, tenant, licensee or assignee of any real
      property owned by any third Person (the “ ***Leased
      Real Property*** ”),
      such
      list setting forth the location of each parcel of such Leased Real Property,
      the
      landlord thereof, the approximate square footage leased and the nature of the
      activities conducted on such Leased Real Property. Target has made available
      to
      Acquiror true, correct and complete copies of each Real Property Lease. With
      respect to the Real Property Leases, (i) there exist no Default under the Real
      Property Leases by Target, and Target has not received written notice of any
      such Default and (ii) to the Knowledge of Target, there exist no Default by
      the
      landlord or other party thereto. Each Real Property Lease is a legal, valid
      and
      binding obligation of Target, and, to the Knowledge of Target, each other party
      thereto, enforceable against each such other party thereto in accordance with
      its terms, except as may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting creditors’ rights generally
      and subject to general principles of equity. Except as set forth on **Schedule 4.8(b)** of the
      Disclosure Schedule, the consummation of the transactions contemplated by this
      Agreement will not result in any Default, penalty, increase in the amounts
      payable under or modification to any Real Property Lease.




4.9  **Absence
      of Undisclosed Liabilities** .  Except
      as
      set forth on **Schedule 4.9** of the
      Disclosure Schedule, since
      the
      Balance Sheet Date, Target has not incurred any liabilities or obligations
      of
      any nature, whether absolute, accrued, contingent or otherwise, whether known
      or
      unknown, which would be required to be set forth in the Balance Sheet or a
      balance sheet of Target as of the date hereof prepared in accordance with U.S.
      GAAP applied in a manner consistent with the Audited Financial Statements,
      except for liabilities and obligations (i) reflected on the Financial
      Statements and not previously paid or discharged, or (ii) arising or incurred
      since the Balance Sheet Date in the Ordinary Course of Business consistent
      with
      past practice.




4.10  **Absence
      of Changes or Events** .  Except
      as
      set forth on **Schedule 4.10** **** of
      the
      Disclosure Schedule, since the Balance Sheet Date, Target has been operated
      only
      in the Ordinary Course of Business and:




(a)  there
      has
      not occurred any event, occurrence, development or state of circumstances or
      facts that has or could reasonably be expected to have, individually or in
      the
      aggregate, a Material Adverse Effect;




(b)  Target
      has not merged or consolidated with any other Person or acquired a material
      amount of assets from any other Person;




(c)  Target
      has not amended or modified its organizational documents;




(d)  Target
      has not declared, set aside or paid any dividend or other distribution with
      respect to any shares of Target Stock;




(e)  Target
      has not repurchased, redeemed or otherwise acquired any outstanding shares
      of
      Target Stock or other securities of, or other ownership interests in,
      Target;




-10-




(f)  Target
      has not incurred, assumed or guaranteed any Indebtedness other than (i) with
      respect to bank arrangements existing on the Balance Sheet Date and in the
      Ordinary Course of Business, or (ii) trade payables and accrued Liabilities
      in
      the Ordinary Course of Business;




(g)  Target
      has not suffered any damage, destruction or loss of any assets, that has or
      could, individually or in the aggregate, reasonably be expected to have a
      Material Adverse Effect;




(h)  there
      have been no changes to Target’s capital structure or concerning issued and
      outstanding Target Capital Stock;




(i)  Target
      has not increased the compensation or benefits of any employee of the Target,
      nor amended any Benefit Plans (as defined in Section 4.15(b) hereof), except
      in
      the Ordinary Course of Business; and




(j)  Target
      has not committed to do any of the foregoing.




4.11  **Compliance
      with Laws** .  Except
      as
      set forth on **Schedule 4.11** of the
      Disclosure Schedule, Target
      has complied in all respects with each, and is not in violation of any,
      Applicable Law and has not failed in any respect to obtain or adhere to the
      requirements of any Permit necessary to the ownership of Target’s Assets or to
      the conduct of Target’s businesses, except where such violation of Applicable
      Law or failure to obtain or adhere to the requirements of any Permit necessary
      to the ownership or operation of Target’s Assets or business would not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect. Target has not received any notice alleging any such violation
      or, to the Knowledge of Target is there threatened against Target, any pending
      inquiry, investigation or proceedings relating thereto, and Target does not
      have
      any Knowledge of any threatened inquiry, investigation or proceedings relating
      thereto.




4.12  **Litigation** .  Except
      as
      set forth on **Schedule 4.12** **** of
      the
      Disclosure Schedule, Target is not a party to any pending or, to the Knowledge
      of Target is there threatened against Target, any legal, administrative,
      arbitration or other similar proceeding, suit, claim, action or investigation
      by
      a Governmental Authority of any nature (collectively, “ ***Action*** ”)
      of or
      before any Governmental Authority. Except as set forth on **Schedule 4.12** **** of
      the
      Disclosure Schedule, Target is not subject to any order, decree, injunction,
      writ, settlement, judgment, or other directive of any Governmental Authority.
      There is no pending or, to the Knowledge of Target, threatened, litigation,
      arbitration, investigation, or other proceeding involving Target of or before
      any Governmental Authority that relates to this Agreement or the transactions
      contemplated by this Agreement.




4.13  **Relevant
      Contracts** .




(a)  Except
      as
      set forth on **Schedule 4.13** **** of
      the
      Disclosure Schedule, Target is not a party to any Contract of the following
      types (each a “ ***Relevant
      Contract*** ”):




(i)  employment
      or consulting contracts involving an amount in excess of $50,000;




-11-




(ii)  contracts
      imposing Liabilities or requiring payment of an amount in excess of $5,000
      for
      the future purchase of, or payment for, supplies, products or
      services;




(iii)  contracts
      imposing Liabilities or requiring payment of an amount in excess of $5,000
      to
      sell or supply products;




(iv)  partnership
      or joint venture agreements;




(v)  collective
      bargaining agreements with any labor union;




(vi)  contracts
      limiting or restraining Target from engaging or competing in any lines or
      business with any person, firm, corporation or other entity;




(vii)  loan
      agreements, notes, mortgages, leveraged or capitalized leases, indentures,
      security agreements, letters of credit or other contracts of Indebtedness for
      the borrowing or lending of money by Target;




(viii)  other
      contracts imposing Liabilities or requiring payment of amounts in excess of
      $5,000 and which cannot be terminated within one year without cost;
      and




(ix)  any
      contract, arrangement or understanding respecting the sale, issuance or grant
      of
      any securities of Target.




(b)  Each
      Relevant Contract is a valid and binding obligation of Target and, to the
      Knowledge of Target, is a valid and binding obligation of each other party
      thereto. Target has duly complied with its material obligations under each
      Relevant Contract. To the Knowledge of Target, no event has occurred which
      may
      be grounds for termination of any Relevant Contract. Target is not a party
      to
      any Relevant Contract of which it or, to the Knowledge of Target, any other
      party is materially in default or, but for the requirements of notice for lapse
      of time or both, would be materially in default.




4.14  **Taxes** **.** **** Except
      as
      set forth on **Schedule 4.14** :




(a)  all
      Tax
      Returns required to be filed with respect to Target or its business have been
      timely filed (taking into account extensions of time to file),




(b)  all
      Taxes
      required to be shown on such Tax Returns or otherwise due have been
      paid,




(c)  all
      such
      Tax Returns are true, correct and complete in all material respects,




(d)  no
      adjustment relating to such Tax Returns has been proposed formally or informally
      by any Governmental Authority and, to the Knowledge of Target, no basis exists
      for any such adjustment,




-12-




(e)  there
      are
      no pending or, to the Knowledge of Target, threatened actions or proceedings
      for
      the assessment or collection of Taxes against Target with respect to the
      activities or income of Target or of any corporation that was includible in
      the
      filing of a Tax Return with Target on a consolidated or combined
      basis,




(f)  no
      consent under Section 341(f) of the Code has been filed with respect to
      Target,




(g)  there
      are
      no Encumbrances on any Assets of Target with respect to Taxes other than
      Permitted Encumbrances,




(h)  Target
      has withheld and paid all Taxes required to have been withheld and paid in
      connection with any amounts paid or owing to any employee, independent
      contractor, creditor, shareholder, or other third party, and all Forms W-2
      and
      1099 required with respect thereto have been properly completed and timely
      filed,




(i)  Target
      has not consented to extend the time in which any Taxes may be assessed or
      collected by any taxing authority,




(j)  Target
      has not requested or been granted an extension of the time for filing any Tax
      Return to a date later than the Closing Date,




(k)  Target
      will not be required :




(i)  as
      a
      result of a change in method of accounting for a taxable period ending on or
      prior to the Closing Date, to include any adjustment under Section 481(c) of
      the
      Code (or any corresponding provision of state, local or foreign law) in taxable
      income for any taxable period (or portion thereof) beginning after the Closing
      Date or




(ii)  as
      a
      result of any “closing agreement,” as described in Section 7121 of the Code (or
      any corresponding provision of state, local or foreign law), to include any
      item
      of income or exclude any item of deduction from any taxable period (or portion
      thereof) beginning after the Closing Date,




(l)  Target
      is
      not a party to or bound by any Tax allocation or Tax sharing agreement and
      does
      not have any current or potential contractual obligation to indemnify any other
      Person with respect to Taxes,




(m)  Target
      has not made any payments, and is or will not become obligated (under any
      agreement or contract entered into on or before the Closing Date) to make any
      payments, that will not be deductible under Section 280G of the Code (or any
      corresponding provision of state, local or foreign law),




(n)  Target
      has not been a United States real property holding corporation within the
      meaning of Section 897(c)(2) of the Code during the applicable period specified
      in Section 897(c)(1)(A)(ii) of the Code,




-13-




(o)  Target
      does not have any permanent establishment in any foreign country as defined
      in
      the relevant income Tax treaty between the United States and such foreign
      county,




(p)  no
      claim
      has ever been made in writing by a taxing authority in a jurisdiction where
      Target does not file Tax Returns that Target is or may be subject to Taxes
      assessed by such jurisdiction,




(q)  to
      the
      Knowledge of Target, there is no basis for any assessment, deficiency notice,
      30
      day letter or similar notice with respect to any Tax to be issued to Target
      with
      respect to any period on or before the Closing Date, and




(r)  copies
      of
      all income Tax Returns filed by or with respect to Target for the past three
      (3)
      fiscal years have been furnished or made available to Acquiror .




4.15  **Employee
      Benefit Matters** .




(a)  **Schedule 4.15** sets
      forth the name of each employee of Target, including the current annual base
      salary, target annual cash incentive bonus opportunity, the amount and terms
      of
      any payments required to be paid to such employee upon a change-in-control
      or a
      termination of employment, date of hire, adjusted date of hire, job title and
      work location of each such employee.




(b)  **Schedule 4.15** lists
      each employee of Target who is (i) absent from active employment due to short
      or
      long term disability, (ii) absent from active employment on a leave pursuant
      to
      the Family and Medical Leave Act or a comparable state law, (iii) absent from
      active employment on any other leave or approved absence (together with the
      reason for each leave or absence) or (iv) absent from active employment due
      to
      military service (under conditions that give the employee rights to
      re-employment). Target has no re-employment obligation or any liability pursuant
      to the Family and Medical Leave Act except as listed on **Schedule 4.15** .




(c)  Except
      as
      set forth on **Schedule 4.15** ,
      Target
      does not, and is not required to, maintain, sponsor or contribute to any
      pension, retirement, profit-sharing, stock bonus, deferred compensation, bonus,
      incentive, performance, stock option, phantom stock, stock purchase, restricted
      stock, equity or equity based compensation, voluntary employees’ beneficiary
      associations under Section 501(c)(9) of the Code, premium conversion, medical,
      hospitalization, vision, dental or other health, life, disability, employment,
      severance, termination, change-in-control, retention or other employee benefit
      plan (within the meaning of Section 3(3) of ERISA), program, arrangement,
      agreement or policy, whether written or unwritten for the benefit of any
      employee or former employee of Target (hereinafter “ ***Benefit
      Plans*** ”).




(d)  **Schedule 4.15** lists
      the monthly premium costs payable for each active employee of Target (and his
      or
      her dependents) with respect to each welfare benefit plan (as defined in Section
      3(1) of ERISA) maintained by Target, or to which Target contributes, and shows
      the percentage of such premiums that is paid by the employee and the percentage
      that is paid by Target. **Schedule 4.15** lists
      those participants in the Eximias Pharmaceutical Corporation 401(k) Profit
      Sharing Plan for whom an employer contribution (non-elective safe harbor
      contribution) is expected to be required for the 2006 plan year.




-14-




(e)  Target
      has made available to Acquiror complete and correct copies of each written
      Benefit Plan, any related trust or other funding vehicle, any reports or
      summaries required under ERISA or the Code (including copies of Forms 5500
      as
      filed with respect to each Benefit Plan for the most recent three plan years),
      the most recent determination letter, if any, received from the Internal Revenue
      Service with respect to each Benefit Plan intended to qualify under Section
      401
      of the Code, insurance contracts, service agreements and all related contracts
      pursuant to which the Benefit Plans are maintained, funded or
      administered.




(f)  Neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated hereby will cause any insurance contracts, service agreements
      or
      other contracts with third parties pursuant to which the Benefit Plans are
      maintained, funded or administered, to be discontinued or amended, and each
      such
      contract or agreement will continue in full force and effect (subject to
      Acquiror’s ability to terminate such contracts and agreements in accordance with
      their terms) notwithstanding the execution of this Agreement nor the
      consummation of the transactions contemplated hereby. Except as disclosed on **Schedule 4.15** none of
      such contracts or agreements require notice of this Agreement or the
      consummation of the transactions contemplated hereby.




(g)  Except
      as
      set forth on **Schedule 4.15** ,
      all
      Benefit Plans (and their trusts) are in material compliance with all applicable
      requirements of ERISA, the Code, and any other Applicable Law. Each Benefit
      Plan
      which is intended to qualify or operate under a specific statutory provision
      of
      the Code or any other Applicable Law is in substantial compliance with that
      statutory provision. Except
      as set forth on **Schedule 4.15** , there
      have been no non-exempt “prohibited transactions” (as such term is defined in
      Section 4975 of the Code and Section 406 of ERISA) with respect to any Benefit
      Plan, and, to Target’s Knowledge, no fiduciary has any liability for breach of
      fiduciary duty or other failure to act or comply in connection with the
      administration or investment of the assets of any such Benefit
      Plan.




(h)  No
      liability under Title IV or Section 302 of ERISA has been incurred by Target,
      and Target has no liability to the Pension Benefit Guaranty Corporation or
      otherwise under Title IV of ERISA (including any withdrawal liability as defined
      in Section 4201 of ERISA), under the Code with respect to any pension plan
      (as
      defined in Section 3(2) of ERISA), or any liability for penalties or excise
      taxes under Part 6 of Subtitle B of Title 1 of ERISA and Section 4980B of the
      Code, or any similar state Law, with respect to any welfare benefit plan (as
      defined in Section 3(1) of ERISA). Target has no obligation to contribute to,
      or
      any liability or potential liability under or with respect to a “multiemployer
      pension plan,” as defined in Section 3(37) of ERISA, nor is any Benefit Plan a
      plan described in Section 4063(a) of ERISA.




(i)  There
      are
      no pending or, to the Knowledge of Target, threatened claims (other than routine
      claims for benefits) asserted or instituted against any Benefit Plan or the
      assets of any Benefit Plan, or against Target, or any trustee, administrator,
      or
      fiduciary of such Benefit Plan, except as set forth on **Schedule 4.15** . All
      compensation and benefits to which former employees of Target are or were
      entitled (including severance and separation pay) have been fully paid to such
      former employees, and, to the Knowledge of Target, no former employee has a
      claim for compensation or benefits other than claims in the ordinary course
      pursuant to the terms of Target’s pension and welfare benefit plans, as those
      terms are defined in Sections 3(1) and 3(2) of ERISA.




-15-




(j)  Each
      Benefit Plan which is intended to be qualified under Code Section 401 has a
      current favorable determination or opinion letters from the Internal Revenue
      Service. No event has occurred and, to the Knowledge of Target, no facts or
      circumstances exist which, if left unaddressed by Target, is likely to cause
      or
      result in the loss or revocation of such determination.




(k)  With
      respect to continuation rights (COBRA) arising under federal or state law as
      applied to Benefit Plans that are group health plans (as defined in Section
      601
      et seq. of ERISA), **Schedule 4.15** lists
      (i) each employee, former employee or qualifying beneficiary who has elected
      continuation and (ii) each employee, former employee or qualifying beneficiary
      who has not elected continuation coverage but is still within the period in
      which such election may be made. **Schedule 4.15** also
      lists each alternate recipient under a qualified child medical support order
      within the meaning of Section 609 of ERISA, with a designation of the Plan
      to
      which the order relates.




(l)  Except
      as
      provided on **Schedule 4.15** ,
      neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated hereby will (i) entitle any employee of Target, any former employee
      of Target, any director of Target or any officer of Target to severance pay,
      unemployment compensation (except in the case of employee terminations or
      layoffs made at or following Closing by or at the direction of the Surviving
      Corporation) or (ii) accelerate the time of payment or vesting, or increase
      the
      amount of compensation due any such person.




(m)  Target
      has at all times in the past three years properly classified each of its
      employees as employees and each of its independent contractors as independent
      contractors, as applicable. There is no action or suit pending and to Target’s
      Knowledge, no such action or suit is threatened nor is any investigation pending
      by any individual or Governmental Authority challenging or questioning the
      classification by Target of any individual as a independent
      contractor.




(n)  Except
      as
      provided on **Schedule 4.15** ,
      Target
      has no obligation to provide post-retirement medical or other health and welfare
      benefits to any employee of Target, any former employee of Target or any
      survivor, dependent or beneficiary of any employee or of any former employee
      of
      Target, except as may be required by Section 4980B of the code or Part 6 of
      Title I or ERISA (“ ***COBRA*** ”)
      or
      applicable state medical benefits continuation law.




(o)  All
      contributions (including employer contributions and employee salary reduction
      contributions) required to be made to or with respect to each Benefit Plan
      with
      respect to the pre-Closing service of the employees and the former employees
      of
      Target have been made or, if not yet due, will be made or will be accrued in
      the
      books and records of the Target.




-16-




(p)  None
      of
      the Benefit Plans is a “defined benefit plan” (within the meaning of Section
      3(35) of ERISA) or a split dollar life insurance arrangement.




4.16  **Labor
      Relations** .  Target
      is
      not a party to any labor or collective bargaining agreement. There are no
      material controversies, strikes, work stoppages, slowdowns, lockouts,
      arbitrations or other material labor disputes pending or, to the Knowledge
      of
      Target, threatened, between Target and any representatives (including unions
      and
      any bargaining unit) of any of their employees. To the Knowledge of Target,
      there are no material organizational efforts presently being made involving
      any
      of the presently unorganized employees of Target. Except as set forth on **Schedule 4.16** of the
      Disclosure Schedule, there are no pending or, to the Knowledge of Target,
      threatened, complaints, charges or claims against Target brought or filed with
      any Governmental Authority, arbitrator or court based on, arising out of, in
      connection with or otherwise relating to the employment or termination of
      employment by any of Target or, relating to the employees or other persons
      providing services to or on behalf of Target. Target is in compliance in all
      material respects with all Applicable Laws applicable to such company or the
      employees or other persons providing services to or on behalf of such company,
      as the case may be, relating to the employment of labor, including all
      Applicable Laws relating to wages, hours, employment standards, WARN Act,
      collective bargaining, discrimination, civil rights, safety and health, and
      workers’ compensation.




4.17  **Intellectual
      Property** .




(a)  Target
      owns or has the right to use pursuant to license, sublicense, agreement, or
      permission all Intellectual Property necessary for the operation of the
      businesses of Target as presently conducted or as was conducted prior to July,
      2005. The description of the Intellectual Property set forth in **Schedule 4.17(a)** is true,
      accurate and complete in all material respects of all material Intellectual
      Property (other than Trade Secrets or Off-the-Shelf Software) used by Target
      or
      which Target has the right to use. Each item of Intellectual Property owned
      or
      used by Target immediately prior to the Closing will be owned or available
      for
      use by Target on identical terms and conditions immediately subsequent to the
      Closing. Except as set forth in **Schedule 4.17(a)** ,
      Target
      has taken all usual and appropriate actions to maintain and protect each item
      of
      Intellectual Property that it owns and uses.




(b)  To
      the
      Knowledge of Target, Target has not infringed upon or misappropriated any
      Intellectual Property rights of third parties. Target (A) has no Knowledge
      that it has infringed upon or misappropriated any Intellectual Property rights
      of third parties, or that the Intellectual Property owned by Target will so
      infringe or misappropriate, or (B) has never received any charge,
      complaint, claim, demand, or notice alleging any such infringement or
      misappropriation (including any claim that Target must license or refrain from
      using any Intellectual Property rights of any third-party). To the Knowledge
      of
      Target, no third-party has infringed upon or misappropriated any Intellectual
      Property rights of Target.




(c)  No
      patent
      or other registration has been issued to Target with respect to any of its
      Intellectual Property, and Target has made no pending application for
      registration with respect to any of its Intellectual Property. There are no
      licenses, agreements, or other permissions pursuant to which Target has granted
      to any third-party any rights with respect to any of its Intellectual Property.
      Target has made available to Acquiror correct and complete copies of all such
      licenses, agreements permissions and applications and has made available to
      Acquiror correct and complete copies of all other written documentation
      evidencing ownership and prosecution (if applicable) of each such item. With
      respect to each item of Intellectual Property required to be identified in **Schedule 4.17(c)** :




-17-




(i)  Target
      possess all right, title, and interest in and to the item, free and clear of
      any
      Encumbrance, license, or other restriction;




(ii)  the
      item
      is not subject to any outstanding injunction, judgment, order, decree, ruling,
      or charge;




(iii)  no
      Action
      is pending or, to the Knowledge of Target, is threatened which challenges the
      legality, validity, enforceability, use, or ownership of the item;
      and




(iv)  except
      as
      set forth in **Schedule 4.17(c)** ,
      Target
      has never agreed to indemnify any Person for or against any interference,
      infringement, misappropriation, or other conflict with respect to the
      item.




(d)  **Schedule 4.17(d)** identifies each item of material Intellectual Property (other than Trade Secrets
      or Off-the-Shelf Software) that any third-party owns and that Target uses
      pursuant to license, sublicense, agreement, or permission and that is or was
      material to the operation of Target’s business. Target has made available to
      Acquiror correct and complete copies of all such licenses, sublicenses,
      agreements, and permissions (as amended to date). With respect to each item
      of
      Intellectual Property required to be identified in **Schedule 4.17(d)** :




(i)  to
      the
      Knowledge of Target the license, sublicense, agreement, or permission covering
      the item is legal, valid, binding, enforceable, and in full force and
      effect;




(ii)  except
      as
      set forth in **Schedule 4.17(d)** ,
      the
      license, sublicense, agreement, or permission will continue to be legal, valid,
      binding, enforceable, and in full force and effect on identical terms following
      the consummation of the transactions contemplated hereby;




(iii)  Target
      is
      not in breach or default of any license, sublicense, agreement or permission,
      and no event has occurred which with notice or lapse of time would constitute
      a
      breach or default or permit termination, modification, or acceleration
      thereunder;




(iv)  Target
      has not repudiated and has no Knowledge of any repudiation of any license,
      sublicense, agreement, or permission;




(v)  Target
      has not granted any sublicense with respect to any item of Intellectual Property
      identified in **Schedule 4.17(d)** .




-18-




(vi)  to
      the
      Knowledge of Target, the underlying item of Intellectual Property is not subject
      to any outstanding injunction, judgment, order, decree, ruling, or
      charge;




(vii)  except
      for complaints, claims, demands or notices not served on Target, no action,
      suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
      is
      pending or, to the Knowledge of Target, is threatened which challenges the
      legality, validity, or enforceability of the underlying item of Intellectual
      Property; and




(viii)  Target
      has not granted any sublicense or similar right with respect to the license,
      sublicense, agreement, or permission.




(e)  Except
      as
      set forth in **Schedule 4.17(e)** ,
      all
      employees of Target who have contributed to or anticipated in the conception
      and/or development of all or any part of Target’s Intellectual Property (which
      is not licensed from a third-party) either (i) have been party to a
“work-for-hire” arrangement or agreement with Target, which in accordance with
      Applicable Law accords Target full, effective, exclusive, and original ownership
      of all tangible and intangible property thereby arising, or (ii) have executed
      appropriate instruments of assignment in favor of Target as assignee that have
      conveyed full, effective and exclusive ownership of all tangible and intangible
      property thereby arising.




4.18  **Insurance** .  Target
      has in place insurance policies in amounts and types that are customary in
      the
      industry for similar companies and sufficient to cover the full value of the
      properties and assets of Target, and all such policies are valid and in full
      force and effect. **Schedule 4.18** sets
      forth a complete and accurate list and an accurate summary (including the named
      insured, whether occurrence or claims made policy, premiums, coverage,
      deductibles and expiration dates, broker and carrier) of all insurance policies
      currently maintained relating to Target. All insurance premiums due on such
      policies have been paid in full when due, and no notice of cancellation,
      termination or nonrenewal has been issued or received by Target and no
      disallowance of any claim under any such policy has been received by Target.
      Target has complied in all material respects with the provisions of such
      policies. No Actions are pending or, to the Knowledge of Target, threatened,
      or
      during the prior three-year period were instituted or threatened, to revoke,
      cancel, limit or otherwise modify such policies and no notice of cancellation
      of
      any such policies has been received.




4.19  **No
      Broker** .  Except
      as
      set forth on **Schedule 4.19** ,
      no
      broker or finder has acted directly or indirectly for Target in connection
      with
      this Agreement or the transactions contemplated hereby, and no broker or finder
      is entitled to any brokerage or finder’s fee or other commission in respect
      thereof based in any way on agreements, arrangements, or understandings made
      by
      or on behalf of Target.




4.20  **Books
      and Records** .  Target
      has made available to Acquiror true and complete copies of the minute books
      of
      Target. The minute books of Target accurately reflect in all respects all
      actions taken at meetings, or by written consent in lieu of meetings, of the
      Stockholders, the Target Board, and all committees of the Target
      Board.




-19-




4.21  **U.S.
      Securities Law Matters** .




(a)  Except
      as
      set forth on **Schedule 4.21** ,
      based
      on the security holder questionnaires received by Target, each Series D
      Stockholder is (i) an accredited investor” within the meaning of Rule 501(a) of
      Regulation D under the U.S. Securities Act (“ ***Accredited
      Investor*** ”),
      or
      (ii) has such knowledge and experience in financial and business matters that
      such Series D Stockholder is capable of evaluating the merits and risks of
      receiving Acquiror Common Stock pursuant to the Merger within the meaning of
      Rule 501(h) of Regulation D under the U.S. Securities Act (“ ***Sophisticated
      Investor*** ”).




(b)  There
      are
      fewer than 35 Series D Stockholders who are not Accredited Investors. Series
      D
      Stockholders who are not Accredited Investors have received and will receive
      the
      same information regarding the Merger as Series D Stockholders who are
      Accredited Investors.




(c)  The
      Information Statement will state that the Series D Stockholders may ask
      questions and receive answers concerning the terms and conditions of the Merger
      and may obtain any additional information which the Acquiror possesses or can
      acquire without unreasonable effort or expense that is necessary to verify
      the
      accuracy of information furnished to Series D Stockholders in connection with
      the Merger.




(d)  Target
      and its officers, directors and employees shall use commercially reasonable
      efforts to provide, and shall use commercially reasonable efforts to cause
      the
      Series D Stockholders to provide, to Acquiror any information about the Series
      D
      Stockholders reasonably required by Acquiror in order to prepare a Form D or
      any
      other filings required to be made in connection with the Merger pursuant to
      the
      U.S. Securities Act or applicable state “blue sky” securities laws.




(e)  The
      Information Statement shall be provided to Acquiror and its counsel prior to
      its
      distribution and shall not be distributed without the written consent of
      Acquiror, which consent shall not be unreasonably withheld.




4.22  **No
      Other Representations or Warranties** .  Except
      for the representations and warranties contained in this **Article 4** ,
      neither
      Target nor any other Person makes any representations or warranties, whether
      express or implied, oral or written, and Target hereby disclaims any other
      representations or warranties, whether express or implied, whether made by
      Target, its Affiliates, or any of their respective officers, directors,
      employees, agents or representatives, with respect to Target, its Affiliates,
      or
      their respective businesses, the execution and delivery of this Agreement,
      or
      the transactions contemplated hereby, notwithstanding the delivery or disclosure
      to Acquiror or Merger Sub or its representatives of any documentation or other
      information with respect to any one or more of the foregoing. Notwithstanding
      the foregoing, no representation or warranty contained in this **Article 4** (including, without limitation, any Schedule hereto and thereto), and no
      schedule, certificate or other written document or instrument delivered or
      to be
      delivered by Target pursuant to this Agreement or in connection with the
      transactions contemplated hereby, contains or will contain any untrue statement
      of a material fact or omits or will omit to state any material fact necessary
      to
      make the statements contained therein not misleading.




-20-




4.23  **Stockholders** .  **Schedule 4.23** hereto
      contains a complete and accurate list of the Stockholders and their respective
      holdings of Target Capital Stock.




4.24  **Bank
      Accounts etc.** **** Other
      than as disclosed in the **Schedule
      3.1** ,
      Target
      does not, directly or indirectly, maintain any bank accounts, brokerage
      accounts, money market accounts or similar accounts. **Schedule 3.1** contains
      a list of checks written but not yet cleared by or on behalf of Target from
      the
      accounts listed on **Schedule 3.1** ,
      transfers that have not yet been completed, and any deposits to such accounts
      that have not yet been credited.




**ARTICLE
      5**


**REPRESENTATIONS
      AND WARRANTIES OF ACQUIROR,**


**YM
      BIOSCIENCES USA INC. AND MERGER SUB**




Acquiror,
      YM BioSciences USA and Merger Sub hereby represent and warrant to Target and
      the
      Stockholders as follows:




5.1  **Corporate
      Existence** .  Each
      of
      Acquiror, YM BioSciences USA and Merger Sub is a corporation, duly organized,
      validly existing and in good standing under the laws of the jurisdiction of
      its
      incorporation. Each of Acquiror, YM BioSciences USA and Merger Sub has all
      requisite corporate power and authority necessary to enable it to own, operate,
      lease or otherwise hold its assets and to carry on its business in the places
      and in the manner as presently conducted. or licensed to do business and is
      in
      good standing (with respect to jurisdictions which recognize such concept)
      as a
      foreign corporation or other legal entity in each jurisdiction where the
      character of the properties owned or leased by it or the nature of the business
      transacted by it requires it to be so qualified, except where the failure to
      be
      so qualified would not, individually or in the aggregate, reasonably be expected
      to have a Material Adverse Effect. Copies of the charter documents of Acquiror
      and of Merger Sub, and all respective amendments thereto, heretofore delivered
      or made available to the Target, are accurate and complete as of the date
      hereof.




5.2  **Authorization** .




(a)  Each
      of
      Acquiror, YM BioSciences USA and Merger Sub has all requisite corporate power
      and authority, and has taken all corporate action necessary, to execute, deliver
      and perform this Agreement, to consummate the transactions contemplated hereby
      and thereby and to perform its obligations hereunder. The execution and delivery
      of this Agreement by each of Acquiror, YM BioSciences USA and Merger Sub and
      the
      consummation by each of Acquiror, YM BioSciences USA and Merger Sub of the
      transactions contemplated hereby has been duly approved by the board of
      directors of each of Acquiror and Merger Sub. No other corporate proceedings
      on
      the part of Acquiror or Merger Sub are necessary to authorize this Agreement
      and
      the transactions contemplated hereby. This Agreement has been duly executed
      and
      delivered by each of Acquiror, YM BioSciences USA and Merger Sub and, assuming
      the due authorization, execution and delivery hereof by Target, is the valid
      and
      binding obligation of each of Acquiror, YM BioSciences USA and Merger Sub
      enforceable against it in accordance with its terms, except as enforcement
      may
      be limited by applicable bankruptcy, insolvency, reorganization, moratorium
      and
      other laws affecting creditors’ rights generally and except insofar as the
      availability of equitable remedies may be limited by Applicable
      Law.




-21-




(b)  No
      person
      has the right, contractual or otherwise to cause YM BioSciences USA or Merger
      Sub to issue or sell any stock in their respective share capital or other equity
      interests in such corporations, no person has any pre-emptive rights, resale
      rights, rights of first refusal or other rights to purchase any stock of their
      respective share capital or other equity interests in such
      corporations.




5.3  **No
      Violation; Required Consents** .  Except
      for the consent of SG Cowen & Co., which shall be obtained prior to the
      Effective Date, neither the execution, delivery, and performance of this
      Agreement by each of Acquiror and Merger Sub, nor the consummation of the
      transactions contemplated hereby or thereby, will contravene or violate (a)
      any
      Applicable Law to which Acquiror or Merger Sub is subject, (b) any judgment,
      order, writ, injunction, or decree of any court, arbitrator, or Governmental
      Authority or agency that is applicable to Acquiror or Merger Sub, or (c) the
      charter or organizational documents of Acquiror or Merger Sub; nor will such
      execution, delivery, or performance (i) constitute a Default under, or give
      rise
      to a loss of any benefit to which Acquiror or Merger Sub is entitled or require
      the consent of any other party to, any Contract or give any party with rights
      thereunder the right to terminate, cancel, or accelerate the rights or
      obligations of Acquiror or Merger Sub thereunder, (ii) cause any acceleration
      of
      the maturity of any note, instrument or other obligation with respect to any
      Liability of Acquiror or Merger Sub or with respect to any document in which
      Acquiror or Merger Sub is an obligor or guarantor or (iii) result in the
      creation or imposition of any Encumbrance (other than any Permitted Encumbrance)
      of any kind whatsoever upon or give to any other Person any interest or right
      (including any right of termination or cancellation) in or with respect to
      any
      of the Assets or Contracts of Acquiror or Merger Sub.




5.4  **Governmental
      Approvals** .  Except
      (a) as may be required pursuant to applicable Antitrust Laws, (b) the
      filing of the Certificate of Merger with the Secretary of State of the State
      of
      Delaware, (c) the conditional listing approval by the TSX in respect of the
      Acquiror Common Stock to be issued in the Merger, or (d) the authorization
      for
      listing of the Acquiror Common Stock to be issued in the Merger on AMEX, no
      authorization, approval, or consent of, and no registration or filing with,
      any
      Governmental Authority is required to be made or obtained by either Acquiror
      or
      Merger Sub in connection with the execution, delivery, and performance of this
      Agreement by each of Acquiror and Merger Sub.




5.5  **Capitalization** .  The
      number of shares and type of all authorized, issued and outstanding capital
      stock, options and other securities of the Acquiror is as set forth in the
      documents publicly filed by Acquiror under the applicable provisions of Canadian
      securities laws and applicable United States securities laws. All outstanding
      shares of capital stock are duly authorized, validly issued, fully paid and
      nonassessable and have been issued in compliance with all applicable securities
      laws.




5.6  **Financial
      Statements** .  The
      audited consolidated financial statements of the Acquiror for its last three
      most recently completed fiscal years, together with the related notes and
      schedules, present fairly the consolidated financial position of the Acquiror
      and the consolidated results of operations and cash flows of the Acquiror for
      such periods as have been prepared in conformity with Canadian GAAP applied
      on a
      consistent basis during the periods involved and the interim financial statement
      of the Acquiror for the interim period ended December 31, 2005, together with
      the related notes and schedules thereto, present fairly the consolidated
      financial position of the Acquiror as of such date and the consolidated results
      of operations and cash flows of the Acquiror for such period had been prepared
      in conformity with Canadian GAAP applied on a consistent basis. Other than
      as
      disclosed in Acquiror’s Annual Report on Form 40-F for the fiscal year ended
      June 30, 2005, neither Acquiror, YM BioSciences USA nor Merger Sub is a party
      to
      or otherwise involved in any “off-balance sheet arrangements” (as defined in the
      United States Securities and Exchange Commission’s Form 40-F).




-22-




5.7  **No
      Broker** .  No
      broker
      or finder has acted directly or indirectly for Acquiror or Merger Sub in
      connection with this Agreement or the transactions contemplated hereby, and
      no
      broker or finder is entitled to any brokerage or finder’s fee or other
      commission in respect thereof based in any way on agreements, arrangements,
      or
      understandings made by or on behalf of Acquiror or Merger Sub.




5.8  **Absence
      of Claims; Compliance with Laws** .  As
      of the
      date hereof, neither Acquiror nor Merger Sub is a party to any pending or,
      to
      the Knowledge of Acquiror and Merger Sub, threatened, Actions against or
      otherwise affecting Acquiror or Merger Sub, or any of their respective Assets
      or
      challenging the validity or propriety of the transactions contemplated by this
      Agreement. There is
      no Action pending or, to the Knowledge of Acquiror and Merger Sub, threatened
      against Acquiror or Merger Sub that would affect their respective abilities
      to
      perform their respective obligations hereunder or delay the consummation of
      the
      Merger. Each of Acquiror, YM BioSciences USA and Merger Sub is in compliance
      with all Applicable Laws which would affect its ability to perform its
      obligations hereunder.




5.9  **Merger
      Shares** .




(a)  The
      Acquiror Common Stock, when issued in accordance with the provisions of this
      Agreement, will be validly issued, fully paid and non-assessable, and not
      subject to any Encumbrances or pre-emptive rights except for applicable
      restrictions on transfer imposed by applicable securities laws, including those
      imposed by the U.S. Securities Act, and applicable “blue sky” state securities
      laws, and will be issued in compliance with applicable Canadian securities
      laws,
      and applicable United States and state securities laws.




(b)  The
      Acquiror Common Stock will be issued pursuant to and in accordance with Section
      2.16 of National Instrument 45-106 – Prospectus and Registration Exemptions
      and no prospectus is required to be filed and no filing with, consent or
      approval of any securities commission or regulatory authority is required in
      connection with the Merger other than the filing of a material change report
      by
      the Acquiror and a business acquisition report within 75 days of the completion
      of the Merger. The Acquiror Common Stock will not be subject to any statutory
      or
      other resale restrictions or hold periods under applicable Canadian Securities
      Laws. No approval of the shareholders of Acquiror is required in connection
      with
      the Merger.




-23-




5.10  **Compliance
      with Securities Laws** .




(a)  The
      Acquiror Common Stock is listed for trading on the Toronto Stock Exchange
      (“ ***TSX*** ”),
      on
      the Alternative Investment Market of the London Stock Exchange (“ ***AIM*** ”)
      and on
      the American Stock Exchange (“ ***AMEX*** ”).
      Acquiror has filed all forms, reports, statements and documents required to
      be
      filed with the TSX, AIM and AMEX, each of which complied in form and all other
      applicable requirements of the Canadian securities laws and applicable United
      States securities laws, as applicable, each as in effect on the date so filed.
      All of Acquiror’s filings with the TSX, AIM and AMEX contained all the material
      information required to be contained therein, did not contain a misstatement
      of
      a material fact and did not omit to state a material fact that was required
      to
      be stated in order to make the information contained therein not misleading
      at
      the time such information was filed. Acquiror has not been notified of any
      default or alleged default by Acquiror of any requirement of securities and
      corporate laws, regulations, orders, notices and policies.




(b)  Acquiror
      has filed all forms, reports, statements and documents required to be filed
      under or in accordance with all Canadian securities laws and United States
      securities laws. The documents publicly filed by Acquiror under the applicable
      provisions of Canadian securities laws and applicable United States securities
      laws contain all the material information required to be contained therein,
      do
      not contain any misstatement of a material fact or fail to include a material
      fact required to be stated therein or necessary in order to make the statements
      made therein not misleading at the time such documents were filed. Acquiror
      has
      not received any material comment letters that remain unresolved from any
      applicable securities commissions or stock exchanges with respect to any such
      documents or any notice of investigation or similar notice from any such
      entities with respect to any such documents or otherwise.




5.11  **Disclosure** .  No
      representation or warranty contained in this **Article 5** (including, without limitation, any Schedule hereto and thereto), and no
      schedule, certificate or other written document or instrument delivered or
      to be
      delivered by Acquiror or Merger Sub pursuant to this Agreement or in connection
      with the transactions contemplated hereby, contains or will contain any untrue
      statement of a material fact or omits or will omit to state any material fact
      necessary to make the statements contained therein not misleading.




5.12  **No
      Plan to Liquidate YM BioSciences USA** .  Neither
      the Acquiror nor YM BioSciences USA has any plan or intention of liquidating
      or
      dissolving YM BioSciences USA, or of merging YM BioSciences USA with another
      entity.




5.13  **No
      Active Business in Merger Sub** .  Merger
      Sub was formed solely for the purpose of engaging in the Merger, has no Assets
      or Liabilities, and has not conducted any business.




**ARTICLE
      6**


**COVENANTS**




6.1  **Confidentiality
      and Announcements** .




(a)  Except
      as
      provided below in this **Section 6.1** ,
      none of
      the parties hereto, nor any of their respective Affiliates, shall publicly
      disclose the execution, delivery or contents of this Agreement other than (i)
      with the prior written consent of the other parties hereto, or (ii) as required
      by any Applicable Law, the applicable rules of any stock exchange, or any
      Governmental Authority upon prior notice to the other parties hereto. As soon
      as
      practicable following the execution of this Agreement, Acquiror and Target
      shall
      agree with each other as to the form, timing and substance of any press release
      or public disclosure related to this Agreement or the transactions contemplated
      hereby; provided that (x)
      such agreement shall not be unreasonably withheld or delayed, and (y) nothing
      contained herein shall prohibit Acquiror or Target, following notification
      and
      consultation with the other party, from making any such disclosure if required
      by any Applicable Law or any Governmental Authority.




-24-




(b)  From
      and
      after the date hereof, each of Acquiror and Merger Sub, on the one hand, and
      Target, on the other hand, shall keep confidential all information (whether
      in
      oral or written form, electronically stored or otherwise) in such party’s
      possession that is related in any way to the proposed Merger, this Agreement
      and
      the other transactions contemplated hereby or to Target or the Surviving
      Corporation, or its business, operations or financial condition (collectively,
      “ ***Confidential
      Information*** ”); provided that any
      Confidential Information that (i) was or becomes generally available to the
      public other than as a result of a disclosure by the party receiving the
      Confidential Information in violation of this Agreement, or (ii) was or becomes
      available to a party on a non-confidential basis from a source other than the
      party disclosing the Confidential Information or its members, managers,
      directors, officers, employees, partners, agents or advisors (collectively,
      “ ***Representatives*** ”); provided , further ,
      that
      such source was not known by the Recipient to be bound by any agreement or
      obligation to keep such information confidential, shall not be subject to the
      restrictions contained in this **Section 6.1(b)** .
      Notwithstanding anything to the contrary contained herein, a party may disclose
      the Confidential Information to its Representatives who need to know such
      Confidential Information to evaluate the transactions contemplated by this
      Agreement, are informed of its confidential nature, and agree to abide by this **Section 6.1(b)** .
      In the
      event that a party or any of its Representatives is required by Applicable
      Law,
      regulation, supervisory authority or other applicable judicial or governmental
      order to disclose any of the Confidential Information, the Surviving
      Corporation, on the one hand, and the Stockholders, on the other hand, shall
      provide the other party with prompt written notice, unless notice is prohibited
      by Applicable Law, of any such request or requirement so that the other party
      may seek a protective order or other appropriate remedy. If, failing the entry
      of a protective order (which the party required to disclose will use its
      reasonable commercial efforts to obtain), the party required to disclose the
      Confidential Information is, in the opinion of its counsel, compelled to
      disclose such Confidential Information, such party may disclose that portion
      of
      the Confidential Information that counsel advises that such party is compelled
      to disclose and will exercise reasonable commercial efforts to obtain assurance
      to the extent possible that confidential treatment will be accorded to that
      portion of the Confidential Information that is being disclosed. In any event,
      the party required to disclose the Confidential Information will use its
      reasonable commercial efforts to, and will not oppose action by the other party
      to, obtain an appropriate protective order or other reliable assurance that
      confidential treatment will be accorded the Confidential Information. The
      parties’ obligations under this **Section 6.1** shall
      survive the termination of this Agreement.




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6.2  **Filings;
      Third Party Consents** .




(a)  Upon
      the
      terms and subject to the conditions of this Agreement, each of the parties
      hereto shall use its reasonable commercial efforts to take, or cause to be
      taken, all actions, and to do, or cause to be done, all things necessary, proper
      or advisable under Applicable Law to consummate and make effective the
      transactions contemplated by this Agreement as promptly as practicable,
      including, without limitation, Acquiror shall file the Certificate of Merger
      when all of the conditions set forth in **Article 7** (other
      than those conditions that by their nature are to be satisfied at the Closing,
      but subject to the satisfaction or waiver of those conditions) shall have been
      satisfied or waived.




(b)  Acquiror
      and Target shall cooperate with each other and (i) shall use their reasonable
      commercial efforts promptly to prepare and to file all necessary documentation,
      and to effect all registrations, applications, notices, petitions and filings,
      with each third party (other than a Governmental Authority) that are necessary
      or advisable to consummate the transactions contemplated by this Agreement,
      and
      (ii) shall use their reasonable commercial efforts to obtain as promptly as
      practicable any Permit of such third party that is necessary or advisable to
      consummate the transactions contemplated by this Agreement.




6.3  **Expenses** .  Except
      as
      otherwise expressly provided herein, Acquiror and Target shall each bear their
      respective direct and indirect expenses incurred in connection with the
      negotiation and preparation of this Agreement and the consummation of the
      transactions contemplated hereby, including legal, accounting, brokerage and
      other fees and expenses.




6.4  **Further
      Assurances** .  From
      time
      to time after the Closing, without additional consideration, each party hereto
      will (or, if appropriate, cause its Affiliates to) execute and deliver such
      further instruments and take such other action as may be necessary or reasonably
      requested by the other party or otherwise required to make effective the
      transactions contemplated by this Agreement and to provide the other party
      with
      the intended benefits of this Agreement.




6.5  **Access** .  Until
      the
      earlier of the Closing or the termination of this Agreement, Target shall
      promptly furnish such information concerning its business, properties, financial
      condition, operations and personnel as Acquiror may from time to time reasonably
      request, and Target shall afford to Acquiror and to the officers, employees
      and
      other representatives of Acquiror for purposes of transition planning,
      reasonable access upon reasonable notice during normal business hours during
      the
      period prior to the Effective Date to all of Target’s Assets, properties, books,
      Contracts, commitments, officers, directors, consultants or agents and records
      during such period.




6.6  **Preservation
      of Business** .




(a)  Except
      as
      expressly contemplated or permitted by this Agreement, from the date of this
      Agreement through and including the Closing, Target shall conduct its business
      only in the Ordinary Course of Business and use reasonable commercial efforts
      to
      preserve intact its current business organizations and its material
      relationships with resellers, customers, suppliers and others having business
      dealings with it, keep available the services of its current employees and
      maintain its material rights and franchises.


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(b)  Without
      limiting the generality of the foregoing, from the date of this Agreement
      through and including the Closing, except as set forth on **Schedule 6.6(b)** of the
      Disclosure Schedule or as expressly contemplated or permitted by this Agreement,
      Target shall not without the prior consent of Acquiror:




(i)  merge
      with or into, enter into a consolidation with or acquire an interest in any
      Person or acquire a substantial portion of the assets or business of any Person
      or any division or line of business thereof, or otherwise acquire any
      assets;




(ii)  sell,
      lease or otherwise transfer any property or assets to, or purchase, lease or
      otherwise acquire any Assets from, or otherwise engage in any transactions
      with,
      any of its Affiliates;




(iii)  make
      any
      capital expenditure or commitment for any capital expenditure;




(iv)  incur
      Indebtedness for money borrowed or guarantee or otherwise become responsible
      for
      any Indebtedness for money borrowed of, or otherwise incur such Indebtedness
      on
      behalf of, any Person (other than accruing interest in connection with existing
      Indebtedness) or pay any Indebtedness that is not otherwise due and
      payable;




(v)  make
      any
      loan, advance or capital contribution to, or investment in, any other Person;




(vi)  amend,
      restate or modify its organizational documents;




(vii)  make
      any
      change in accounting methods, principles or practices used by Target, except
      insofar as may be contemplated by this Agreement or required by Applicable
      Law
      or regulation or by a change in applicable accounting principles;




(viii)  a
      other
      than as previously disclosed to Acquiror, adopt or amend any employment, bonus,
      severance or similar agreement or arrangement or adopt or amend any employee
      benefit plan, fringe benefit or equity or incentive compensation plan, program
      or arrangement;




(ix)  grant
      to
      any officer or employee any increase in compensation or benefits, except as
      may
      be required under agreements existing on the date hereof;




(x)  cancel
      any Indebtedness for borrowed money owed to Target or waive any claims or rights
      of substantial value;




(xi)  settle
      any Action in excess of $5,000 individually;




(xii)  declare
      or pay any dividend or other distribution on its capital stock or make any
      payment to holders of Target Capital Stock;




(xiii)  split,
      combine, redeem, repurchase or reclassify any shares of Target Capital
      Stock;


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(xiv)  incur
      any
      cash expenses, or accrue any accounts payable, advance billings or accrued
      expenses, except in the Ordinary Course of Business;




(xv)  issue
      any
      securities or grant any options to purchase capital stock of Target;
      or




(xvi)  take,
      or
      agree to take, any of the foregoing actions.




6.7  **Supplemental
      Disclosure** .  Target
      shall have the right from time to time prior to the Closing to supplement or
      amend any exhibit or schedule provided to Acquiror with respect to any matter
      hereafter arising or discovered which, if existing or known at the date of
      this
      Agreement, would have been required to be set forth or described in such exhibit
      or schedule; *provided* that no
      such supplemental or amended disclosure shall be deemed to cure any inaccuracy
      of any representation or warranty made in this Agreement for purposes of
      determining whether or not the condition set forth in **Section 7.1(a)** has been
      satisfied.




6.8  **Stockholder
      Approval** .  Promptly
      following the execution and delivery of this Agreement, Target shall submit
      this
      Agreement and a form of written consent to its Stockholders for their written
      consent and approval of the Agreement and the consummation of the transactions
      contemplated hereby. A copy
      of the duly executed written consents shall be delivered to Acquiror promptly
      upon execution thereof by Stockholders holding the requisite number of shares
      of
      Target Capital Stock as set forth in **Section 7.3(c)** . At such
      time, Target shall deliver the Information Statement to all Stockholders.
      Acquiror hereby agrees and consents to the inclusion in the Information
      Statement of Acquiror’s Annual Report on Form 40-F for the fiscal year ended
      June 30, 2005, as amended, Acquiror’s financial statements (including the
      reconciliation to U.S. GAAP related thereto) and Management’s Decision and
      Analysis for the interim period ended December 31, 2005, Acquiror’s short-form
      prospectus dated February 6, 2006, Acquiror’s revised annual information form
      dated September 8, 2005 and Acquiror’s audited financial statements (including
      the reconciliation to U.S. GAAP related thereto) and Management’s Decision and
      Analysis for the periods ended September 8, 2005, September 8, 2004 and
      September 8, 2003 as well as the Management Information Circular of the Acquiror
      in connection with its annual and special meeting of shareholders held on
      November 17, 2005.




6.9  **Employment
      Agreements** .




(a)  Immediately
      prior to, and conditioned on the consummation of, the Closing, Target shall
      cause to be terminated the employment agreements between Target and Gail Schulze
      and Target and L. J. Randall.




(b)  Immediately
      prior to, and conditioned on the consummation of, the Closing, Target shall
      enter into an employment agreement with Gail Schulze, dated as of the Closing
      Date, in a form agreed to by Acquiror and Gail Schulze.




(c)  Except
      as
      provided in **Section
      6.9(a)** ,
      all
      employment agreements of Target existing and in full force prior to the
      execution of this Agreement shall remain in full force after the Closing and
      shall be binding on and inure to the Surviving Corporation.


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(d)  At
      the
      Effective Time, Acquiror shall issue options to purchase an aggregate of 905,000
      shares of Acquiror’s Stock to employees of the Surviving Corporation (the
“ ***Employee
      Options*** ”).




6.10  **Directors
      and Officers Insurance** .  Acquiror
      shall not take, for the period commencing on the Effective Date and ending
      on
      the sixth anniversary thereof, any steps to prospectively or retrospectively
      cancel, buy out or remove as an insured Person any Person who is or was a
      director or officer of Target at or prior to the Effective Time (the
“ ***Directors
      and Officers*** ”)
      from a
      directors’ and officers’ liability insurance policy providing coverage to such
      Directors and Officers.




6.11  **Tax
      Returns, Payments and Related Matters** .




(a)  Acquiror
      shall prepare or cause to be prepared and file or cause to be filed all Tax
      Returns of Target for all Tax periods (x) ending on or prior to the Closing
      Date
      which are due (taking into account extensions for time to file) after the
      Closing Date and (y) which begin on or before the Closing Date and end after
      the
      Closing Date. Acquiror shall pay all Taxes due, if any, with respect to such
      Tax
      Returns.




(b)  All
      transfer, documentary, sales, use, real property transfer, stock transfer,
      recording, stamp, registration and other similar Taxes and fees (including
      penalties and interest) incurred in connection with the transactions
      contemplated by this Agreement shall be paid by Acquiror when due. Acquiror
      will, at its expense, file all necessary Tax Returns and other documentation
      with respect to all such transfer, documentary, sales, use, real property
      transfer, stock transfer, recording, stamp, registration and other similar
      Taxes
      and fees.




(c)  Prior
      to
      the expiration of the period ending one year after the Effective Date, neither
      Acquiror nor YM BioSciences USA shall take any action, fail to take any action,
      or agree to any action that may result in the liquidation, dissolution or merger
      of YM BioSciences USA.




6.12  **Listing
      of Additional Shares** .  Promptly
      following execution of this Agreement and prior to the Effective Time, Acquiror
      shall file with TSX, AIM and AMEX an application to list, or a notification
      form
      of listing of, as the case may be, additional shares with respect to the shares
      of Acquiror Common Stock issuable upon acquisition of the Target Series D
      Preferred Stock in the Merger.




**ARTICLE
      7**


**CONDITIONS
      TO CLOSING**




7.1  **Conditions
      to Acquiror’s Obligations** .  In
      addition to the conditions set forth in **Section 7.3** ,
      the
      obligations of Acquiror, YM BioSciences USA and Merger Sub to effect the Closing
      shall be subject to the following conditions, any one or more of which may
      be
      waived in writing by Acquiror:




(a)  The
      representations and warranties of Target set forth in this Agreement and in
      any
      certificate or instrument delivered by Target in connection with this Agreement
      shall be true and correct as of the date of this Agreement and at and as of
      the
      Closing Date with the same effect as though such representations and warranties
      have been made at and as of such time, other than representations and warranties
      that speak as of a specific date or time (which need only be true and correct
      only as of such date or time), except where the failure of the representations
      and warranties to be true and correct would not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse
      Effect;


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(b)  Target
      shall have performed and complied in all material respects with all agreements,
      covenants, obligations and conditions required by this Agreement to be performed
      or complied with by Target on or prior to the Closing Date;




(c)  Target
      shall have caused to be delivered to Acquiror a certificate executed by Target’s
      President and Chief Financial Officer certifying that each of the conditions
      set
      forth in **Section 7.1(a),**  **(b),
      (d), (g), (h) and (k)** have
      been satisfied;




(d)  Target
      shall have filed all documentation and effected all applications, notices,
      petitions and filings with each third party that are necessary to consummate
      the
      transactions contemplated by this Agreement;




(e)  Target
      shall have delivered a legal opinion of Pepper Hamilton in the form contained
      in **Exhibit E** hereto,
      which shall be limited to matters of due authorization and enforceability of
      the
      Merger and Agreement, including without limitation the enforceability against
      all Series D Stockholders of the indemnity and escrow provisions of this
      Agreement and **Section 10.10** hereof,
      such opinion to be dated the Closing Date;




(f)  The
      employment agreement referred to in **Section 6.9** shall
      have been executed and delivered by Gail Schulze to Acquiror and Merger
      Sub;




(g)  Between
      the date of this Agreement and the Effective Time, Target shall not have
      experienced any occurrence, event or condition that has, or would reasonably
      be
      expected to have, a Material Adverse Effect;




(h)  All
      agreements among Target and Stockholders to the extent that such agreements
      are
      still in effect shall have been terminated and any and all rights of first
      refusal or similar rights granted pursuant to such agreements shall have been
      waived;




(i)  Each
      of
      the documents and instruments required to be delivered by Target on or before
      the Closing Date in connection therewith shall have been duly authorized and
      executed by Target substantially in the forms attached hereto and delivered
      by
      all of the parties thereto and shall be in full force and effect;




(j)  Net
      Cash
      at Closing shall be at least $25,000,000. Target shall have caused to be
      delivered to Acquiror, dated no greater than three days prior to the Closing
      Date and no fewer than two days prior to the Closing Date, a certificate
      executed by a duly authorized officer of Target disclosing the Net Cash at
      Closing, including an itemized, line item description of the amounts comprising
      such Net Cash at Closing;




(k)  The
      time
      period during which a Stockholder is entitled to exercise appraisal rights
      with
      respect to the Merger pursuant to Section 262 of the DGCL shall have expired,
      and no Target Stockholder shall have exercised and not withdrawn the exercise
      of
      such appraisal right;


-30-


(l)  Target
      shall have delivered to Acquiror a Certificate of Insurance satisfactorily
      evidencing, in Acquiror’s sole discretion, acting reasonably, that Target’s
      current insurance policy relating to Target’s clinical drug trials has been
      extended and amended, if necessary, (or equivalent insurance procured) to
      provide indefinite “tail” or “run out” coverage on a claims arising basis, name
      Acquiror and YM Biosciences USA Inc. as additional named insureds, be
      non-cancelable and require no further premium. At Closing such insurance policy
      shall be: (A) legal, valid, binding, enforceable, and in full force and effect
      in all respects; and (B) the policy will continue to be legal, valid, binding,
      enforceable, and in full force and effect on identical terms following the
      consummation of the transactions contemplated hereby;




(m)  Target
      shall have delivered to Acquiror a Certificate of Insurance evidencing that
      Target’s current directors’ and officers’ liability insurance policy has been
      extended for the period commencing on the Effective Date and ending on the
      sixth
      anniversary thereof to provide coverage to the Directors and Officers at the
      same levels as currently maintained by Target and to add Acquiror and YM
      BioSciences Inc. as additional named insureds, be non-cancelable and require
      no
      further premiums. At Closing, such insurance policy shall be: (A) legal, valid,
      binding, enforceable, and in full force and effect in all respects; and (B)
      the
      policy will continue to be legal, valid, binding, enforceable, and in full
      force
      and effect on identical terms following the consummation of the transactions
      contemplated hereby;




(n)  Target
      shall deliver to Acquiror either (i) a notice from the Target, also delivered
      to
      the Internal Revenue Service, that the shares of the Target Capital Stock are
      not a “U.S. real property interest” in accordance with the Treasury Regulations
      under Section 897 and 1445 of the Code, or (ii) certifications from all of
      the
      Target Shareholders that they are not “foreign persons” in accordance with
      Treasury Regulations under Section 1445 of the Code. If the Acquiror does not
      receive either the notice or certifications described above on or before the
      Closing Date, the Acquiror shall be permitted to withhold from the Merger
      Consideration any required withholding tax under Section 1445 of the Code;
      and




(o)  All
      consents or approvals required to be obtained by a third party in connection
      with the Merger and other transactions contemplated by this Agreement shall
      have
      been obtained and shall be in full force and effect;




7.2  **Conditions
      to Target’s Obligations** .  In
      addition to the conditions set forth in **Section 7.3** ,
      the
      obligations of Target to effect the Closing shall be subject to the following
      conditions, any one or more of which may be waived in writing by
      Target:




(a)  The
      representations and warranties of Acquiror, YM BioSciences USA and Merger Sub
      set forth in this Agreement shall be true and correct as of the date of this
      Agreement and at and as of the Closing Date, with the same effect as though
      such
      representations and warranties have been made at and as of such time, other
      than
      representations and warranties that speak as of a specific date or time (which
      need only be true and correct only as of such date or time), except where the
      failure of the representations and warranties to be true and correct would
      not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect;


-31-


(b)  Acquiror,
      YM BioSciences USA and Merger Sub shall have performed and complied in all
      material respects with all agreements, covenants, obligations and conditions
      required by this Agreement to be performed or complied with by Acquiror on
      or
      prior to the Closing Date;




(c)  Acquiror
      shall have caused to be delivered to Target a certificate executed by a duly
      authorized officer of Acquiror certifying that each of the conditions set forth
      in **Section 7.2(a)** and **(b)** has been
      satisfied;




(d)  The
      Acquiror Common Stock to be issued in the Merger shall have been authorized
      for
      listing on TSX and AMEX;




(e)  All
      consents or approvals required to be obtained by a third party, including
      without limitation SG Cowen & Co., in connection with the Merger and other
      transactions contemplated by this Agreement shall have been obtained and shall
      be in full force and effect;




(f)  Acquiror
      shall have received conditional listing approval from the TSX, subject only
      to
      the usual post-closing listing requirements;




(g)  Acquiror
      shall have delivered one or more legal opinions substantially in the form
      provided in **Exhibit F** hereto,
      which shall be limited to matters of due authorization and enforceability of
      the
      Merger and this Agreement, and that the issuance of shares of Acquiror Common
      Stock is exempt from the prospectus and registration requirements under Canadian
      securities law, that the issuance of shares of Acquiror Common Stock shall
      be
      free of any hold period and that the shares of Acquiror Common Stock have been
      validly issued as fully paid and non-assessable, such opinion to be dated the
      Closing Date; and




(h)  Each
      of
      the documents and instruments required to be delivered by Acquiror or Merger
      Sub
      on or before the Closing Date in connection therewith shall have been duly
      authorized and executed by Acquiror and Merger Sub, as applicable, substantially
      in the forms attached hereto and delivered by all of the parties thereto and
      shall be in full force and effect.




7.3  **Mutual
      Conditions** .  The
      obligations of each of Acquiror, Merger Sub and Target to effect the Closing
      shall be subject to the following conditions, any one or more of which may
      be
      waived in writing, as to itself, by either party:




(a)  No
      order
      issued by any Governmental Authority of competent jurisdiction or other legal
      restraint or prohibition preventing the consummation of the transactions
      contemplated by this Agreement shall be in effect; no proceeding initiated
      by
      any Governmental Authority seeking an injunction against the transactions
      contemplated by this Agreement shall be pending; no statute, rule, regulation,
      order, injunction or decree shall have been enacted, entered, promulgated or
      enforced by any Governmental Authority that prohibits, restricts or makes
      illegal consummation of the transactions contemplated hereby;


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(b)  Other
      than the filing of the Certificate of Merger, all approvals, authorizations,
      consents or orders of, or notices to, Governmental Authorities required to
      consummate the transactions contemplated hereby, including such approvals,
      waivers and consents as may be required under the U.S. Securities Act, shall
      have been obtained or requested, and shall remain in full force and effect;
      and




(c)  This
      Agreement and the transactions contemplated hereby shall have been approved
      and
      adopted by the requisite vote of Stockholders holding not less than sixty
      percent (60%) of the shares of Series D Preferred Stock and fifty percent (50%)
      of all shares of Target Capital Stock in accordance with the DGCL and the
      Restated Certificate of Incorporation and Bylaws of Target.




**ARTICLE
      8**


**TERMINATION**




8.1  **Termination** .




(a)  This
      Agreement may be terminated on or prior to the Effective Date only as
      follows:




(i)  by
      mutual
      written consent of Acquiror and Target;




(ii)  at
      the
      election of either Acquiror or Target, if the Effective Date shall not have
      occurred on or before 5:00 P.M. Eastern time on the 30 th day
      following the execution of this Agreement (the “ ***Termination
      Date*** ”); provided that no
      party shall be entitled to terminate this Agreement pursuant to this **Section 8.1(a)(ii)** if such
      party’s failure to fulfill any obligation under this Agreement has been the
      primary cause of the failure of the Closing to occur on or before such
      date;




(iii)  by
      either
      Acquiror or Target if a court of competent jurisdiction shall have issued an
      order, decree or ruling permanently restraining, enjoining or otherwise
      prohibiting the transactions contemplated by this Agreement, and such order,
      decree, ruling or other Action shall have become final and
      nonappealable;




(iv)  by
      either
      Acquiror or Target if a material condition to its obligation to perform becomes
      incapable of fulfillment. Notwithstanding the foregoing, the right to terminate
      this Agreement pursuant to this **Section 8.1(a)(iv)** shall
      not be available to any party if its condition to perform became incapable
      of
      fulfillment due to its failure to fulfill any obligation under this
      Agreement;




(v)  by
      Acquiror, (i) if Acquiror is not in material breach of its obligations under
      this Agreement and there has been a material breach of any representation,
      warranty, covenant, or agreement of Target contained in this Agreement such
      that
      the conditions set forth in **Section 7.1(a)** ,
      or **** **Section 7.1(b)** would
      not be satisfied and such breach has not been cured within 15 calendar days
      after written notice thereof to Target and the Stockholders; provided that no
      cure period shall be required for a breach which by its nature cannot be cured;
      or (ii) if
      any Stockholder exercises their dissenters’ rights under the
      DGCL;


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(vi)  by
      Acquiror if, between the date of this Agreement and the Closing Date, Target
      shall have experienced any occurrence, event or condition that has, or would
      reasonably be expected to have, a Material Adverse Effect;




(vii)  by
      Target
      if, between the date of this Agreement and the Closing Date, Acquiror shall
      have
      experienced any occurrence, event or condition that has, or would reasonably
      be
      expected to have, a Material Adverse Effect; or




(viii)  by
      Target
      if Target is not in material breach of its obligations under this Agreement
      and
      there has been a material breach of any representation, warranty, covenant,
      or
      agreement of Acquiror contained in this Agreement such that the conditions
      set
      forth in **Section 7.2(a)** ,
      or **** **Section 7.2(b)** would
      not be satisfied and such breach has not been cured within 15 calendar days
      after written notice thereof to Acquiror; provided that no
      cure period shall be required for a breach which by its nature cannot be
      cured.




(b)  The
      termination of this Agreement shall be effectuated by the delivery of a written
      notice of such termination from the party terminating this Agreement to the
      other party.




8.2  **Obligations
      upon Termination** .  Except
      in
      the event of a termination pursuant to **Section 8.1(v)** or **Section 8.1(vii)** ,
      in the
      event that this Agreement shall be terminated pursuant to **Section 8.1** ,
      all
      obligations of the parties hereto under this Agreement shall terminate and
      there
      shall be no liability of any party hereto to any other party except (a) as
      set
      forth in **Sections 6.1** and **6.3** ,
      and (b)
      that nothing herein will relieve any party from liability for any breach of
      this
      Agreement.




**ARTICLE
      9**


**REMEDIES
      FOR BREACHES OF THIS AGREEMENT**




9.1  **Limited
      Recourse Indemnity** .  All
      of
      the representations, warranties and covenants of the Target contained in **Articles 4** and **6** shall
      survive the Closing and continue in full force and effect for a period of one
      year thereafter (the “ ***Survival
      Period*** ”).
      If
      any of such representations, warranties and covenants of Target are breached
      and
      Acquiror, YM BioSciences USA or Merger Sub (together the “ ***Indemnified
      Parties*** ”
and
      each an “ ***Indemnified
      Party*** ”)
      suffers or incurs any claim (including any Third Party Claim, as defined below),
      loss, liability, expense or other damage resulting from, arising out of,
      relating to, in the nature of, or caused by the breach (“ ***Adverse
      Consequences*** ”),
      then
      the Series D Stockholders, jointly and severally, agree (by the Stockholder
      Representative’s execution of this Agreement on their behalf) to indemnify the
      Indemnified Parties from and against the entirety of any Adverse Consequences
      the Indemnified Parties have suffered; provided, however, that (A) the Series
      D
      Stockholders shall not have any obligation to indemnify the Indemnified Parties
      from and against any Adverse Consequences until the Adverse Consequences by
      reason of all such breaches are in excess of a $150,000 aggregate deductible,
      (B) the maximum aggregate liability of the Series D Stockholders for all claims
      under this **Article 9** shall be
      limited to $3,000,000, and (C) the Indemnified Parties’ recovery pursuant to
      this **Section 9.1** shall be
      limited to the Hold Back Consideration, and the Indemnified Parties shall have
      no recourse to the Series D Stockholders personally. In the event of any claim
      under this **Article 9** ,
      the
      Acquiror, on behalf of any of the Indemnified Parties, shall make a written
      claim for indemnification against the Series D Stockholders by sending a notice
      of claim to the Stockholder Representative within the Survival Period. For
      all
      purposes under this **Article 9** ,
      the
      portion of the Hold Back Consideration comprised of Acquiror Common Stock shall
      be valued based on the Acquiror Stock Value at the Effective Date,
      notwithstanding any increase or decrease in the value of any shares of Acquiror
      Common Stock comprising the Hold Back Consideration. All claims under this **Article 9** will be
      paid solely from the Hold Back Consideration in cash and in shares of Acquiror
      Common Stock based on the proportion of cash and Acquiror Common Stock
      comprising the Hold Back Consideration on the Effective Date, which shall be
      the
      sole and exclusive remedy of the Indemnified Parties in connection with any
      such
      claim.


-34-


9.2  **Matters
      Involving Third Parties** .




(a)  If
      any
      third party shall notify any Indemnified Party with respect to any matter (a
      “ ***Third
      Party Claim*** ”)
      which
      may give rise to a claim for indemnification against the Series D Stockholders
      under this **Article 9** ,
      then
      Acquiror, on behalf of the Indemnified Party, shall promptly notify the
      Stockholder Representative in writing.




(b)  The
      Stockholder Representative, on behalf of the Series D Stockholders, will have
      the right to assume the defense of the Third Party Claim with counsel chosen
      by
      the Stockholder Representative reasonably satisfactory to the Indemnified Party
      at any time within 15 days after the Indemnified Party has given notice of
      the
      Third Party Claim; provided,
      however ,
      that
      the Indemnified Party may retain separate co-counsel at its sole cost and
      expense and participate in the defense of the Third Party Claim.




(c)  So
      long
      as the Stockholder Representative has assumed and are conducting the defense
      of
      the Third Party Claim in accordance with **Section 9.2(b)** ,
      (A) the
      Stockholder Representative and the Series D Stockholders will not consent to
      the
      entry of any judgment or enter into any settlement with respect to the Third
      Party Claim without the prior written consent of the Indemnified Party (not
      to
      be unreasonably withheld, conditioned or delayed) unless the judgment or
      proposed settlement involves only the payment of money damages by one or more
      of
      the Indemnifying Parties and does not impose an injunction or other equitable
      relief upon the Indemnified Party and (B) the Indemnified Party will not consent
      to the entry of any judgment or enter into any settlement with respect to the
      Third Party Claim without the prior written consent of the Stockholder
      Representative on behalf of the Series D Stockholders (not to be withheld
      unreasonably).




(d)  In
      the
      event the Stockholder Representative does not assume the defense of the Third
      Party Claim in accordance with **Section 9.2(b)** ,
      however, (A) the Indemnified Party may defend against, and consent to the entry
      of any judgment or enter into any settlement with respect to, the Third Party
      Claim in any manner he or it reasonably may deem appropriate (after consultation
      with, and consent from, the Stockholder Representative in connection therewith,
      which consent shall not to be unreasonably withheld, conditioned or delayed)
      and
      (B) the Series D Stockholders (by virtue of the Stockholder Representative’s
      execution of this Agreement on their behalf) will remain responsible for any
      Adverse Consequences the Indemnified Party may suffer resulting from, arising
      out of, relating to, in the nature of, or caused by the Third Party Claim to
      the
      fullest extent provided in this **Article 9** .


-35-


9.3  **Determination
      of Adverse Consequences** .  All
      indemnification payments under this **Article 9** shall be
      deemed adjustments to the Merger Consideration.




9.4  **Exclusive
      Remedy** .  The
      Indemnified Parties and the Stockholder Representative on behalf of the Series
      D
      Stockholders acknowledge and agree that the foregoing indemnification provisions
      in this **Article 9** shall be
      the exclusive remedy with respect to breaches of the representations, warranties
      and covenants in **Articles 4** and **6** .




9.5  **Release
      of Hold Back Consideration** .  At
      the
      expiration of the Survival Period and in accordance with the terms and
      conditions of the Escrow Agreement, Acquiror and the Stockholder Representative
      shall provide joint written instructions to the Escrow Agent in accordance
      with
      the Escrow Agreement to release any remaining portion of the Hold Back
      Consideration, minus any amounts subject to pending claims, to Acquiror.
      Simultaneously with the release of such amount (the “ ***Released
      Amount*** ”),
      the
      Escrow Agent shall deliver to the Stockholder Representative cash and shares
      of
      Acquiror Common Stock in an aggregate amount equal to the Released Amount,
      for
      disbursement to the Series D Stockholders. The proportion of cash and shares
      of
      Acquiror Common Stock delivered at such time will be the same as the proportion
      of cash and Acquiror Common Stock comprising the Hold Back Consideration on
      the
      Effective Date. Promptly upon resolution of any pending claim, any remaining
      portion of the Hold Back Consideration that is not otherwise payable to Acquiror
      with respect to such resolved claim, or subject to any other pending claim,
      shall be disbursed to the Series D Stockholders in accordance with the preceding
      provisions of this **Section 9.5** and the
      Escrow Agreement. All
      disbursements by the Stockholder Representative shall be made to the Series
      D
      Stockholders in the proportions of cash and Acquiror Common Stock establish
      under **Section 3.1** **** such
      that
      no Acquiror Common Stock will be disbursed to any Series D Stockholder who
      has
      not certified in a security holder questionnaire that such Series D Stockholder
      is an Accredited Investor or a Sophisticated Investor.




**ARTICLE
      10**


**GENERAL**




10.1  **Amendments;
      Extension; Waiver** .  This
      Agreement may not be amended, altered or modified except by written instrument
      executed by Acquiror, the Stockholder Representative, and Target.




10.2  **Entire
      Agreement** .  This
      Agreement constitutes the entire understanding of the parties hereto with
      respect to the transactions contemplated hereby, and supersedes all prior
      agreements and understandings, written and oral, among the parties with respect
      to the subject matter hereof.




10.3  **Interpretation** .  When
      reference is made in this Agreement to any Article, Section, Exhibit or
      Schedule, such reference is to an Article or Section of, or an Exhibit or
      Schedule to, this Agreement unless otherwise indicated. The table of contents
      and headings contained in this Agreement are for reference purposes only and
      shall not affect in any way the meaning or interpretation of this Agreement.
      Whenever the words “include,” “includes” or “including” are used in this
      Agreement, they shall be deemed to be followed by the words “without
      limitation.” The phrases “the date of this Agreement,” “the date hereof” and
      terms of similar import, unless the context otherwise requires, shall be deemed
      to refer to the date set forth in the preamble of this Agreement. The words
      “hereof,” “herein,” “hereby” and other words of similar import refer to this
      Agreement as a whole unless otherwise indicated. Whenever the singular is used
      herein, the same shall include the plural, and whenever the plural is used
      herein, the same shall include the singular, where appropriate.


-36-


10.4  **Severability** .  Any
      term
      or provision of this Agreement that is invalid or unenforceable in any
      jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
      such invalidity or unenforceability without rendering invalid or unenforceable
      the remaining terms and provisions of this Agreement or affecting the validity
      or enforceability of any of the terms or provisions of this Agreement in any
      other jurisdiction. If any provision of this Agreement is so broad as to be
      unenforceable, that provision shall be interpreted to be only so broad as is
      enforceable.




10.5  **Notices** .  All
      notices and other communications hereunder shall be in writing and shall be
      deemed given if they are: (a) delivered in person, (b) transmitted by facsimile
      (with confirmation), (c) mailed by certified or registered mail (return receipt
      requested), or (d) delivered by an express courier (with confirmation) to a
      party at its address listed below (or at such other address as such party shall
      deliver to the other party by like notice):




To
                Target prior to the Closing:
            Eximias
                Pharmaceutical Corporation
              1055
                Westlakes Drive
              Suite
                200
              Berwyn,
                Pennsylvania 19312
              Facsimile:
                610-560-0701
              Attention:
                Gail SchulzeWith
                a concurrent copy
              (which
                shall not constitute
              notice)
                to:
            Pepper
                HamiltonLLP
              400
                Berwyn Park
              899
                Cassatt Road
              Berwyn,
                PA 19312-1183
              Attention:
                Jeffrey P. Libson, Esq.
              Facsimile:
                610-640-7835To
                Stockholder
              Representative:
            OrbiMed
                Advisors, LLC
              767
                3rd Avenue, 30th Floor
              New
                York, NY  10017
              Attention:
                Michael Sheffery and
              Eric
                Bittleman
              Facsimile:
                _______________




-37-





To
                Acquiror:
            YM
                BioSciences Inc.
              5045
                Orbitor Drive
              Suite
                400, Building 11
              Mississauga,
                Ontario L4W 4Y4
              Attention:
                David G.P. Allan
              Facsimile:
                (905) 629-4959With
                concurrent copies
              (which
                shall not constitute
              notice)
                to:
            Heenan
                Blaikie LLP
              Suite
                2600, Royal Bank Plaza
              200
                Bay Street, South Tower
              Toronto,
                Ontario M5J 2J4
              Attention:
                Sonia M. Yung
              Facsimile:
                866-285-9466
              
              and
              
              Dorsey
                & Whitney LLP
              Suite
                1605, 777 Dunsmuir Street
              P.O.
                Box 10444, Pacific Centre
              Vancouver,
                B.C. V7Y 1K4
              Attention:
                Daniel M. Miller
              Facsimile:
                604-687-8504





10.6  **Binding
      Effect; Persons Benefiting; No Assignment** .  This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective successors and permitted assigns. Except as expressly
      provided in **Section 6.10** ,
      nothing
      in this Agreement is intended or shall be construed to confer upon any entity
      or
      Person other than the parties hereto and their respective successors and
      permitted assigns any right, remedy or claim under or by reason of this
      Agreement or any part hereof. This Agreement may not be assigned by any party
      hereto without the prior written consent of Acquiror (in the case of an
      assignment by Target) or Target (in the case of an assignment by
      Acquiror).




10.7  **Counterparts** .  This
      Agreement may be executed in two or more counterparts (delivery of which may
      occur via facsimile), each of which shall be binding as of the date first
      written above, and, when delivered, all of which shall constitute one and the
      same instrument. A facsimile signature or electronically scanned copy of a
      signature shall constitute and shall be deemed to be sufficient evidence of
      a
      party’s execution of this Agreement, without necessity of further proof. Each
      such copy shall be deemed an original, and it shall not be necessary in making
      proof of this Agreement to produce or account for more than one such
      counterpart.




10.8  **No
      Prejudice** .  The
      parties hereto acknowledge that the terms and language of this Agreement were
      the result of negotiations among the parties and, as a result, there shall
      be no
      presumption that any ambiguities in this Agreement shall be resolved against
      any
      particular party. Any controversy over construction of this Agreement shall
      be
      decided without regard to events of authorship or negotiation.


-38-


10.9  **Governing
      Law** .  This
      Agreement and all matters arising out of or relating hereto, including its
      validity, construction and interpretation, shall be governed by the laws of
      the
      State of Delaware, without regard to the laws as to choice or conflict of laws,
      except to the extent that the laws of the jurisdiction of incorporation of
      a
      party shall govern its internal corporate affairs.




10.10  **Stockholder
      Representative** .




(a)  OrbiMed
      Advisors, LLC is hereby appointed as the Stockholder Representative for and
      on
      behalf of the Series D Stockholders solely with respect to matters involving
      the
      Hold Back Consideration and the Escrow Agreement. The Stockholder Representative
      shall have the authority to take the following actions with respect to such
      matters:




(i)  to
      give
      and receive notices and communications,




(ii)  to
      receive funds and give receipts therefor,




(iii)  to
      receive service of process with respect to any claim under this
      Agreement,




(iv)  to
      agree
      to, negotiate, execute and deliver agreements, documents and
      instruments,




(v)  to
      authorize payments of amounts from the Hold Back Consideration pursuant to
      the
      terms of this Agreement and the Escrow Agreement,




(vi)  to
      agree
      to, negotiate, enter into settlements and compromises of, and demand arbitration
      and comply with orders of courts and awards of arbitrators with respect to
      such
      claims, and




(vii)  to
      take
      or refrain from taking all other action, and execute and deliver all additional
      agreements, documents, certificates and instruments as the Stockholder
      Representative may deem necessary or appropriate in connection with the Hold
      Back Consideration and the Escrow Agreement.




The
      Stockholder Representative may not be removed unless two-thirds interest of
      the
      Series D Stockholders agree to such removal and to the identity of the
      substituted agent. A vacancy in the position of Stockholder Representative
      may
      be filled by the affirmative vote of two-thirds interest of the Series D
      Stockholders. No bond shall be required of the Stockholder Representative,
      and
      the Stockholder Representative shall not receive any compensation for its
      services. Notices or communications to or from the Stockholder Representative
      shall constitute notice to or from the Series D Stockholders with respect to
      matters involving the Hold Back Consideration and the Escrow
      Agreement.


-39-


(b)  The
      Stockholder Representative shall not be liable to the Series D Stockholders
      for
      any act done or omitted hereunder as Stockholder Representative while acting
      in
      good faith and in the absence of gross negligence or willful misconduct. A
      decision, act, consent or instruction of the Stockholder Representative,
      including to an amendment, extension or waiver of this Agreement pursuant to **Section 10.1** hereof
      regarding the Hold Back Consideration shall be final, binding and conclusive
      upon the Series D Stockholders as beneficiaries of the Hold Back Consideration;
      and Acquiror may conclusively and absolutely, rely, without any inquiry, upon
      any such decision, act, consent or instruction of the Stockholder Representative
      without further consent or instruction of the Series D Stockholders. Acquiror
      is
      hereby relieved from any liability to any Person, including any Series D
      Stockholder, for any acts done by it in accordance with or reliance on such
      decision, act, consent or instruction of the Stockholder
      Representative.




(c)  All
      notices or other communications required to be made or delivered by Acquiror
      to
      the Series D Stockholders with respect to the Hold Back Consideration or the
      Escrow Agreement shall be made to the Stockholder Representative for the benefit
      of the Series D Stockholders and any notices so made shall discharge in full
      all
      notice requirements of Acquiror to the Series D Stockholders with respect
      thereto.




(d)  Notwithstanding
      anything to the contrary contained herein, at the Effective Time, the Surviving
      Corporation shall cause to be delivered to the Stockholder Representative an
      amount in cash equal to $100,000 (the “ ***Expense
      Fund*** ”)
      to be
      held in a bank account controlled by the Stockholder Representative. Such
      account shall be established with a reputable bank with regional or national
      standing. Upon the final release of all amounts included in the Hold Back
      Consideration, the remaining amount in the Expense Fund, if any, shall be
      distributed to the Series D Stockholders pro rata based upon the value of the
      Acquiror Common Stock or cash comprising the Hold Back Consideration in respect
      of each such holder on the Effective Date. The Stockholder Representative shall
      be entitled to be reimbursed from the Expense Fund for any expense or liability
      reasonably incurred by the Stockholder Representative in connection with the
      administration of the Stockholder Representative’s duties under this Agreement
      and the Escrow Agreement, including, but not limited to, the reasonable fees
      and
      expenses of any legal counsel or accountant retained by the Stockholder
      Representative. To the extent that the amount of any such expenses or
      liabilities of the Stockholder Representative exceed the amount of the Expense
      Fund, the Stockholder Representative shall be entitled to be reimbursed out
      of
      any portion of the Hold Back Consideration to be released to the Series D
      Stockholders.




10.11  **Arbitration** .  All
      disputes, controversies and claims arising out of or related to this Agreement
      or in respect of any defined legal relationship associated with or derived
      from
      this Agreement shall be referred to and finally resolved by arbitration under
      the International Arbitration Rules of the American Arbitration Association.
      There shall be one arbitrator who shall be a U.S. lawyer. The arbitrator shall
      not be a resident of Pennsylvania or any state contiguous with Pennsylvania.
      The
      place of arbitration shall be the arbitrators’ city of residence. The IBA Rules
      of Evidence shall apply together with the general rules governing any submission
      to arbitration specified above, except that where such rules are inconsistent
      the IBA Rules of Evidence shall apply. Judgment upon the award rendered by
      the
      arbitrator may be entered in any court having jurisdiction
      thereof.


-40-


IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
      Merger to be executed as of the date first set forth above.




**YM
                BIOSCIENCES INC.**By:
            *“David
                G.P. Allan”*Name:
                David G. P. AllanTitle:
                Chairman, CEO and President**YM
                BIOSCIENCES USA INC.**By:
            *“David
                G.P. Allan”*Name:
                David G. P. AllanTitle:
                Chairman, CEO and President**YM
                BIOSCIENCES U.S. OPERATIONS INC.**By:
            *“David
                G.P. Allan”*Name:
                David G. P. AllanTitle:
                Chairman, CEO and President**EXIMIAS
                PHARMACEUTICAL CORPORATION**By:
            *“Gail
                Schulze”*Name:
                Gail SchulzeTitle:
                President and CEO**ORBIMED
                ADVISORS, LLC, AS STOCKHOLDER REPRESENTATIVE**By:
            *“Michael
                Sheffery”*Name:
                Michael ShefferyTitle:
                General Partner




[ *Signature
      Page to Agreement and Plan of Merger* ]





**Exhibit
      A**




**DEFINITIONS**




For
      all
      purposes of the Agreement, the following terms shall have the respective
      meanings set forth in this Exhibit (such definitions to be equally applicable
      to
      both the singular and plural forms of the terms herein defined).




“ ***Accredited
      Investor*** ”
has
      the
      meaning set forth in **Section 4.21(a)** .




“ ***Acquiror*** ”
has
      the
      meaning set forth in the first paragraph of this Agreement.




“ ***Acquiror
      Common Stock*** ”
has
      the
      meaning set forth in **Section 3.1(a)** .




“ ***Acquiror
      Stock Value*** ”
means
      the daily volume-weighted average sale price for each share of Acquiror Common
      Stock traded on AMEX for the five (5) day trading period ending immediately
      prior to the date in question.




“ ***Action*** ”
has
      the
      meaning set forth in **Section 4.12** .




“ ***Adverse
      Consequences*** ”
has
      the
      meaning set forth in **Section 9.1** .




“ ***Affiliate*** ”
means,
      with respect to any Person, any other Person who directly or indirectly
      controls, is controlled by or is under common control with such Person. The
      term
“control,” for the purposes of this definition, means the power to direct or
      cause the direction of the management or policies of the controlled
      Person.




“ ***Agreement*** ”
means
      this Agreement, as such may hereafter be amended from time to time.




“ ***AIM*** ”
has
      the
      meaning set forth in **Section 5.10(a)** .




“ ***AMEX*** ”
has
      the
      meaning set forth in **Section 5.10(a)** .




“ ***Antitrust
      Laws*** ”
means
      the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade
      Commission Act, as amended, the Competition Act (Canada), as amended, and any
      other federal, state or foreign statutes, rules, regulations, orders or decrees
      that are designed to prohibit, restrict or regulate actions having the purpose
      or effect of monopolization or restraint of trade.




“ ***Applicable
      Law*** ”
means
      with respect to any Person, any United States, Canadian, foreign, state,
      provincial or local statute, law, ordinance, rule, notice, policy, regulation,
      order, writ, injunction, judgment or decree of any governmental agency or agent
      or self regulatory organization or stock exchange applicable to such Person
      or
      any such Person’s Affiliates, properties, assets, officers, directors, employees
      or agents.




“ ***Assets*** ”
means
      all property and assets of a Person (whether real, personal, tangible or
      intangible).


A-1


“ ***Audited
      Financial Statements*** ”
has
      the
      meaning set forth in **Section 4.6** .




“ ***Balance
      Sheet*** ”
has
      the
      meaning set forth in **Section 4.6** .




“ ***Balance
      Sheet Date*** ”
has
      the
      meaning set forth in **Section 4.6** .




“ ***Benefit
      Plans*** ”
has
      the
      meaning set forth in **Section 4.15** .




“ ***Business
      Day*** ”
means
      any day other than Saturday, a Sunday or a day on which banks in Philadelphia,
      Pennsylvania or Toronto, Ontario, Canada are authorized or required to be closed
      for regular banking business.




“ ***Canadian
      GAAP*** ”
means
      GAAP as in effect in Canada from time to time.




“ ***Canadian
      Securities Laws*** ”
means
      the securities laws of the Provinces and Territories of Canada, the rules,
      their
      respective regulations, prescribed forms, notices, policies, orders and rulings
      made thereunder and the policy statements issued by the securities commissions
      or other applicable securities regulatory authorities.




“ ***Cash
      Proceeds*** ”
has
      the
      meaning set forth in **Section 3.1(a)** .




“ ***Certificate
      of Merger*** ”
has
      the
      meaning set forth in **Section 1.3** .




“ ***Certificates*** ”
has
      the
      meaning set forth in **Section 3.5(c)** .




“ ***Closing*** ”
has
      the
      meaning set forth in **Section 1.2** .




“ ***Code*** ”
means
      the Internal Revenue Code of 1986, as amended from time to time, or any
      successor statute.




“ ***Common
      Stock*** ”
means
      the Common Stock, $0.001 par value, of Target.




“ ***Confidential
      Information*** ”
has
      the
      meaning set forth in **Section 6.1(b)** .




“ ***Contract*** ”
means
      any written or oral contract, agreement, lease (including Real Property Leases),
      license, instrument, or other document or commitment, arrangement, undertaking,
      practice or authorization that is binding on any Person or its
      Assets.




“ ***Copyrights*** ”
means
      rights arising from or in respect to copyrights and copyrightable works and
      registrations, applications and renewals for registration thereof, mask works
      and registrations and applications for registration or renewals thereof, created
      or arising under the laws of the United States or any other
      jurisdiction.




“ ***Custom
      Software*** ”
means
      any computer software that has been developed or designed for use in the
      business of Target.




“ ***Default*** ”
means
      (a) any violation, breach or default of a Contract, (b) the occurrence of an
      event that, with the passage of time, the giving of notice or both, would
      constitute a violation, breach or default of a Contract, or (c) the occurrence
      of an event that, with or without the passage of time, the giving of notice
      or
      both, would give rise to a right of termination, renegotiation or acceleration
      of, or pursuant to, a Contract.


A-2


“ ***DGCL*** ”
has
      the
      meaning set forth in **Section 1.1** .




“ ***Directors
      and Officers*** ”
has
      the
      meaning set forth in **Section 6.10** .




“ ***Disclosure
      Schedule*** ”
has
      the
      meaning set forth in the introductory paragraph to **Article 4** .




“ ***Dissenting
      Shares*** ”
has
      the
      meaning set forth in **Section 3.7** .




“ ***Dissenting
      Stockholder*** ”
has
      the
      meaning set forth in **Section 3.7** .




“ ***Dollars*** ”
or
      “ ***$*** ”
means
      the lawful currency of the United States.




“ ***Effective
      Date*** ”
has
      the
      meaning set forth in **Section 1.3** .




“ ***Effective
      Time*** ”
has
      the
      meaning set forth in **Section 1.3** .




“ ***Election
      Form*** ”
has
      the
      meaning set forth in **Section 3.1(c)** .




“ ***Employee
      Options*** ”
has
      the
      meaning set forth in **Section 6.9** .




“ ***Encumbrance*** ”
(a)
      any
      encumbrance, mortgage, hypothec, pledge, lien, charge or other security interest
      of any kind upon any property or assets of any character, or upon the income,
      profits or proceeds therefrom; (b) any acquisition of or agreement to have
      an
      option to acquire any property or assets upon conditional sale or other title
      retention agreement, device or arrangement (including a capitalized lease);
      or
      (c) any sale, assignment, pledge or other transfer for security of any accounts,
      general intangibles or chattel paper, with or without recourse.




“ ***ERISA*** ”
means
      the Employee Retirement Income Security Act of 1974, as amended.




“ ***Escrow
      Agent*** ”
means
      J.P. Morgan Chase Bank, National Association.




“ ***Exchange
      Ratio*** ”
has
      the
      meaning set forth in **Section 3.1(a)** .




“ ***Expense
      Fund*** ”
has
      the
      meaning set forth in **Section 10.10(d)** .




“ ***Financial
      Statements*** ”
has
      the
      meaning set forth in **Section 4.6** .




“ ***GAAP*** ”
means
      generally accepted accounting principles, consistently applied, as in effect
      at
      the time any applicable financial statements were prepared.




“ ***Governmental
      Authority*** ”
means,
      with respect to any Person, any United States, Canadian, country, state,
      provincial, municipal, local or other political subdivision, agency or
      instrumentality thereof, or any entity exercising executive, legislative,
      judicial, regulatory or administrative functions of or pertaining to
      government.


A-3


“ ***Hold
      Back Consideration*** ”
has
      the
      meaning set forth in **Section 3.1(f)** .




“ ***Indebtedness*** ”
means:
      (a) any obligation of Target for borrowed money or issued in substitution for
      or
      exchange of indebtedness of Target for borrowed money, (b) any obligation
      evidenced by any note, bond, debenture or other debt security or instrument
      issued by Target, (c) any obligation for the deferred purchase price of property
      or services of Target (other than accounts payable, advance billings and accrued
      expenses incurred in the Ordinary Course of Business), (d) any obligations
      under
      capitalized leases of Target; (e) any obligation secured by an Encumbrance
      on
      the Assets of Target, (f) any obligation of the type in clauses (a)-(e)
      guaranteed or supported by surety or assurance in any manner by Target
      (including performance bonds, guarantees in the form of an agreement to
      repurchase or reimburse), and (g) any interest, principal, prepayment penalty,
      fees or expenses to the extent paid, due or owing in respect of those items
      listed in clauses (a) through (f) of this defined term.




“ ***Indemnified
      Party*** ”
or
      “ ***Indemnified
      Parties*** ”
has
      the
      meaning set forth in **Section 9.1** .




“ ***Information
      Statement*** ”
means
      an information statement including all information with respect to this
      Agreement and the transactions contemplated hereby that is required pursuant
      to
      Applicable Law.




“ ***Intellectual
      Property*** ”
means
      any Copyrights, Patents, Trademarks, Internet domain names and Trade
      Secrets.




“ ***Knowledge*** ”
means:
      (a) with respect to an individual, such individual shall be deemed to have
      knowledge of a particular fact or other matter if (i) that individual is
      actually aware of that fact or matter or (ii) a prudent individual would
      reasonably be expected to have actual knowledge of that fact or matter after
      conducting a reasonable investigation; and (b) with respect to a Person other
      than an individual, such Person shall be deemed to have Knowledge of a
      particular fact or other matter if any individual who is serving as an executive
      officer of such Person has actual knowledge of that fact or matter, or would
      reasonably be expected to have actual knowledge of that fact or matter after
      conducting a reasonable investigation.




“ ***Leased
      Real Property*** ”
has
      the
      meaning set forth in **Section 4.8(b)** .




“ ***Letter
      of Transmittal*** ”
has
      the
      meaning set forth in **Section 3.5(b)** .




“ ***Liability*** ”
means
      any direct or indirect liability, indebtedness, obligation, interest, penalty,
      commitment, expense, claim, deficiency, guaranty or endorsement of or by any
      Person of any type, known or unknown, asserted or unasserted and whether
      accrued, absolute, contingent, matured or unmatured.




“ ***Loss*** ”
means
      any and all claims, losses, liabilities, damages, costs and expenses (including
      reasonable attorney’s, accountant’s, consultant’s and expert’s fees and
      expenses) that are actually incurred by the relevant party without giving effect
      to any multiplier that may be alleged by Acquiror to have been used in the
      computation of Merger Consideration.


A-4


“ ***Material
      Adverse Effect*** ”
means
      any change, effect, event, occurrence, state of facts or development that is
      materially adverse to the financial condition, results of operations, business
      or Assets of any Person, taken as a whole.




“ ***Merger*** ”
has
      the
      meaning set forth in the Recitals of this Agreement.




“ ***Merger
      Consideration*** ”
has
      the
      meaning set forth in **Section 3.1(a)** .




“ ***Merger
      Sub*** ”
has
      the
      meaning set forth in the first paragraph of this Agreement.




“ ***Net
      Cash at Closing*** ”
has
      the
      meaning set forth on **Schedule 3.1** .




“ ***Off-the-Shelf
      Software*** ”
means
      any applications software that is licensed to Target by a third party in its
      standard, unmodified condition pursuant to a “shrinkwrap,” “clickwrap” or other
      standard license agreement.




“ ***Ordinary
      Course of Business*** ”
means
      an action taken by Target that is consistent with the past practices of Target
      during the six months immediately prior to the date hereof and is taken in
      the
      ordinary course of the normal day-to-day operations of Target during the six
      months immediately prior to the date hereof; for the avoidance of doubt,
“Ordinary Course of Business” never includes an action that requires
      authorization by the Target Board or the Stockholders.




“ ***Patents*** ”
means
      rights arising from or in respect to patents and patent applications, including
      continuation, divisional, continuation-in-part, reissue or reexamination patent
      applications and patents issuing therefrom, patent disclosures and inventions,
      and foreign versions of the foregoing whether protected, created or arising
      under the laws of the United States or any other jurisdiction.




“ ***Permit*** ”
means
      all permits, licenses, consents, clearances, registrations, approvals, waivers,
      franchises, notices, authorizations and provider and supplier agreements issued
      by any Governmental Authority.




“ ***Permitted
      Encumbrances*** ”
has
      the
      meaning set forth in **Section 4.7** .




“ ***Person*** ”
means
      any individual, corporation, company, partnership (limited or general), joint
      venture, limited liability company, association, trust or other
      entity.




“ ***Real
      Property*** ”
means
      all interests in land and buildings, structures and other improvements
      thereon.




“ ***Real
      Property Leases*** ”
has
      the
      meaning set forth in **Section 4.8(b)** .




“ ***Reduced
      Cash Consideration*** ”
has
      the
      meaning set forth in **Section 3.1(d)** .




“ ***Released
      Amount*** ”
has
      the
      meaning set forth in **Section 9.5** .




“ ***Relevant
      Contract*** ”
has
      the
      meaning set forth in **Section 4.13** .


A-5


“ ***Representatives*** ”
has
      the
      meaning set forth in **Section 6.1(b)** .




“ ***Series
      D Stockholder*** ”
has
      the
      meaning set forth in **Section 3.1(a)** .




“ ***Sophisticated
      Investor*** ”
has
      the
      meaning set forth in **Section 4.21(a)** .




“ ***Stock
      Threshold*** ”
has
      the
      meaning set forth in **Section 3.1(d)** .




“ ***Stockholder*** ”
or
      “ ***Stockholders*** ”
means
      the holder(s) of Target Capital Stock.




“ ***Stockholder
      Representative*** ”
has
      the
      meaning set forth in the first paragraph of this Agreement.




“ ***Software*** ”
means
      any computer software of any nature whatsoever, including all systems software,
      all applications software, whether for general business usage (e.g., accounting,
      finance, word processing, graphics, spreadsheet analysis, etc.) or specific,
      unique-to-the-business usage (e.g., purchase or service order processing, etc.),
      all computer operating, security or programming software, and any and all
      written documentation and object and source codes related thereto, including
      Custom Software and Off-the-Shelf Software.




“ ***Survival
      Period*** ”
has
      the
      meaning set forth in **Section 9.1** .




“ ***Surviving
      Corporation*** ”
has
      the
      meaning set forth in **Section 1.1** .




“ ***Target*** ”
has
      the
      meaning set forth in the first paragraph of this Agreement.




“ ***Target
      Board*** ”
means
      the Board of Directors of Target.




“ ***Target
      Series A Preferred Stock*** ”
means
      the Preferred Series A Stock, $0.001 par value, of Target.




“ ***Target
      Series B Preferred Stock*** ”
means
      the Preferred Series B Stock, $0.001 par value, of Target.




“ ***Target
      Series C Preferred Stock*** ”
means
      the Preferred Series C Stock, $0.001 par value, of Target.




“ ***Target
      Series D Preferred Stock*** ”
means
      the Preferred Series D Stock, $0.001 par value, of Target.




“ ***Target
      Capital Stock*** ”
means
      all of the shares of Target common stock, Target Series A Preferred Stock,
      Target Series B Preferred Stock, Target Series C Preferred Stock and Target
      Series D Preferred Stock, which are issued and outstanding immediately prior
      to
      the Effective Time.




“ ***Taxes*** ”
or
      “ ***Tax*** ”
means
      all federal, state, provincial, local or foreign net or gross income, gross
      receipts, net proceeds, sales, use, ad valorem, value added, franchise,
      withholding, payroll, employment, excise, property, deed, stamp, alternative
      or
      add-on minimum, profits, windfall profits, transaction, license, lease, service,
      occupation, severance, unemployment, social security, worker’s compensation,
      capital, premium, or other taxes, together with any interest, penalties, and
      additions to tax.


A-6


“ ***Tax
      Return*** ”
means
      any return or report relating to Taxes made to a Governmental
      Authority.




“ ***Termination
      Date*** ”
has
      the
      meaning set forth in **Section 8.1(a)(ii)** .




“ ***Third
      Party Claim*** ”
has
      the
      meaning set forth in **Section 9.2(a)** .




“ ***Trademarks*** ”
means
      rights arising from or in respect to trademarks, service marks, trade names,
      logos and internet domain names (whether registered or unregistered, including
      any applications for registration of the foregoing), trade dress rights and
      general intangibles of a like nature, industrial or product designs together
      with all of the goodwill associated therewith, and foreign versions of the
      foregoing whether protected, created or arising under the laws of the United
      States or any other jurisdiction.




“ ***Trade
      Secrets*** ”
means
      rights arising from or in respect to trade secrets and other confidential
      information (including, without limitation, ideas, formulas, compositions,
      inventions (whether patentable or unpatentable and whether or not reduced to
      practice), know-how, concepts, manufacturing and production processes and
      techniques, research and development information, drawings, specifications,
      designs, plans, proposals, technical data, financial and marketing plans and
      customer and supplier lists and information whether protected, created or
      arising under the laws of the United States or any other
      jurisdiction.




“ ***TSX*** ”
has
      the
      meaning set forth in **Section 5.10(a)** .




“ ***Unaudited
      Financial Statements*** ”
has
      the
      meaning set forth in **Section 4.6** .




“ ***U.S.
      GAAP*** ”
means
      GAAP as in effect in the United States from time to time.




“ ***U.S.
      Securities Act*** ”
means
      the United States Securities Act of 1933, as amended.




“ ***YM
      BioSciences USA*** ”
has
      the
      meaning set forth in the first paragraph of this Agreement.


A-7


**Exhibit
      B**




**Certificate
      of Merger**


B-1


**Exhibit
      C**




**Initial
      Directors and Officers**




**Directors** :





David
      Allan


John
      Friedman


Gail
      Schulze





**Officers** :





David
      Allan, Chairman


Gail
      Schulze, CEO


Len
      Vernon, Director, Finance and Administration


C-1


**Exhibit
      D**




**Form
      of Escrow Agreement**


-1-




ESCROW
      AGREEMENT




**THIS
      ESCROW AGREEMENT,** dated
      _____________, 2006 (“ ***Escrow
      Agreement*** ”),
      is by
      and among YM BioSciences Inc., a corporation existing under the laws of Nova
      Scotia, Canada (“ ***Acquiror*** ”),
      OrbiMed Advisors, LLC, in the capacity as the Stockholder Representative under
      the Merger Agreement (the “ ***Stockholder
      Representative*** ”),
      and
      J.P. Morgan Chase Bank, National Association (the “ ***Escrow
      Agent*** ”).




**BACKGROUND**




Acquiror,
      YM BioSciences USA Inc., a Delaware corporation and wholly-owned subsidiary
      of
      Acquiror (“ ***YM
      BioSciences USA*** ”),
      YM
      BioSciences U.S. Operations Inc., a Delaware corporation and wholly-owned
      subsidiary of YM BioSciences USA (“ ***Merger
      Sub*** ”),
      Eximias Pharmaceutical Corporation, a Delaware corporation (“ ***Target*** ”),
      and
      the Stockholder Representative are parties to an Agreement and Plan of Merger,
      dated April 12, 2006 (the “ ***Merger
      Agreement*** ”),
      providing for the merger of Merger Sub with and into Target. This Escrow
      Agreement is being executed and delivered pursuant to the terms of the Merger
      Agreement.




**TERMS**




**NOW,
      THEREFORE** ,
      in
      consideration of the foregoing premises, the agreements herein contained, and
      other good and valuable consideration, the receipt and legal sufficiency of
      which are hereby acknowledged, the parties hereto, intending to be legally
      bound, hereby agree as follows:




4.  Definitions. Capitalized
      terms used in this Escrow Agreement but not defined herein shall have the
      meanings ascribed to such terms in the Merger Agreement.




4.  Appointment
      of and Acceptance by Escrow Agent. Acquiror
      and the Stockholder Representative hereby appoint Escrow Agent to serve as
      escrow agent hereunder. Escrow Agent hereby accepts such appointment and, upon
      receipt of the Hold Back Consideration (as defined below) in accordance with Section 3 below,
      agrees to hold, invest and disburse the Hold Back Consideration in strict
      accordance with this Escrow Agreement.




4.  Creation
      of Hold Back Account. On
      the
      date hereof, in accordance with Section 3.1(d) of the
      Merger Agreement, Acquiror shall deliver or cause to be delivered an amount
      of
      the aggregate Cash Proceeds and certificates representing the number of shares
      of Acquiror Common Stock (based on the Acquiror Stock Value as of the Effective
      Date, or the deemed Acquiror Stock Value should Section 3.1(b) of the
      Merger Agreement apply) equal to $3,000,000 (the “ ***Hold
      Back Consideration*** ”)
      in the
      account described below (the “ ***Hold
      Back Account*** ”),
      to be
      held by Escrow Agent in accordance with the terms of this Escrow Agreement.
      The
      Hold Back Consideration shall be available, in accordance with the terms and
      conditions of this Escrow Agreement, solely for payments to be made to the
      Indemnified Parties pursuant to the Series D Stockholders’ indemnification
      obligations under Section 9.1 **** of
      the
      Merger Agreement. During the term of this Agreement, the Hold Back Account
      shall
      consist of both (i) shares of Acquiror Common Stock (the “ ***Hold
      Back Shares*** ”)
      and
      (ii) the Cash Proceeds (the “ ***Hold
      Back Cash*** ”).
      The
      identities of the Series D Stockholders and the number of Hold Back Shares
      or
      Hold Back Cash deposited in the Hold Back Account in respect of each of them
      (the “ ***Allocation
      Percentage*** ”)
      are
      set forth in **Exhibit A** attached
      hereto. The securities to be held by the Escrow Agent pursuant to this Escrow
      Agreement are set forth in **Exhibit C** attached
      hereto.


-2-


.22.  The
      Escrow Agent shall maintain on the Hold Back Account a ledger containing the
      name, balance and Allocation Percentage for each Series D Stockholder (for
      purposes of this Escrow Agreement, a “ ***Sub-Account*** ”),
      which
      balance shall be the amount of such Series D Stockholder’s Hold Back
      Consideration held in the Hold Back Account.




4.  Procedure
      with Respect to Claims Generally.




.21.  Escrow
      Agent shall release from the Hold Back Account and distribute the Hold Back
      Consideration (or any portion thereof) only as follows:




(a)  Escrow
      Agent shall disburse the Hold Back Consideration at any time and from time
      to
      time, in accordance with a written direction executed by Acquiror and the
      Stockholder Representative, in substantially the form attached hereto as **Exhibit B** (a
“ ***Hold
      Back Joint Written Direction*** ”).




(b)  If
      the
      Escrow Agent receives (i) a notice, signed by the Acquiror and the Stockholder
      Representative, of final determination of liability pursuant to Section 9.1 of the
      Merger Agreement (a “ ***Final
      Determination Notice*** ”)
      or
      (ii) a copy of a written claim notice pursuant to Section 9.1 of the Merger
      Agreement (a “ ***Claim
      Notice*** ”),
      together with a certificate signed by an executive officer of the Acquiror
      certifying that the Acquiror has given the Stockholder Representative notice
      of
      such claim for indemnification in accordance with the Merger Agreement, and
      the
      Stockholder Representative has not disputed such claim within thirty days of
      receipt of such notice (a “ ***Notice
      Period Expiration Certificate*** ”),
      then
      the Escrow Agent shall distribute from the Hold Back Consideration the amount
      specified in the Final Determination Notice or Claim Notice, as the case may
      be
      (the “ ***Claim
      Amount*** ”),
      in
      accordance with Section 4.2 below.




.22.  Within
      10
      days after receipt of a Final Determination Notice or the Notice Period
      Expiration Certificate, as the case may be (a “ ***Distribution
      Date*** ”),
      in
      accordance with Section 4.1 above,
      the Escrow Agent shall pursuant to written instructions distribute to Acquiror
      from the Hold Back Account that amount of the Hold Back Consideration sufficient
      to satisfy the Claim Amount and each Series D Stockholder’s Sub-Account shall be
      reduced by (x) the product of (A) such Series D Stockholder’s Allocation
      Percentage times (B) the Claim Amount. Notwithstanding anything to the contrary
      contained herein, the maximum aggregate liability for all claims paid pursuant
      to Section 9.1 of the
      Merger Agreement with respect to the Series D Stockholders shall be limited
      to
      $3,000,000 (based on the Acquiror Common Stock being valued based on the
      Acquiror Stock Value at the Effective Date), notwithstanding any increase or
      decrease in the value of the Hold Back Shares.




.23.  For
      purposes of any distribution of the Hold Back Consideration pursuant to this Section 4 ,
      the
      Hold Back Shares shall be valued based on the Acquiror Stock Value at the
      Effective Date, notwithstanding any increase or decrease in the actual price
      of
      Acquiror Common Stock as of the Distribution Date.


-3-


.24.  All
      claims will be satisfied from the Hold Back Consideration in cash and shares
      of
      Acquiror Common Stock based on the proportion of cash and Acquiror Common Stock
      comprising the Hold Back Consideration on the Effective Date.




.25.  In
      no
      event will fractional shares of Acquiror Common Stock be delivered from the
      Hold
      Back Account, and any calculation that would result in delivery of a fractional
      share to Acquiror shall be rounded downward to the next whole
      share.




.26.  All
      disbursements of the Hold Back Cash shall be made by federal funds wire transfer
      or by cashier’s check, as set forth in the Hold Back Joint Written Direction, or
      as otherwise elected by the party receiving the funds.




.27.  All
      necessary calculations pursuant to this Section 4 shall be
      performed by the parties and included in the written instructions given to
      the
      Escrow Agent.




4.  Escrow
      Period; Termination of Escrow.




.21.  The
      period during which the Hold Back Consideration shall be held in escrow
      hereunder (the “ ***Escrow
      Period*** ”)
      shall
      commence on the date hereof and, subject to the provisions of Section 5.3 below,
      shall end on the earlier of (i) the date on which all of the Hold Back
      Consideration have been delivered to Acquiror pursuant to Section 4.2 hereof
      or (ii) the expiration of the Survival Period (the “ ***Scheduled
      Final Disbursement Date*** ”).




.22.  On
      the
      Scheduled Final Disbursement Date, Acquiror and the Stockholder Representative
      shall deliver a Hold Back Joint Written Direction to the Escrow Agent to release
      any remaining portion of the Hold Back Consideration, minus any amounts subject
      to a Pending Claim (as defined in Section 5.3 ,
      below),
      to Acquiror. Simultaneously with the release of such amount (the “ ***Released
      Amount*** ”),
      Acquiror shall deliver to the Stockholder Representative the Hold Back
      Consideration in an aggregate amount equal to the Released Amount, for
      disbursement to the Series D Stockholders in accordance with their respective
      Allocation Percentages.




.23.  If
      a
      claim is unresolved on the Scheduled Final Disbursement Date (a “ ***Pending
      Claim*** ”),
      the
      Escrow Agent shall hold back and not distribute a portion of the then remaining
      Hold Back Consideration in an amount equal to such unresolved claim as set
      forth
      in a copy of the Claim Notice delivered by Acquiror to the Escrow Agent. The
      funds held back shall continue to be held by the Escrow Agent and invested
      in
      accordance with Section 6 below.
      After final determination and payment of all Pending Claims, the balance of
      the
      Hold Back Consideration shall be delivered to the Stockholder Representative
      for
      distribution to the Series D Stockholders in accordance with their respective
      Allocation Percentages.




.24.  For
      purposes of any distribution of the Hold Back Consideration to the Stockholder
      Representative pursuant to this Section 5 ,
      the
      Hold Back Shares shall be valued based on the Acquiror Stock Value as of the
      Scheduled Final Disbursement Date or, in the event of a Pending Claim, as of
      the
      date the Hold Back Shares are released by the Escrow Agent.


-4-


.25.  Any
      distributions of Hold Back Consideration to the Stockholder Representative
      pursuant to this Section 5 shall be
      made by the Escrow Agent to the Stockholder Representative at the address set
      forth in Section 15 hereof
      or such other address as may be furnished in writing to the Escrow
      Agent.




4.  Rights
      of
      the Series D Stockholders to Hold Back Consideration.




.21.  As
      long
      as the Hold Back Shares are held by the Escrow Agent, the Hold Back Shares
      shall
      remain registered in the name of the respective Series D Stockholders, and
      the
      respective Series D Stockholders shall be entitled to vote the Hold Back Shares
      and to receive all cash dividends and other distributions paid on the Hold
      Back
      Shares. Any securities issued or other distributions made in respect to the
      Hold
      Back Shares as a result of a stock dividend, stock split, spin-off, merger,
      consolidation, reorganization or other similar transaction shall be deposited
      with the Escrow Agent and shall become part of the Hold Back Account under
      this
      Escrow Agreement.




.22.  Until
      released in accordance with this Escrow Agreement, Escrow Agent shall invest
      and
      reinvest the Hold Back Cash as
      set
      forth on **Schedule A** .
      Escrow
      Agent shall receive and collect all dividends, interest, gains and other
      distributions received by Escrow Agent as a result of such investments
      (collectively, “ ***Earnings*** ”)
      in
      respect of such investments. All Earnings shall be held by Escrow Agent in
      the
      Hold Back Account and reinvested. Upon the final release of all Hold Back
      Consideration, the Earnings shall be paid to Acquiror and the Stockholder
      Representative in the same proportion as the aggregate Hold Back Cash was
      disbursed among Acquiror and the Stockholder Representative. The Stockholder
      Representative shall provide the Escrow Agent with Form W-9 and/or W-8 of all
      Series D Stockholders. The Escrow Agent will be provided with a Schedule showing
      the allocation of the Series D Stockholders earnings. The Stockholder
      Representative shall be responsible for paying the Series D Stockholders their
      allocable share pursuant to this Schedule. The Escrow Agent shall be responsible
      for reporting the earnings for this account and any necessary withholding if
      applicable.




.23.  If
      Escrow
      Agent has not received instruction as to an investment decision, Escrow Agent
      shall invest the Hold Back Cash, or such portion thereof as to which no
      investment instruction has been received, in investments described in Section 6.2 above.
      Each of the foregoing investments shall be made in the name of Escrow Agent;
      provided, however, that the Hold Back Cash shall be for the exclusive benefit
      of
      Acquiror and the Series D Stockholders and their respective successors and
      assigns, and no other person or entity shall have any right, title, interest
      or
      lien therein. No investment shall be made in any instrument or security that
      has
      a maturity of greater than sixty days. Notwithstanding anything to the contrary
      contained herein, Escrow Agent may, without notice to Acquiror or the
      Stockholder Representative, sell or liquidate any of the foregoing investments
      at any time if the proceeds thereof are required for any release of funds
      permitted or required hereunder, and Escrow Agent shall not be liable or
      responsible for any loss, cost or penalty resulting from any such sale or
      liquidation. With respect to any Hold Back Cash received by Escrow Agent for
      deposit into the Hold Back Account or any joint written direction received
      by
      Escrow Agent with respect to investment of any Hold Back Cash after 1:00 P.M.
      New York time, Escrow Agent shall not be required to invest such funds or to
      effect such investment instruction until the next day upon which banks in New
      York, New York are open for business.


-5-




4.  Reports.




.21.  As
      soon
      as practicable after the end of each calendar month during the term of this
      Escrow Agreement, Escrow Agent shall deliver to Acquiror and the Stockholder
      Representative a written statement setting forth (x) the assets and value of
      the
      Hold Back Consideration as of the end of such month and (y) the amount of all
      Earnings on the Hold Back Accounts earned during such month.




.22.  Receipt,
      investment and reinvestment of the Hold Back Consideration shall be confirmed
      by
      Escrow Agent as soon as practicable by account statement, and any discrepancies
      in any such account statement shall be noted by the parties to Escrow Agent
      within 30 calendar days after receipt thereof. Failure to inform Escrow Agent
      in
      writing of any discrepancies in any such account statement within said 30-day
      period shall conclusively be deemed confirmation of such account statement
      in
      its entirety.




4.  Disbursement
      Into Court. If:
      (i)
      at any time there shall exist any dispute among Acquiror and the
      Stockholder  Representative
      with respect to the holding or disposition of any portion of the Hold Back
      Consideration or any other obligations of Escrow Agent hereunder, (ii) if at
      any
      time Escrow Agent is unable to determine, to Escrow Agent’s sole satisfaction,
      the proper disposition of any portion of Acquiror’s or the
      Stockholder  Representative’s
      proper actions with respect to its obligations hereunder or (iii) if Acquiror
      and the Stockholder Representative have not within ninety (90) days of the
      furnishing by Escrow Agent of a notice of resignation pursuant to Section 10 hereof,
      appointed a successor Escrow Agent to act hereunder, then Escrow Agent may,
      in
      its sole discretion, take either or both of the following actions:




(a)  suspend
      the performance of any of its obligations (including without limitation any
      disbursement obligations) under this Escrow Agreement until such dispute or
      uncertainty shall be resolved to the sole satisfaction of Escrow Agent or until
      a successor Escrow Agent shall have been appointed (as the case may be); *provided,
      however* ,
      that
      Escrow Agent shall continue to invest the Hold Back Cash in accordance with Section 6.2 hereof;
      and/or




(b)  petition
      (by means of an interpleader action or any other appropriate method) any court
      of competent jurisdiction in the State of Delaware for instructions with respect
      to such dispute or uncertainty, and to the extent required by law, pay into
      such
      court for holding and disposition in accordance with the instructions of such
      court, all funds held by it in the Hold Back Account, after deduction and
      payment to Escrow Agent of all fees and expenses (including court costs and
      reasonable attorneys’ fees) payable to Escrow Agent in connection with the
      performance of its duties hereunder.




4.  Stockholder
      Representative.




.21.  In
      accordance with Section 10.10 of the
      Merger Agreement, the Series D Stockholders shall be bound by any and all
      actions taken by the Stockholder Representative on their
      behalf.


-6-




.22.  Acquiror
      shall be entitled to rely upon any communication or writing given or executed
      by
      the Stockholder Representative. All communications or writings to be sent to
      the
      Series D Stockholders generally pursuant to this Escrow Agreement shall be
      addressed to the Stockholder Representative and any communication or writing
      so
      sent shall be deemed notice to all of the Series D Stockholders
      hereunder.




.23.  The
      Stockholder Representative shall have full power to act in each Series D
      Stockholder’s name and on each Series D Stockholder’s behalf according to the
      terms of this Escrow Agreement in the absolute discretion of the Stockholder
      Representative, and in general to do all things and to perform all acts
      including, without limitation, executing and delivering all agreements,
      certificates, receipts, instructions and other instruments contemplated by
      or
      deemed advisable in connection with this Escrow Agreement.




4.  Resignation
      and Removal of Escrow Agent. Escrow
      Agent may resign from the performance of its duties hereunder at any time by
      giving thirty (30) days’ prior written notice to Acquiror and the Stockholder
      Representative or may be removed, with or without cause, by Acquiror and the
      Stockholder Representative, acting jointly by furnishing a joint written
      instruction to Escrow Agent, at any time by the giving of thirty (30) days’
prior written notice to Escrow Agent. Such resignation or removal shall take
      effect upon the appointment of a successor Escrow Agent as provided below.
      Upon
      any such notice of resignation or removal, the Acquiror and the Stockholder
      Representative jointly shall appoint a successor Escrow Agent hereunder, which
      shall be a commercial bank, trust company or other financial institution with
      a
      combined deposits in excess of $100,000,000. Upon the acceptance in writing
      of
      any appointment as Escrow Agent hereunder by a successor Escrow Agent, such
      successor Escrow Agent shall thereupon succeed to and become vested with all
      the
      rights, powers, privileges and duties of the retiring Escrow Agent, and the
      retiring Escrow Agent shall be discharged from its duties and obligations under
      this Escrow Agreement, but shall not be discharged from any liability for
      actions taken as Escrow Agent hereunder prior to such succession. After any
      retiring Escrow Agent’s resignation or removal, the provisions of this Escrow
      Agreement shall inure to its benefit as to any actions taken or omitted to
      be
      taken by it while it was Escrow Agent under this Escrow Agreement. The retiring
      Escrow Agent shall transmit all records pertaining to the Hold Back
      Consideration and shall pay all funds held by it in the Hold Back Account to
      the
      successor Escrow Agent, after making copies of such records as the retiring
      Escrow Agent deems advisable and after deduction and payment of the retiring
      Escrow Agent of all fees and expenses (including court costs and reasonable
      attorneys’ fees) payable to Escrow Agent in connection with the performance of
      its duties hereunder. If a
      successor Escrow Agent has not been appointed within thirty (30) days after
      the
      giving of such notice of resignation, then the resigning Escrow Agent may,
      may,
      at the shared expense of Acquiror, on the one hand, and the Stockholder
      Representative, on the other, petition any court of competent jurisdiction
      for
      the appointment of a successor Escrow Agent.


-7-




4.  Liability
      of Escrow Agent.




.21.  Escrow
      Agent shall have no liability or obligation with respect to the Hold Back
      Consideration for any action taken or omitted by it in good faith except to
      the
      extent that a court of competent jurisdiction determines that Escrow Agent’s
      gross negligence or willful misconduct was the primary cause of any loss to
      Acquiror or the Series D Stockholders. Escrow Agent’s sole responsibility shall
      be for the safekeeping, investment, and disbursement of the Hold Back
      Consideration in accordance with the terms of this Escrow Agreement and shall
      neither be responsible for, nor chargeable with, knowledge of the terms and
      conditions of any other agreement, instrument or document between the other
      parties hereto, in connection herewith including, without limitation, the Merger
      Agreement. Escrow Agent shall have no implied duties or obligations and shall
      not be charged with knowledge or notice of any fact or circumstance not
      specifically set forth herein. Escrow Agent shall have no liability and no
      duty
      to inquire as to the provisions of any agreement other than this Escrow
      Agreement and the Merger Agreement. Escrow Agent may rely upon any instrument,
      not only as to its due execution, validity and effectiveness, but also as to
      the
      truth and accuracy of any information contained therein, which Escrow Agent
      shall in good faith believe to be genuine, to have been signed or presented
      by
      the person or parties purporting to sign the same and to conform to the
      provisions of this Escrow Agreement. Escrow Agent shall not be obligated to
      take
      any legal action or commence any proceeding in connection with the Hold Back
      Consideration, any account in which Hold Back Consideration are deposited,
      this
      Escrow Agreement or the Merger Agreement ,
      or to
      appear in, prosecute or defend any such legal action or proceeding. Escrow
      Agent
      may consult legal counsel selected by it in the event of any dispute or question
      as to the construction of any of the provisions hereof or of any other agreement
      or of its duties hereunder, or relating to any dispute involving any party
      hereto, and shall incur no liability and shall be fully indemnified from any
      liability whatsoever in acting in accordance with the opinion or instruction
      of
      such counsel.




.22.  Escrow
      Agent is authorized, in its sole discretion, to comply with orders issued or
      process entered by any court with respect to the Hold Back Consideration,
      without determination by Escrow Agent of such court’s jurisdiction in the
      matter. If any portion of the Hold Back Consideration is at any time attached,
      garnished or levied upon under any court order, or in case the payment,
      assignment, transfer, conveyance or delivery of any such property shall be
      stayed or enjoined by any court order, or in case any order, judgment or decree
      shall be made or entered by any court affecting such property or any part
      thereof, then and in any such event, Escrow Agent is authorized, in its sole
      discretion, to rely upon and comply with any such order, writ, judgment or
      decree which it is advised by legal counsel selected by it is binding upon
      it
      without the need for appeal or other action; and if Escrow Agent complies with
      any such order, writ, judgment or decree, it shall not be liable to any of
      the
      parties hereto or to any other person or entity by reason of such compliance
      even though such order, writ, judgment or decree may be subsequently reversed,
      modified, annulled, set aside or vacated. Notwithstanding anything in this
      Escrow Agreement to the contrary, in no event shall Escrow Agent be liable
      for
      any special, indirect or consequential loss or damage of any kind whatsoever
      (including, but not limited to, lost profits), even if Escrow Agent has been
      advised of the likelihood of such loss or damage and regardless of the form
      of
      action.


-8-




4.  Indemnification
      of Escrow Agent. From
      and
      at all times after the date of this Escrow Agreement, Acquiror and the
      Stockholder Representative (on behalf of the Series D Stockholders), jointly
      and
      severally, shall, to the fullest extent permitted by law and to the extent
      provided herein, indemnify and hold harmless Escrow Agent and each director,
      officer, employee, attorney, agent and affiliate of Escrow Agent (collectively,
      the “ ***Indemnified
      Escrow Agent Parties*** ”)
      against any and all actions, claims, losses, damages, liabilities, costs and
      expenses of any kind or nature whatsoever (including without limitation
      reasonable attorneys’ fees, costs and expenses) incurred by or asserted against
      any of the Indemnified Escrow Agent Parties from and after the date hereof,
      whether direct, indirect or consequential, as a result of or arising from or
      in
      any way relating to any claim, demand, suit, action or proceeding (including
      any
      inquiry or investigation) by any person, whether threatened or initiated,
      asserting a claim for any legal or equitable remedy against any person under
      any
      statute or regulation, including, but not limited to, any federal or state
      securities laws, or under any common law or equitable cause or otherwise,
      arising from or in connection with the negotiation, preparation, execution,
      performance or failure of performance of this Escrow Agreement or any
      transactions contemplated herein, whether or not any such Indemnified Escrow
      Agent Party is a party to any such action, proceeding, suit or the target of
      any
      such inquiry or investigation; *provided, however* ,
      that no
      Indemnified Escrow Agent Party shall have the right to be indemnified hereunder
      for any liability finally determined by a court of competent jurisdiction,
      subject to no further appeal, to have resulted from the gross negligence or
      willful misconduct of such Indemnified Escrow Agent Party. If any such action
      or
      claim shall be brought or asserted against any Indemnified Escrow Agent Party,
      such Indemnified Escrow Agent Party shall promptly notify Acquiror and the
      Stockholder Representative in writing, and Acquiror and the Stockholder
      Representative (on behalf of the Series D Stockholders) shall assume the defense
      thereof, including the employment of counsel and the payment of all expenses.
      Such Indemnified Escrow Agent Party shall have the right to employ separate
      counsel (who may be selected by such Indemnified Escrow Agent Party in its
      sole
      discretion) in any such action and to participate in the defense thereof, and
      the fees and expenses of such counsel shall be paid by such Indemnified Escrow
      Agent Party. All of the foregoing losses, damages, costs and expenses of the
      Indemnified Escrow Agent Parties shall be payable by Acquiror and the
      Stockholder Representative (on behalf of the Series D Stockholders), jointly
      and
      severally, to the extent of the Hold Back Consideration upon demand by such
      Indemnified Escrow Agent Party. The obligations of Acquiror and the Stockholder
      Representative under this Section 12 shall
      survive any termination of this Escrow Agreement and the resignation or removal
      of Escrow Agent shall be independent of any obligation of Escrow
      Agent.




The
      parties agree that neither the payment by Acquiror and the Stockholder
      Representative (on behalf of the Series D Stockholders) of any claim by Escrow
      Agent for indemnification hereunder nor the disbursement of any amounts to
      Escrow Agent from the Hold Back Account in respect of a claim by Escrow Agent
      for indemnification shall impair, limit, modify, or affect, as among Acquiror
      and the Stockholder Representative, the respective rights and obligations of
      Acquiror and the Stockholder Representative under the Merger Agreement .




4.  Fees
      and
      Expenses of Escrow Agent. Escrow
      Agent shall be compensated for its services hereunder in accordance with **Schedule B** attached
      hereto. All of the compensation and reimbursement obligations set forth in
      this Section 13 shall be
      split equally between Acquiror
      and the Stockholder Representative (on behalf of the Series D
      Stockholders).




4.  Consent
      to Jurisdiction and Venue. Each
      party hereto irrevocably submits to the exclusive jurisdiction of the federal
      and state courts located in the State of New York for purposes of any suit,
      action or other proceeding arising out of this Escrow Agreement (and agrees
      not
      to commence any action, suit or proceeding relating hereto except in such
      courts). Each party further agrees that service of any process, summons, notice
      or document by U.S. registered mail to such party’s respective address set forth
      in Section 15 shall be
      effective service of process for any action, suit or proceeding with respect
      to
      any matters to which it has submitted to jurisdiction as set forth in the
      immediately preceding sentence. Each party irrevocably and unconditionally
      waives any objection to the laying of venue of any action, suit or proceeding
      arising out of this Escrow Agreement in the federal or state courts located
      in
      the State of New York and hereby further irrevocably and unconditionally waives
      and agrees not to plead or claim in any such court that any such action, suit
      or
      proceeding brought in any such court has been brought in an inconvenient
      forum.


-9-




4.  Notices. All
      notices and other communications hereunder shall be in writing and shall be
      deemed given if they are: (a) delivered in person, (b) transmitted by facsimile
      (with confirmation), (c) transmitted by email (with confirmation) (d) mailed
      by
      certified or registered mail (return receipt requested), or (e) delivered by
      an
      express courier (with confirmation) to a party at its address listed below
      (or
      at such other address as such party shall deliver to the other party by like
      notice):




If
                  to Acquiror:
              YM
                  BioSciences Inc.5045
                  Orbitor DriveSuite
                  400, Building 11Mississauga,
                  Ontario L4W 4Y4Attention:
                  David G.P. AllanFacsimile:
                  (905) 629-4959with
                  copies (which shall not constitute notice) to:Heenan
                  Blaikie LLPSuite
                  2600, Royal Bank Plaza200
                  Bay Street, South TowerToronto,
                  Ontario M5J 2J4Attention:
                  Sonia M. YungFacsimile:
                  866-285-9466andDorsey
                  & Whitney LLPSuite
                  1605, 777 Dunsmuir StreetP.O.
                  Box 10444, Pacific CentreVancouver,
                  B.C. V7Y 1K4Attention:
                  Daniel M. MillerFacsimile:
                  604-687-8504If
                  to Stockholder
              OrbiMed
                  Advisors, LLCRepresentative:
              767
                  3rd Avenue, 30th FloorNew
                  York, NY 10017Attention:
                  Michael Sheffery andEric
                  BittlemanFacsimile:
                  _______________
  -10-
  If to Escrow Agent:
              JPMorgan
                  Chase Bank, National Association4
                  New York Plaza – 21st FloorNY,
                  NY 10004Facsimile:
                  212.623.6168Email:
                  Sandra.F.Frierson@jpmorgan.comAttn:
                  Sandra F. Frierson




4.  Amendment,
      Parties in Interest, Assignment, Etc. This
      Agreement may be amended, modified or supplemented only by a written instrument
      duly executed by each of the parties hereto. If any provision of this Agreement
      shall for any reason be held to be invalid, illegal, or unenforceable in any
      respect, such invalidity, illegality, or unenforceability shall not affect
      any
      other provision hereof, and this Agreement shall be construed as if such
      invalid, illegal or unenforceable provision had never been contained herein.
      This Agreement shall be binding upon and inure to the benefit of and be
      enforceable by the respective heirs, legal representatives, successors and
      permitted assigns of the parties hereto. No party hereto shall assign this
      Agreement or any right, benefit or obligation hereunder.




4.  Governing
      Law. This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      state of New York, without giving effect to the conflicts of laws principles
      thereof.




4.  Counterparts. This
      Agreement may be executed in two or more counterparts (delivery of which may
      occur via facsimile), each of which shall be binding as of the date first
      written above, and, when delivered, all of which shall constitute one and the
      same instrument. A facsimile signature or electronically scanned copy of a
      signature shall constitute and shall be deemed to be sufficient evidence of
      a
      party’s execution of this Agreement, without necessity of further proof. Each
      such copy shall be deemed an original, and it shall not be necessary in making
      proof of this Agreement to produce or account for more than one such
      counterpart.




4.  Account
      Opening Information/TINs.  To
      help
      the government fight the funding of terrorism and money laundering activities,
      Federal law requires all financial institutions to obtain, verify, and record
      information that identifies each person who opens an account. When the Hold Back
      Account is opened, Escrow Agent shall request for information that will allow
      Escrow Agent to identify each party’s relevant Taxpayer Identification Number
      (“ ***TIN*** ”).
      Acquiror, and the Stockholder Representative as to each Series D Stockholder,
      shall represent that the correct TIN assigned by the Internal Revenue Service
      (“ ***IRS*** ”)
      or any
      other taxing authority to it, or in the case of the Stockholder Representative
      to each Series D Stockholder, will be forwarded to Escrow Agent. In addition,
      all Earnings earned under this Escrow Agreement shall be allocated in accordance
      with Section 6 .
      Notwithstanding anything else in this Escrow Agreement, Escrow Agent shall
      report and, as required, withhold any taxes as it determines may be required
      by
      any law or regulation in effect at the time of the distribution. Except as
      otherwise provided in this Escrow Agreement, in the absence of timely direction,
      all proceeds of the Hold Back Consideration shall be retained in the Hold Back
      Account and reinvested from time to time by Escrow Agent as provided in Section 6 .




-11-




4.  Security
      Procedures. In
      the
      event funds transfer instructions are given (other than in writing at the time
      of execution of this Escrow Agreement), whether in writing, by telecopier,
      Escrow Agent is authorized to seek confirmation of such instructions by
      telephone call-back to the person or persons designated on **Schedule C** hereto,
      and Escrow Agent may rely upon the confirmation of anyone purporting to be
      the
      person or persons so designated. Each funds transfer instruction shall be
      executed by an authorized signatory, a list of such authorized signatories
      is
      set forth on **Schedule C** .
      The
      undersigned is authorized to certify that the signatories on **Schedule C** are
      authorized signatories. The persons and telephone numbers for call-backs may
      be
      changed only in a writing actually received and acknowledged by Escrow Agent.
      If
      Escrow Agent is unable to contact any of the authorized representatives
      identified on **Schedule C** ,
      Escrow
      Agent is hereby authorized to seek confirmation of such instructions by
      telephone call-back to the Stockholder Representative and any one or more of
      Acquiror’s executive officers (“ ***Executive
      Officers*** ”),
      as
      Escrow Agent may select. Such Executive Officer shall deliver to Escrow Agent
      a
      fully executed Incumbency Certificate, and Escrow Agent may rely upon the
      confirmation of anyone purporting to be any such officer. Escrow Agent and
      the
      beneficiary’s bank in any funds transfer may rely solely upon any account
      numbers or similar identifying numbers provided by Acquiror or the Stockholder
      Representative to identify (a) the beneficiary, (b) the beneficiary’s bank, or
      (c) an intermediary bank. Escrow Agent may apply any of the escrowed funds
      for
      any payment order it executes using any such identifying number, even when
      its
      use may result in a person other than the beneficiary being paid, or the
      transfer of funds to a bank other than the beneficiary’s bank or an intermediary
      bank designated. The parties to this Escrow Agreement acknowledge that these
      security procedures are commercially reasonable.




**[** *Signatures
      appear on next page* **]**


-12-




**IN
      WITNESS WHEREOF,** the
      parties hereto have caused this Escrow Agreement to be executed under seal
      as of
      the date first above written.




**ACQUIROR:****YM
                BIOSCIENCES, INC.**By:Name:Title:**STOCKHOLDER
                REPRESENTATIVE:****ORBIMED
                ADVISORS, LLC**By:Name:Title:**ESCROW
                AGENT:****JPMORGAN
                CHASE BANK, NATIONAL ASSOCIATION**By:Name:
            Michael
                KuzmiczTitle:
            Vice
                President




**[Signature
      Page to Escrow Agreement]**










**SCHEDULE
      A**




Permitted
      Investment of Hold Back Consideration




 ̈  JPMorgan
      Chase Bank, N.A. Money Market Account;




 ̈  A
      trust
      account with JPMorgan Chase Bank, N.A.;




 ̈  A
      money
      market mutual fund, including without limitation the JPMorgan Fund or any other
      mutual fund for which the Depository Agent or any affiliate of the Depository
      Agent serves as investment manager, administrator, shareholder servicing agent
      and/or custodian or subcustodian, notwithstanding that (i) the Depository Agent
      or an affiliate of the Depository Agent receives fees from such funds for
      services rendered, (ii) the Depository Agent charges and collects fees for
      services rendered pursuant to this Depository Agreement, which fees are separate
      from the fees received from such funds, and (iii) services performed for such
      funds and pursuant to this Depository Agreement may at times duplicate those
      provided to such funds by the Depository Agent or its affiliates.









**SCHEDULE
      B**




Fees
      Payable to Escrow Agent





$3,
      000  Payable
      Upon Account Opening and in Advance each year in which Escrow Agent acts as
      Escrow Agent. Annual fees are non pro-rated for partial years. There shall
      be no
      additional charges, subject to Sections 8(b), 10 and 12 of this Escrow
      Agreement.





**SCHEDULE
      C**







Telephone
      Number(s) and signature(s) for




Person(s)
      Designated to give and confirm Funds Transfer Instructions





Telephone
      call backs shall be made to both Acquiror and the Stockholder Representative
      if
      joint instructions are required pursuant to the agreement. All funds transfer
      instructions must include the signature of the person(s) authorizing said funds
      transfer and must not be the same person confirming said transfer.





**If
                to Acquiror:****Name**
            
            **Telephone
                Number**
            
            **Signature**





**If
                to Stockholder Representative:****Name**
            
            **Telephone
                Number**
            
            **Signature**







**EXHIBIT
      A**





**Series
                D Stockholders****Name
                and Address of**
              **Series
                D Stockholders**
            
            **Amount
                of Hold**
              **Back
                Cash**
            
            **Number
                of Hold**
              **Back
                Shares**
            
            **TIN
                Number**








**EXHIBIT
      B**




**FORM
      OF JOINT WRITTEN DIRECTION**


**(Hold
      Back Account)**




[Date]




***VIA
      [describe permitted delivery method]***




[ESCROW
      AGENT]





Re:
            YM
                BioSciences Inc. Escrow Agreement dated as of _______ __, 2006 Hold
                Back
                Account (the “Hold Back
                Account”)




Gentlemen:




Reference
      is made to the above referenced Hold Back Account. Pursuant to that certain
      Escrow Agreement (the “ Escrow
      Agreement ”)
      dated
      ____________, 2006, by and YM Biosciences Inc., a corporation existing under
      the
      laws of Nova Scotia, Canada (“ Acquiror ”),
      OrbiMed Advisors, LLC (the “ Stockholder
      Representative ”),
      and
      J.P. Morgan Chase Bank, National Association (the “ Escrow
      Agent ”),
      we
      hereby instruct you to make the following disbursements:




Pay
      the
      amount of $___________ from the Hold Back Account to the Escrow Agent as
      follows:




***[insert
      address or wire instructions]***




Such
      Payment is being made pursuant to Section 9.1 of the Merger
      Agreement.




Pay
      the
      amount of $___________ from the Hold Back Account to Acquiror as
      follows:




***[insert
      address or wire instructions]***




Such
      Payment is being made pursuant to Section 9.1 of the Merger
      Agreement.







Very
                truly yours,ORBIMED
                ADVISORS, LLCAuthorized
                OfficerYM
                BIOSCIENCES INC.By:Authorized
                Officer





**EXHIBIT
      C**




**Certificate
                No.**
            
            **No.
                of Shares**
            
            **Date
                Issued**
            
            **Registration**





**Exhibit
      E**




**Form
      of Target Legal Opinion**





April
      _____, 2006


YM
      BioSciences Inc.


5045
      Orbitor Drive


Suite
      400, Building II


Mississauga,
      Ontario L4W 4Y4





Re:
            Agreement
                and Plan of Merger by and among YM BioSciences Inc.,YM
                BioSciences USA Inc., YM Merger Sub, Inc.. EximiasPharmaceutical
                Corporation and OrbiMed Advisors. LLC, asStockholder
                Representative





Ladies
      and Gentlemen:





We
      have
      acted as counsel to Eximias Pharmaceutical Corporation, a Delaware corporation
      (“Target”), in connection with that certain Agreement and Plan of Merger, dated
      April ______, 2006, by and among Target, YM BioSciences Inc., a corporation
      existing under the laws of Nova Scotia, Canada (“Acquiror”), YM BioSciences USA
      Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror (“YM
      BioSciences USA”), YM Merger Sub, Inc., a Delaware corporation and wholly-owned
      subsidiary of YM BioSciences USA (“Merger Sub”), and OrbiMed Advisors, LLC, as
      Stockholder Representative (the “Merger Agreement”). This opinion is delivered
      to you pursuant to Section 7.1(e) of the Merger Agreement. All capitalized
      terms
      used but not defined herein have the meanings assigned thereto in the Merger
      Agreement.





In
      rendering this opinion, we have examined the Merger Agreement, including all
      schedules thereto, the Escrow Agreement and the Certificate of Merger
      (collectively, the “Transaction Documents”), We have also examined: (i)
      originals or certified, conformed or photostatic copies of the restated
      certificate of incorporation of Target, (ii) the bylaws Target, (iii) certain
      resolutions of the board of directors and stockholders of Target, and (iv)
      such
      other documents, records and instruments as we have deemed necessary and
      appropriate to form a basis for the opinions expressly set forth herein. We
      have
      also made such examinations of laws, certificates of public officials,
      instruments, documents and corporate records and have made such other
      investigations as we have deemed necessary in connection with the opinions
      hereinafter set forth. In making such examination, we have assumed: (i) the
      genuineness of all signatures (other than those of Target on the Transaction
      Documents), (ii) the legal capacity of natural persons, (iii) the accuracy,
      completeness and authenticity of all records and documents submitted to us
      as
      originals, (iv) the conformity to original documents of all documents submitted
      to us as certified. conformed, photostatic or facsimile copies, (v) the
      authenticity of the originals of such latter documents, (vi) as to factual
      matters, the accuracy and continuing validity of all certificates,
      representations, warranties and covenants of Target, whether set forth in the
      Transaction Documents or otherwise supplied to us, (vii) each certificate issued
      by any government official, office or agency concerning a party’s property or
      status is accurate, complete and authentic and that all official public records
      are accurate and complete, and (viii) the accuracy and completeness of the
      corporate records of Target.








As
      to
      certain matters of fact relevant to the opinions expressly set forth herein,
      we
      have relied solely upon, without investigation, and assumed the accuracy of:
      (i)
      the representations and warranties of Target set forth in any of the Transaction
      Documents, (ii) the restated certification of incorporation of Target, (iii)
      certificates of the respective officers of Target and (iv) certificates of
      public officials. To the extent that our opinion is based on matters known
      to us
      or of which we have knowledge, such knowledge is limited to the conscious
      awareness, without investigation, of the current attorneys of Pepper Hamilton
      LLP who have devoted substantive attention to the representation of Target
      in
      connection with the Merger Agreement. No inference of our knowledge may be
      drawn
      merely by our representation of Target, Additionally, we have not undertaken
      a
      search of any records of any court, administrative agency or governmental
      authority. With respect to the opinions set forth in Paragraph 1 below as to
      good standing, we have relied solely upon certificates of public
      officials.





This
      opinion is limited to the laws and regulations of the United States, the
      Delaware General Corporation Law and the other laws of the State of Delaware.
      We
      render no opinion with respect to the laws of any other jurisdiction. We express
      no opinion, implicitly or otherwise, on any matter not expressly set forth
      herein.





Based
      upon the foregoing and subject to the qualifications, exceptions and limitations
      stated herein, we are of the opinion that:





1.  Target
      is
      a corporation, duly organized, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation. Target has all requisite
      corporate power and authority necessary to enable it to own, operate, lease
      or
      otherwise hold its Assets and to carry on its business in the places and in
      the
      manner as presently conducted.





2.  Target
      has full power and authority, and has taken all corporate action necessary,
      to
      execute, deliver and perform the Merger Agreement, to consummate the
      transactions contemplated thereby and to perform its obligations thereunder.
      The
      execution and delivery of the Merger Agreement by Target and the consummation
      by
      Target of the transactions contemplated thereby have been duly approved by
      the
      Target Board and the Stockholders. The Merger Agreement has been duly executed
      and delivered by Target and, assuming the due authorization, execution and
      delivery thereof by Acquiror, YM BioSciences USA and Merger Sub, is the valid
      and binding obligation of Target, enforceable against it and all of the Series
      D
      Stockholders (including, without limitation, as to Section 3.1(f), Article
      9 and
      Section 10.10 of the Merger Agreement even though the Series D Stockholders
      are
      not parties to the Merger Agreement) in accordance with its terms, except as
      enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
      moratorium and other laws affecting creditors’ rights generally and except
      insofar as the availability of equitable remedies may be limited by Applicable
      Law.





3.  The
      Escrow Agreement is valid and binding on the Series D Stockholders, enforceable
      against them in accordance with its terms, except as enforcement may be limited
      by applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      affecting creditors’ rights generally and except insofar as the availability of
      equitable remedies may be limited by Applicable Law.








The
      opinions herein expressed are subject to the following assumptions, limitations,
      qualifications and exceptions:





a.  We
      have
      assumed that there has not been any mutual mistake of fact or misunderstanding,
      fraud, duress or undue influence in connection with the transactions
      contemplated by the Transaction Documents.





b.  No
      opinion is given with respect to the validity or enforceability of any
      provisions of the Transaction Documents under which any party thereto waives
      any
      rights afforded to any party under any provisions of the U.S.
      Constitution.





c.  We
      express no opinion as to the effect of other agreements or understandings among
      the parties, written or oral, or any usage of trade or course of prior dealing
      among the parties or whether, in either case, any of the foregoing would define,
      supplement or qualify the terms of the Transaction Documents.





d.  No
      opinion is given as to any provision in the Transaction Documents that purports
      to:





(1)  require
      the payment or reimbursement of any fee, cost, expense or other item that is
      unreasonable in nature or amount;





(2)  preclude
      modification of any of the Transaction Documents through conduct, custom or
      course of performance, action or dealing;





(3)  define,
      waive or set standards for good faith, reasonableness, commercial
      reasonableness, fair dealing, diligence or the like;





(4)  govern
      the election of remedies or provide that remedies are cumulative;
      or




(5)  waive
      or
      restrict the right to a jury trial, or relate to jurisdiction, service of
      process or governing law.





e.  No
      opinion is given to the enforceability of the Transaction Documents in
      accordance with terms and conditions of the Transaction Documents to the extent,
      if any, that any provision of the Transaction Documents provides for
      indemnification, contribution, waiver or release by a party under circumstances
      in which such term and condition of such Transaction Documents may be limited
      or
      rendered unenforceable, in whole or in part, by applicable federal or state
      securities laws, criminal statutes, the policies underlying such laws or public
      policy generally. No opinion is given herein with respect to the remedy of
      specific performance.








f.  No
      opinion is given as to:




(1)  the
      right
      to exercise remedies upon the happening of a non- material breach of any of
      the
      Transaction Documents (including material breaches of non- material
      provisions);





(2)  the
      effect of applicable bankruptcy, insolvency, fraudulent conveyance,
      reorganization, moratorium or similar laws of general application relating
      to or
      affecting the enforcement of the rights of creditors on the enforceability
      of
      the Transaction Documents; or





(3)  the
      effect of general principles of equity, including without limitation, concepts
      of materiality, reasonableness, good faith and fair dealing, the availability
      of
      specific performance and injunctive relief; regardless of whether considered
      in
      a proceeding at law or in equity or the enforceability of covenants not to
      compete.





g.  No
      opinion is rendered as to matters not specifically referred to herein and under
      no circumstances are you to infer from anything stated or not stated herein
      any
      opinion with respect to which such reference is not made. In furtherance and
      not
      in limitation of the foregoing, except as otherwise expressly set forth in
      this
      opinion letter, no opinion is expressed herein as to any of the topics listed
      under Section 19 “Specific Legal Issues” of the Third-Party Legal Opinion
      Report, published in 1991 by the Section of Business Law of the American Bar
      Association.





This
      opinion is rendered as of the date hereof and we assume no obligation to modify,
      update or supplement this opinion to reflect any facts or circumstances which
      may hereafter come to our attention, or any changes in laws which may hereafter
      occur. The opinions expressed herein have been delivered to you in connection
      with the execution and delivery of the Merger Agreement and may be relied upon
      solely by you in connection therewith. This opinion may not be quoted by you
      or
      any other person in whole or in part or otherwise referred to, filed with,
      or
      furnished to any person or entity, and may not be relied upon by any such person
      or entity, without our prior written consent in each instance (which may be
      withheld for any reason).





Very
                truly yours,PEPPER
                HAMILTON LLP





**Exhibit
      F**




**Form
      of Acquiror Legal Opinion**


I-1




●,
      2006




Eximias
      Pharmaceutical Corporation


1055
      Westlakes Drive


Suite
      200


Berwyn,
      Pennsylvania 19312




Dear
      Sirs/Mesdames:





**Re:**  **Acquisition
      of Eximias Pharmaceutical Corporation** ****** **by
      YM BioSciences Inc.**








We
      have
      acted as counsel to YM BioSciences Inc. (the “ **Corporation** ”)
      in
      connection with the acquisition (the “ **Acquisition** ”)
      of
      Eximias Pharmaceutical Corporation (the “ **Target** ”)
      by way
      of merger under applicable Delaware laws of YM Merger Sub (“ **Merger**  **Sub** ”)
      and
      the Target pursuant to a merger agreement dated April 13, 2006, (the
“ **Merger**  **Agreement** ”)
      among
      the Corporation, YM BioSciences USA Inc. (“ **YM
      USA** ”),
      Merger Sub and Target.





Pursuant
      to the Acquisition, the Corporation has issued an aggregate of ● common shares
      in the capital of the Corporation (“ **Common
      Shares** ”)
      to
      former holders of Series D shares of common stock of the Target.





This
      opinion is being delivered to you pursuant to Section ● of the Merger Agreement.
      Capitalized terms used and not otherwise defined shall have the meanings
      ascribed thereto in the Merger Agreement.




For
      the
      purposes of our opinions expressed herein, the term **“Canadian
      Securities Laws”** means,
      collectively, all applicable securities laws in each of the provinces of Ontario
      and Québec and the respective regulations, instruments, notices and rules under
      such laws together with applicable published policy statements, notices and
      orders of the Ontario Securities Commission (the “ **OSC** ”)
      and
      the Autorité des marchés financiers (“ **AMF** ”),
      respectively.




**A.**  **Documentation**




As
      Canadian counsel to the Corporation, we have participated, together with Pepper
      Hamilton and Davies Ward Phillips Vineberg LLP, counsel to the Target in the
      preparation of:





(a)
            the
                Merger****Agreement;
                and




(b)
            the
                escrow agreement dated ●, 2006 (the “**Escrow
                Agreement**”)
                among the Corporation, OrbiMed Advisors LLC, in its capacity as the
                Stockholder Representative under the Merger Agreement, and J.P. Morgan
                Chase Bank, National Association.




**B.**  **Jurisdiction**




We
      are
      solicitors qualified to practice law in the provinces of Ontario and Québec and
      we express no opinion as to any laws or any matters governed by any laws other
      than the laws of such provinces and the federal laws of Canada applicable
      therein. Insofar as the opinions in paragraphs 1 to 6, inclusive, relate to
      matters governed by laws other than the laws of such provinces or the federal
      laws of Canada applicable therein, we have relied upon the opinions of the
      following local counsel:








(i)
            with
                respect to matters of law in the Province of Nova Scotia, Stewart
                McKelvey
                Stirling Scales (“**Nova
                Scotia Counsel**”),
                and




(ii)
            with
                respect to matters of law in the United States, Dorsey & Whitney LLP
                (“**U.S.
                Counsel**”),




(collectively,
      the “ **Local
      Opinions** ”)
      dated
      the date hereof, copies of which have been delivered to you concurrently
      herewith. To the extent that any Local Opinion on which we are relying is based
      on any assumption or is made subject to any limitation or qualification, our
      opinion given in reliance on any such opinion is based on the same assumption
      and is subject to the same limitation or qualification.




**C.**  **Scope
      of Examinations**




The
      opinions expressed herein are based upon and subject to legislation,
      regulations, rules, policies, procedures and administrative practices of the
      applicable securities regulatory authorities in effect on the date hereof,
      and
      we assume no obligation to update the opinions set forth herein after the date
      hereof.





In
      connection with the opinions expressed in this letter, we have considered such
      questions of law and examined such statutes, public and corporate records,
      certificates of governmental authorities and officers of the Corporation, other
      documents and conducted such other examinations as we have considered necessary
      for the purpose of our opinion.




**D.**  **Assumptions
      and Reliances**




We
      have
      assumed the legal capacity of all individuals, the veracity of the information
      contained in the documents, the genuineness of all signatures, the authenticity
      of all documents submitted to us as originals and the conformity to authentic
      original documents of all documents submitted to us as certified, conformed,
      photostatic or facsimile copies.





The
      opinions with respect to the Corporation set out in paragraphs 1 through 5
      inclusive (except as it relates to YM USA and Merger Sub) relate to the laws
      of
      the Province of Nova Scotia and, in expressing such opinions, we have relied
      solely upon the Local Opinion of Nova Scotia Counsel.





The
      opinions set out in paragraphs 3 and 4 relate to the laws of Delaware and the
      federal laws of the United States and, in expressing such opinions, we have
      relied solely upon the Local Opinion of U.S. Counsel.





In
      expressing the opinion in paragraph 7 as to the Corporation’s status as a
      reporting issuer not in default in the provinces of Ontario and Québec, we have
      relied solely upon certificates dated ●, 2006 and ●, 2006 issued by the OSC and
      the AMF, respectively, copies of which has been delivered to you. We have
      assumed that these certificates continue to be accurate on the date
      hereof.





In
      rendering our opinion set forth in paragraph 10 below, we have relied solely
      on
      the conditional approval letter (the "TSX Letter") of the Toronto Stock Exchange
      (the "TSX") addressed to the Corporation dated ●, 2006, a copy of which has been
      provided to you.


2





We
      have
      also relied, as to certain factual matters, upon a certificate of an officer
      (the "Officer’s Certificate") of the Corporation dated the date hereof, a copy
      of which has been delivered to you.





We
      have
      assumed that each of the parties to the Agreements other than the Corporation,
      YM USA and Merger Sub, as applicable, has all requisite power and authority
      to
      enter into, execute, deliver and perform its obligations thereunder and to
      carry
      out the transactions contemplated thereby and that each of such documents
      constitutes a legal, valid and binding obligation of each of such parties
      enforceable against such other parties in accordance with its terms.





We
      have
      also assumed that there has been no advertising in connection with the issue
      and
      sale of the Common Shares or any other securities of the Corporation in the
      printed public media, on radio, television or telecommunications, including
      electronic display.





On
      the
      basis of the foregoing and subject to the qualifications hereinafter expressed,
      we are of the opinion that:





1.  Each
      of
      the Corporation, YM USA, and
      Merger Sub is a corporation continued or incorporated, as the case may be,
      and
      validly existing under the laws of its governing jurisdiction. The Corporation
      has the corporate power and authority to carry on its business, and has the
      corporate power and authority to own, lease and operate its properties and
      assets. YM USA and Merger Sub each are in good standing under the laws of the
      State of Delaware with corporate power to conduct any lawful business
      activity.




2.  The
      Corporation has the corporate power and capacity to enter into and to carry
      out
      its obligations under the Merger Agreement and the Escrow Agreement
      (collectively, the “ **Agreements** ”),
      including without limitation to allot and issue the Common Shares. YM USA and
      Merger Sub each have the corporate power to execute, deliver and perform the
      Merger Agreement.




3.  All
      necessary corporate action has been taken to authorize the execution and
      delivery by the Corporation of the Agreements and the performance by the
      Corporation of its obligations thereunder, including the allotment and issuance
      of the Common Shares.




4.  Each
      of
      the Agreements has been duly executed and delivered by the
      Corporation.




5.  The
      Merger Agreement has been duly authorized by all requisite corporate action,
      executed and delivered by each of YM USA and Merger Sub.




6.  The
      Common Shares have been validly authorized and issued as fully paid and
      non-assessable shares in the capital of the Corporation.




7.  The
      Corporation is a “reporting issuer” in the provinces of Ontario and Québec
      pursuant to applicable securities laws of such provinces and is not included
      in
      the list of defaulting reporting issuers maintained by the OSC and AMF,
      respectively, pursuant to Canadian Securities Laws.




8.  The
      issue
      of the Common Shares is exempt from the prospectus and registration requirements
      of Canadian Securities Laws and no filing, proceeding, approval, permit, consent
      or authorization is required to be made, taken or obtained by the Corporation
      under Canadian Securities Laws in connection with such issue.


3




9.  No
      prospectus will be required to be filed, and no other filing, proceeding,
      approval, consent or authorization is required to be made, taken or obtained
      pursuant to Canadian Securities Laws to permit the first trade of the Common
      Shares in the provinces of Ontario or Québec, as the case may be, through
      registrants registered under the Canadian Securities Laws of such province
      who
      comply with such Canadian Securities Laws, or in circumstances in which there
      is
      an exemption from the registration requirements of Canadian Securities Laws
      of
      such province, provided that:




(a)
            the
                Corporation is and has been a “reporting issuer”, as such term is defined
                by Securities Laws, in a jurisdiction of Canada, for the four months
                immediately preceding the first
                trade;




(b)
            such
                trade is not a “control distribution” as defined in National Instrument
                45-102 –*Resale
                of Securities*;




(c)
            no
                unusual effort is made to prepare the market or create a demand for
                the
                securities that are the subject of the
                trade;




(d)
            no
                extraordinary commission or other consideration is paid to a person
                or
                company in respect of the trade;
                and




(e)
            if
                the selling security holder is an “insider” or “officer” of the
                Corporation, as such terms are defined under Canadian Securities
                Laws, the
                selling security holder has no reasonable grounds to believe that
                the
                Corporation is in default of “securities legislation”, as defined in
                National Instrument 14-101.




10.  The
      Common Shares have been conditionally approved for listing by the TSX, subject
      to compliance with all requirements of the TSX as described in the TSX
      Letter.




The
      opinions in this letter are given solely for the benefit of the addressees
      hereof in connection with the transactions referred to herein and may not,
      in
      whole or in part, be relied upon by any other person.




Yours
      very truly,


4




**Schedule 3.1**




**Net
      Cash at Closing**




“ ***Net
      Cash at Closing*** ”
shall
      be defined, as of the Effective Date, as:





1.  The
      account balance of all of Target’s accounts with PNC Bank (Account No. ●,
      Certificate No. ●, Certificate No. ●), less any outstanding checks written by or
      on behalf of Target from such accounts that have not yet cleared, transfers
      from
      such accounts that have not yet been completed and plus any deposits into such
      accounts not yet credited, plus





2.  The
      value, marked to market on the day prior to the Effective Date, of all funds
      and
      securities held for the account of Target by BlackRock, including accrued
      interest and all investment gains and losses, whether or not realized, plus





3.  The
      value
      of all certificates of deposit held by PNC Bank as collateral for standby
      letters of credit guaranteeing lease obligations of Target, including interest
      paid or payable through the Closing Date, minus





4.  Amounts
      recorded in Target’s books as accounts payable, minus





5.  The
      total
      amount owed to employees and former employees of Target terminated at or prior
      to Closing for salary, fringe benefits and vacation benefits as of the Closing
      Date, minus





6.  The
      total
      amounts due to Gail Schulze, Jeff Randall, Lisa DeLuca, Scott Jackson and
      Gerrard Kennealey under employment agreements with Target as a result of a
      “Change of Control” or termination event, minus





7.  Amounts
      due to Susquehanna Investment Group, minus





8.  Amounts
      estimated to become payable by Target to trade creditors or other persons
      incurred prior to the Closing Date, excluding any estimated obligation to Chiron
      Corporation for minimum development expenditures for MACROTAQ or any estimated
      obligation to Pfizer (Agouron or Warner-Lambert) for Intellectual Property
      maintenance costs related to THYMITAQ, minus





9.  Amounts
      due to Pepper Hamilton LLP and Davies Ward Phillips & Vineberg LLP in
      connection with the transactions hereunder, whether paid prior to the Closing
      or
      payable as of immediately prior to the Closing Date, minus





10.  Costs
      of
      maintaining indefinite “tail” or “run out” coverage for Directors and Officers
      liability for six years and for product liability relating to clinical trials
      indefinitely unless premiums for such coverages shall have already been paid, minus





11.  The
      amount of the Expense Fund, equal to $100,000, to be held by the Stockholder
      Representative pursuant to this Agreement.


J-1