Exhibit 10.1

 

FORM OF SECURITIES PURCHASE AGREEMENT

 

TO:                          METHYLGENE INC. (the “Corporation”)

 

The undersigned (the “Purchaser”) hereby subscribes for and agrees to purchase (i) the number of units of the Corporation (the “Units”) set forth on the following page at a price of C$0.1243 per Unit (the “Subscription Price”); and (ii) C$[ ] principal amount (the “Debenture Subscription Price”) of unsecured convertible debentures issued by the Corporation (the “Debenture”), convertible into Units at a conversion price equal to the Subscription Price. The Purchaser agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Debentures, Common Shares and Warrants of MethylGene Inc.”. The Purchaser further agrees, without limitation, that the Corporation may rely upon its representations, warranties and covenants contained in this document. Each Unit purchased will consist of one (1) common share in the capital of the Corporation (a “Common Share”) and thirty one-hundredths (0.30) of a common share purchase warrant (each whole common share purchase warrant, a “Warrant”). Each whole Warrant shall be exercisable for a period of five (5) years following the Closing Date (as defined herein) and entitle the holder thereof to acquire one (1) Common Share (a “Warrant Share”) at a price of C$0.1492. The certificates representing the Debentures, Common Shares and Warrants will be registered and delivered as indicated on the following page.

 

[Signature page follows]

 











 

	
Beneficial Purchaser Information:
    	
 
    	
Number of Units:
    
	
 
    	
 
    	
 
    
	
Name   of Purchaser (please print)
    	
 
    	
 
    
	
 
    	
 
    	
Aggregate Subscription Price for the Units: C$
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Authorized   Signature
    	
 
    	
Deliver the Debentures, Common Shares and  Warrants as set forth below:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Official Capacity of Title (please print)
    	
 
    	
 
    
	
 
    	
 
    	
Name
    
	
 
    	
 
    	
 
    
	
Please   print name of individual whose signature 
    	
 
    	
 
    
	
appears   above if different than the name of the purchaser printed above.)
    	
 
    	
Account   Reference, if applicable
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Contact   Name
    
	
Purchaser’s   Address
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Registration Instructions:
    	
 
    	
 
    
	
 
    	
 
    	
Telephone   Number
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
Present Ownership of Securities:
    
	
 
    	
 
    	
List number and type(s) of securities held
    
	
Account   reference, if applicable
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address
    	
 
    	
 
    


 

ACCEPTANCE:  The Corporation hereby accepts the above subscription and agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Debentures, Common Shares and Warrants of MethylGene Inc.” and in this Agreement. The Corporation further agrees, without limitation, that the Purchaser may rely upon its representations, warranties and covenants contained in this document.

 

                      , 2011

 

METHYLGENE INC.

 

	
By:
    	
 
    	
 
    


 

THE “TERMS AND CONDITIONS OF SUBSCRIPTION FOR DEBENTURES, COMMON SHARES AND WARRANTS OF METHYLGENE INC.” AND SCHEDULES THERETO ARE INCORPORATED IN THIS SECURITIES PURCHASE AGREEMENT AND FORM INTEGRAL PARTS HEREOF.

 

[Signature page to SECURITIES PURCHASE AGREEMENT]

 











 

TERMS AND CONDITIONS OF SUBSCRIPTION

FOR DEBENTURES, COMMON SHARES AND WARRANTS OF METHYLGENE INC.

 

ARTICLE 1

DEFINITIONS

 

Certain terms and abbreviations used in this Agreement shall have the meaning given below:

 

“Affiliate” shall have the meaning to such term in NI 45-106. With respect to the Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as the Purchaser will be deemed to be an Affiliate of the Purchaser.

 

“Aggregate Subscription Price” means, as to the Purchaser, the aggregate amount to be paid for Units purchased hereunder as specified on the face page of this Agreement in immediately available funds.

 

“Agreement” means, collectively, the Securities Purchase Agreement attached hereto, the “Terms and Conditions of Subscription for Debentures, Common Shares and Warrants of MethylGene Inc.” and the “Schedules” hereto.

 

“Business Day” means any day (other than a Saturday, Sunday, statutory or civic holiday) on which banks are open during normal business hours in Montreal, Canada.

 

“C$” refers to the dollar currency of Canada. “Closing”

 

means the closing of the sale of the Units. “Closing Date”

 

means the date at which the Closing occurs.

 

“Common Share Equivalents” means any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Shares, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.

 

“Co-Lead Investors” means Baker Brothers Life Sciences, L.P. and Tavistock Life Sciences.

 

“Corporation Counsel” means Davies Ward Phillips & Vineberg LLP.

 

“Debentures” means, collectively, the unsecured convertible debentures, in the form of the Debenture certificate contained in Schedule B attached hereto delivered to the Co-Lead Investors on the date hereof.

 

“Debenture Shares” means the Common Shares issuable upon the conversion of the Debentures.

 

“Financial Statements” means the audited financial statements of MethylGene Inc. (now 9222-9129 Québec Inc.), the accompanying notes and the auditors’ report thereon for the year ended December 31, 2009 and the unaudited financial statements of the Corporation and the accompanying notes for the nine-month period ended September 30, 2010, all as filed with the securities regulators in each of the provinces of Canada pursuant to the applicable Securities Laws.

 

“Investors” means investors purchasing Units under this Offering, including the Purchaser, and “Investor” means any one of them.

 











 

“knowledge” means the actual knowledge of the senior officers of the Corporation with respect to such matter so long as such individual can demonstrate that he has made due inquiry in the circumstances regarding the relevant matter or, if any such individual cannot so demonstrate, the actual and constructive knowledge such individual would have had after making due inquiry regarding the relevant matter.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal or pre-emptive right.

 

“NI 45-106” means, collectively, National Instrument 45-106 — Prospectus and Registration Exemptions and Regulation 45-106 respecting Prospectus and Registration Exemptions (Québec).

 

“Offering” means the offering and sale by the Corporation of approximately C$34.5 million of Units.

 

“Permanent Information Record” means information concerning the Corporation contained in (i) the Financial Statements; (ii) the management proxy circular dated April 14, 2010, distributed in connection with the annual and special meeting of shareholders of MethylGene Inc. (now 9222-9129 Québec Inc.) held on May 14, 2010, (iii) the annual information form of MethylGene Inc. (now 9222-9129 Québec Inc.) dated March 31, 2010 for the year ended December 31, 2009, (iv) management’s discussion and analysis of the financial condition and results of operations for the financial year ended December 31, 2009 compared to the year ended December 31, 2008 and the quarter ended September 30, 2010 with the quarter ended September 30, 2009, all as filed with the securities regulators in each of the provinces of Canada pursuant to the applicable Securities Laws. Any documents of the type referred to in this paragraph or any material change report (excluding confidential material change reports) or any amendments or restatements thereto filed by the Corporation on SEDAR after the date of this Agreement and prior to the Closing Date, shall be deemed to be included in the definition of “Permanent Information Record” for the purposes of this Agreement.

 

“Permitted Liens” means (i) Liens for taxes not yet due or payable or that are being contested in good faith by appropriate Proceedings for which adequate reserves are maintained by the Corporation, (ii) Liens in favour of vendors, carriers, warehousemen, repairmen, mechanics, workers, materialmen, construction or other Liens arising by operation of law or in the ordinary course of business in respect of obligations that are not yet due or that are being contested in good faith by appropriate Proceedings, for which adequate reserves are maintained by the Corporation, (iii) easements, servitudes, reservations, rights of way, restrictions, covenants, conditions and other similar encumbrances whether of record or apparent on the premises, including road, highway, pipeline, railroad and utility easements and servitudes, and municipal, zoning and building by-laws which do not, individually or in the aggregate, materially interfere with the use, occupancy or operation of the leased real property of the Corporation as currently used, occupied and operated or as intended to be used, occupied and operated; (iv) statutory Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, employment insurance and other social security legislation that are not material; and (v) the Liens listed on Schedule 1.

 

“Person” means any individual (whether acting as an executor, trustee administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and pronouns have a similar extended meaning.

 

“Phase 2a Trial” means a clinical trial that is intended to meet the requirements of 21 CFR 312.21(b).

 

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“Private Placement” means any offering of securities by the Corporation that benefits from a prospectus exemption under NI 45-106.

 

“Proceeding” means an action, course of action, demand, claim, charge, prosecution, complaint, suit, inquiry, notice of violation, litigation, assessment, reassessment, grievance, arbitration, hearing, investigation or proceeding, whether civil, criminal or administrative, at law or in equity, commenced or threatened.

 

“Public Offering” means any offering of securities by the Corporation that does not benefit from a prospectus exemption under NI 45-106.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities” means, collectively, the Debentures, the Common Shares, the Warrants and the Warrant Shares.

 

“Securities Laws” means, as applicable, the securities laws, regulations, rules, rulings and orders in each of the provinces of Canada, in the United States and in each of the member states of the United States, the applicable policy statements issued by the securities regulators in each of the provinces of Canada and in the United States.

 

“SEDAR” means the System for Electronic Document Analysis and Retrieval (www.sedar.com) administered for the Canadian Securities Administrators.

 

“Shareholder Approval” means such approval as will be required by law and by the applicable rules and regulations of the TSX (or any successor entity) from the shareholders of the Corporation with respect to the transactions contemplated by the Transaction Documents.

 

“Subscription Price” means C$0.1243 per Unit.

 

“Subsidiary” means any direct and indirect domestic subsidiaries of the Corporation as of the date hereof.

 

“Transaction Documents” means this Agreement, the certificate representing the Debentures and the certificate representing the Warrants.

 

“TSX” means the Toronto Stock Exchange.

 

“U.S. Person” shall have the meaning assigned to such term by Rule 902 of Regulation S promulgated under the U.S. Securities Act, which definition shall include, but not be limited to, an individual resident in the United States and an estate or trust of which any executor or administrator or trustee, respectively, is a U.S. person, and any partnership or company organized or incorporated under the laws of the United States.

 

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

 

“United States” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

 

“Units” shall have the meaning ascribed to such term on the face page of this Agreement.

 

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“Warrants” means, collectively, the Common Shares purchase warrants, in the form of the Warrant certificate contained in Schedule A attached hereto delivered to the Purchasers at the Closing.

 

“Warrant Shares” means the Common Shares issuable upon the exercise of the Warrants.

 

ARTICLE 2

PURCHASE AND SALE

 

2.1          Closing. On the date hereof, upon the terms and subject to the conditions set forth herein, concurrent with the execution and delivery of this Agreement by the parties hereto, the Corporation agrees to sell, and the Purchaser agrees to purchase, a Debenture in the principal amount of C$[ ]. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Corporation agrees to sell, and the Purchaser agrees to purchase, the number of Units set forth on the face page of this Agreement. On the date hereof, the Purchaser shall deliver to the Corporation via wire transfer or a certified cheque in immediately available funds equal to the Debenture Subscription Price and the Corporation shall deliver to the Purchaser a Debenture in the principal amount of C$[ ]. The Purchaser shall deliver to the Corporation via wire transfer or a certified cheque in immediately available funds equal to their Aggregate Subscription Price and the Corporation shall deliver to the Purchaser its respective Common Shares and Warrants as determined pursuant to Section 2.3(a) and the other items set forth in Section 2.3 issuable at the Closing. The Purchaser understands that pursuant to the Offering, the Corporation intends to offer up to 277,494,756 Units to eligible investors.

 

2.2          Closing Date. The Closing Date shall be on or about April 1, 2011 or such other earlier date as the Corporation and the Investors shall mutually determine and shall, in no event, be later than May 15, 2011, and all events required to occur on the Closing Date shall occur, subject to satisfaction of the conditions set forth in Sections 2.3 or 2.4, at the offices of Corporation Counsel in Montreal, Canada.

 

2.3          Deliveries.

 

(a)           On the date hereof, the Corporation shall deliver or cause to be delivered to the Purchaser the following:

 

(i) this Agreement duly executed by the Corporation; and

 

(ii) a Debenture, in the form of Schedule B attached hereto, registered in the name of the Purchaser in the principal amount of C$[ ].

 

(b)           On the date hereof, the Purchaser shall deliver or cause to be delivered to the Corporation the following:

 

(i) this Agreement duly executed by the Purchaser; and

 

(ii) the Debenture Subscription Price by wire transfer or certified cheque to the account as specified in writing by the Corporation.

 

(c)           On the Closing Date, the Corporation shall deliver or cause to be delivered to the Purchaser the following:

 

(i) the number of Common Shares registered in the name of the Purchaser, that is equal to the number of Units set forth on the face page of this Agreement;

 

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(ii) a Warrant certificate, in the form of Schedule A attached hereto, registered in the name of the Purchaser to purchase up to a number of Common Shares equal to 30% of the number of Common Shares being purchased by the Purchaser pursuant to Section 2.3(a)(i), with an exercise price equal to C$0.1492 exercisable for a period of 5 years following the Closing Date, subject to the adjustments described in the Warrants;

 

(iii) written evidence that holders of more than 50% of the Common Shares currently outstanding are familiar with the terms of the Offering and are in favour of it;

 

(iv) a certificate addressed to the Investors, dated as of the Closing Date, signed by the President and Chief Executive Officer or by the Chief Financial Officer of the Corporation certifying on behalf of the Corporation that the representations and warranties of the Corporation contained herein are true and correct and all the terms and conditions relating to the Corporation contained herein and required to be performed and complied with by the Corporation by or at the time of Closing have been performed and complied with by the Corporation;

 

(v) a certificate dated as of the Closing Date, signed by appropriate officers of the Corporation, addressed to the Investors and the Investors’ counsel, with respect to the articles and by-laws of the Corporation, all resolutions of the Corporation’s board of directors (the “Board”) relating to the Offering and the incumbency and specimen signatures of signing officers; and

 

(vi) an opinion dated as of the Closing Date, of Corporation Counsel addressed to the Investors substantially in the form attached as Schedule 2.3(a)(vi) hereto.

 

(d)           On the Closing Date, the Purchaser shall deliver or cause to be delivered to the Corporation the following:

 

(i) the Purchaser’s Aggregate Subscription Price by wire transfer or certified cheque to the account as specified in writing by the Corporation.

 

2.4          Closing Conditions.

 

(a)           The obligations of the Corporation hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects when made and on the Closing Date (as if made on and as of the Closing Date) of the representations and warranties of the Purchaser contained herein;

 

(ii) all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the Corporation shall have received confirmation of any required approvals of the transactions contemplated hereby by all securities regulatory authorities having jurisdiction over such transactions;

 

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(iv) the Corporation shall have received written confirmation that holders of more than 50% of the Common Shares currently outstanding are familiar with the terms of the Offering and are in favour of it;

 

(v) the delivery by the Purchaser of the items set forth in Section 2.3(d) of this Agreement; and

 

(vi) the issue and sale of the Units shall be exempt from the prospectus and registration requirements provided for or obtained under the Securities Laws.

 

(b)           The obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date (as if made on and as of the Closing Date) of the representations and warranties of the Corporation contained herein;

 

(ii) all obligations, covenants and agreements of the Corporation required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the Corporation shall have received confirmation of any required approvals of the transactions contemplated hereby by all securities regulatory authorities having jurisdiction over such transactions;

 

(iv) the Corporation shall have received written confirmation that holders of more than 50% of the Common Shares currently outstanding are familiar with the terms of the Offering and are in favour of it;

 

(v) the delivery by the Corporation of the items set forth in Section 2.3(a) of this Agreement;

 

(vi) the issue and sale of the Units shall be exempt from the prospectus and registration requirements provided for or obtained under the Securities Laws; and

 

(vii)        there shall have been no Material Adverse Effect (as defined herein) with respect to the Corporation since the date hereof.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

3.1          Representations, Warranties and Covenants of the Corporation. Except as set forth under the corresponding section of the disclosure schedules attached to this Agreement (the “Disclosure Schedules”) which Disclosure Schedules shall be deemed a part hereof, the Corporation hereby makes the representations, warranties and covenants set forth below to the Purchaser.

 

(a)           Subsidiaries. The Corporation owns, directly or indirectly, no equity interest in any Subsidiary.

 

(b)           Organization and Qualification. The Corporation has been duly amalgamated, and is a valid and subsisting corporation under the laws of Canada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted

 

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and to own or lease its properties and assets. The Corporation is a reporting issuer (or its equivalent) not in default of any material requirement of the Securities Act of each of the provinces of Canada, and the respective regulations thereunder.

 

The Corporation is not in violation or default of any of the provisions of its certificate of amalgamation, bylaws or other organizational or charter documents. The Corporation is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Corporation; or (iii) a material adverse effect on the Corporation’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and to the Corporation’s knowledge no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)           Authorization; Enforcement. The Corporation has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder, including to issue, sell and deliver the Debentures and the Units in accordance with this Agreement. The execution and delivery of each of the Transaction Documents by the Corporation and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Corporation and no further action is required by the Corporation in connection therewith other than in connection with the Required Approvals. Each Transaction Document has been (or upon delivery will have been) duly executed by the Corporation and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

(d)           No Conflicts. The execution, delivery and performance of the Transaction Documents by the Corporation and the consummation by the Corporation of the other transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the articles of the Corporation, bylaws or other organizational or charter documents; or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Corporation, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Corporation debt or otherwise) or other understanding to which the Corporation is a party or by which any property or asset of the Corporation is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any applicable law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Corporation is subject, or by which any property or asset of the Corporation is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have a Material Adverse Effect.

 

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(e)           Filings, Consents and Approvals. The Corporation is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with any governmental authority or other Person in connection with the execution, delivery and performance by the Corporation of the Transaction Documents, other than: (i) the notice and application to the TSX for the issuance and sale of the Debentures, Common Shares and Warrants and the listing of the Common Shares and the Warrants Shares for trading thereon in the time and manner required thereby; (ii) Shareholder Approval, which will be satisfied by providing the TSX with written evidence that holders of more than 50% of the Common Shares are in favour of the Offering; and (iii) such securities filings as are required to be made under applicable Securities Laws (collectively, the “Required Approvals”).

 

(f)            Issuance of the Securities. The Debentures, Common Shares and Warrants are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents. The Warrant Shares and the Debenture Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and non-assessable, free and clear of all Liens. The Corporation has reserved from its duly authorized share capital up to 83,248,422 Common Shares for issuance of (i) the Warrant Shares on the date hereof, which will constitute, as of the Closing Date, a sufficient number of Common Shares to be issued upon exercise of all the Warrants sold to the Investors in the Offering; and (ii) the Debenture Shares on the date hereof, which constitute, as of the date hereof, a sufficient number of Common Shares to be issued upon conversion of the Debentures sold to the Co-Lead-Investors in the Offering.

 

The Common Shares and the Warrant Shares are and will be at the time of issue to the Purchaser, part of a class of shares of the Corporation that is presently, and will be at the time of issue to the Purchaser, listed and posted for trading on the TSX, and the Common Shares and the Warrant Shares issuable pursuant to this Agreement and/or upon the conversion of the Debentures and/or upon the exercise of the Warrants will, at the time of issue to the Purchaser, have been conditionally approved to be listed and posted for trading on the TSX. The Corporation will take or cause to be taken all steps necessary to comply with all of the requirements of the TSX in connection with the issuance to the Purchaser of the Common Shares, the Debentures, the Warrants and the Warrant Shares pursuant to this Agreement and to permit such Common Shares and Warrant Shares to be listed and posted for trading on the TSX.

 

(g)           Capitalization. The capitalization of the Corporation is set forth on Schedule 3.1(g). No Person has any right of first refusal, pre-emptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as disclosed in the Disclosure Schedules and as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Shares, or contracts, commitments, understandings or arrangements by which the Corporation is or may become bound to issue additional Common Shares or Common Share Equivalents. The issuance and sale of the Securities will not obligate the Corporation to issue Common Shares or other securities to any Person (other than the Investors) and will not result in a right of any holder of Corporation securities to adjust the exercise, conversion, exchange or reset price under such securities. All of the outstanding shares of the Corporation are validly issued, fully paid and non-assessable, have been issued in compliance with all Securities Laws, and none of such outstanding shares was issued in violation of any pre-emptive rights or similar rights to subscribe for or purchase securities. Except as otherwise provided in this Agreement, no

 

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further approval or authorization of any shareholder, the Board or others is required for the issuance and sale of the Securities. There are no shareholders agreements, voting agreements or other similar agreements with respect to the Corporation’s capital stock to which the Corporation is a party or, to the knowledge of the Corporation, between or among any of the Corporation’s shareholders.

 

(h)           Permanent Information Record; Financial Statements. The documents comprising the Permanent Information Record at their applicable dates of filing with the securities regulatory authorities pursuant to the applicable Securities Laws (i) complied in all material respects with the requirements of the Securities Laws; (ii) did not contain any misrepresentations; (iii) constituted full, true and plain disclosure of the material facts relating to the Corporation; and (iv) did not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made. The Financial Statements of the Corporation included in the Permanent Information Record complied in all material respects with applicable accounting requirements and the rules and regulations of Securities Laws with respect thereto as in effect at the time of filing. The Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in the Financial Statements or the notes thereto, and fairly present in all material respects the financial position of the Corporation as of and for the date thereof and the results of operations and cash flows for the period then ended.

 

(i)            Material Changes. Since the date of the Financial Statements, except as specifically disclosed in the Permanent Information Record or the Financial Statements: (i) there has been no event, occurrence or development that has had a Material Adverse Effect; (ii) the Corporation has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Financial Statements pursuant to GAAP or required to be disclosed in filings made with the regulatory authorities; (iii) the Corporation has not altered its method of accounting; (iv) the Corporation has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its share capital; and (v) the Corporation has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Corporation stock option plans. The Corporation does not have pending before any regulatory authorities any request for confidential treatment of information.

 

(j)            Litigation. There are no Proceedings pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation, or any of its respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (collectively, an “Action”) which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities; or (ii) could, if there were an unfavourable decision, have a Material Adverse Effect. Except as set forth on Schedule 3.1(j), neither the Corporation, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under the Securities Laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Corporation, there is not pending or contemplated, any investigation by the regulatory authorities involving the Corporation or any current or former director or officer of the Corporation. The regulatory authorities have not issued any stop order or other order suspending the effectiveness of any documents filed by the Corporation under the Securities Laws and the rules and policies of the TSX.

 

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(k)                                 Labour Relations. No material labour dispute exists or, to the knowledge of the Corporation, is imminent with respect to any of the employees of the Corporation.

 

(l)                                     Compliance. The Corporation: (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Corporation), nor has the Corporation received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived); (ii) is not in violation of any order of any court, arbitrator or governmental body; and (iii) neither is nor has been in material violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, provincial, state and local laws applicable to its business.

 

(m)                             Regulatory Permits. The Corporation possesses all material certificates, authorizations and permits issued by the appropriate Canadian federal, provincial or local regulatory authorities necessary to conduct its business (the “Material Permits”), and the Corporation has not received any notice of Proceedings relating to the revocation or modification of any Material Permit.

 

(n)                                 Title to Assets. The Corporation has good and marketable title to all real property owned by it that is material to the business of the Corporation and good and marketable title in all personal property owned by it that is material to the business of the Corporation, in each case free and clear of all Liens except for Permitted Liens. Any real property and facilities held under lease by the Corporation are held by it under valid, subsisting and enforceable leases of which the Corporation is in material compliance.

 

(o)                                 Patents and Trademarks. The Corporation owns, or has sufficient legal rights to use, all patents, patent applications, trademarks, trade names, copyrights, trade secrets and other proprietary information necessary or material for use in connection with its business as presently conducted (collectively, “Intellectual Property Rights”). The Corporation has not received a written notice that any of the Intellectual Property Rights used by the Corporation violates or infringes upon the existing rights of any Person. To the knowledge of the Corporation, all such Intellectual Property Rights are enforceable and there is no existing infringement by the Corporation of any currently issued and enforceable patents, trademarks, trade names, copyrights or trade secrets of any other Person. To the Corporation’s knowledge, the Corporation has not violated or, by conducting its business as presently conducted or as presently proposed to be conducted, as indicated in the Permanent Information Record, would not violate, any currently issued and enforceable patents, trademarks, trade names, copyrights or trade secrets of any other Person. The Corporation is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his or her best efforts to promote the interests of the Corporation or that would conflict with the Corporation’s business. Except as indicated in the Permanent Information Record, no claim by any third party contesting the validity, enforceability, use or ownership of any of the Corporation’s rights to the Intellectual Property Rights has been made, is currently outstanding or, to the knowledge of the Corporation, is threatened. The Corporation has taken all commercially reasonable actions to maintain and protect all of the Corporation’s Intellectual Property Rights. The Corporation does not believe it is or will be necessary to utilize any inventions of any of its employees (or people it currently intends to hire) made prior to or outside the scope of their employment by the Corporation.

 

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(p)                                 Environment. The Corporation has not received notice that it is in default, in a material manner, under any applicable law requirements relating to the protection and preservation of the environment, occupational health and safety or the manufacture, processing, distribution, sale, use, treatments, storage, disposal, discharge, destruction, packaging, labelling, transport or handling of any pollutants, contaminants, chemicals, dangerous substances, or toxic or hazardous wastes, materials or substances (“Environmental Laws”). The Corporation has not received any notice that it is not in material compliance with any reporting and monitoring requirements under any Environmental Laws. The Corporation has not received any notice that it has not obtained all permits under Environmental Laws (the “Environmental Permits”) materially required for its operations and to own, use and operate its assets. The Corporation has not received any notice that any proceeding would be pending or threatened to revoke or limit any of the Environmental Permits.

 

(q)                                 Insurance. The Corporation is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Corporation is engaged, including, but not limited to, directors and officers insurance coverage at least equal to C$5,000,000. To the best of the Corporation’s knowledge, the Corporation has complied with all material terms and conditions of such insurance contracts and policies, including premium payments, and all such policies are in full force and effect. The Corporation has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

(r)                                    Transactions With Affiliates and Employees. Except as set forth in the Permanent Information Record, none of the officers or directors of the Corporation and, to the knowledge of the Corporation, none of the employees of the Corporation is presently a party to any transaction with the Corporation (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Corporation, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of C$50,000 other than: (i) for payment of salary, directors’ or consulting fees for services rendered; (ii) reimbursement for expenses incurred on behalf of the Corporation; and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Corporation.

 

(s)                                   Internal Accounting Controls. The Corporation has established disclosure controls and procedures for the Corporation and designed such disclosure controls and procedures to ensure that material information relating to the Corporation is made known to the certifying officers by others within the Corporation. The Corporation’s certifying officers have evaluated the effectiveness of the Corporation’s controls and procedures as of December 31, 2009 (the “Evaluation Date”). Since the Evaluation Date, there have been no significant changes in the Corporation’s internal controls or, to the Corporation’s knowledge, in other factors that could significantly affect the Corporation’s internal controls.

 

(t)                                    Certain Fees. Neither the Corporation nor any of its officers has retained any placement agent (the “Intermediary”), other than MTS Securities LLC, with respect to the transactions contemplated by this Agreement and the Corporation shall indemnify and hold harmless the Purchasers from any liability for any compensation to any Intermediary and the fees and expenses of defending against said liability or alleged liability.

 

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(u)                                 Private Placement. Subject to the truth and accuracy of the Purchaser’s representations and warranties set forth in Section 3.2 at the time of the issuance, the issue by the Corporation of the Securities will be exempt from the registration and prospectus requirements under the Securities Laws. As at the Closing Date, the Common Shares and the Warrant Shares will not be subject to a restricted period or statutory hold period under the Securities Laws or to any resale restrictions under the policies of the TSX which extends beyond four (4) months and one (1) day after the Closing Date (except that such shares sold in the U.S. will be “restricted securities” as defined in Rule 144 under the U.S. Securities Act and, as a consequence, subject to certain restrictions on resale). Neither the Corporation nor any Person acting on its behalf: (i) has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the U.S. Securities Act) or any “direct selling efforts” (within the meaning of Regulation S under the U.S. Securities Act) in the United States, in connection with the offer or sale of the Securities; (ii) has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under any circumstances that would require registration of the Securities under the U.S. Securities Act; (iii) except for offers or sales made to Persons outside the United States in accordance with Regulation S under the U.S. Securities Act, has offered or sold the Securities to any Person other than Persons it reasonably believed to be “accredited investors”, as defined in Rule 501(a) under the U.S. Securities Act; or (iv) has issued any Common Shares or shares of any series of preferred stock or other securities or instruments convertible into, exchangeable for or otherwise entitling the holder thereof to acquire Common Shares which would be integrated with the sale of the Securities for purposes of the U.S. Securities Act. The offer and sale to the Investors of the Securities were not made through or as a result of, and the offering of the Securities is not being accompanied by, any advertisement in printed media or printed public media of general and regular paid circulation, radio or television or telecommunications, including electronic display or any other form of general solicitation or advertisement in connection with the offer, sale or purchase of the Securities.

 

(v)                                 U.S. Investment Company Act. The Corporation is not and, after receipt of the proceeds from the sale of the Securities and application of such proceeds as provided herein, will not be, required to register as an “investment company” under the U.S. Investment Company Act of 1940, as amended.

 

(w)                               Foreign Issuer. The Corporation is a “foreign issuer” and reasonably believes that there is no “substantial U.S. market interest” (as such terms are defined in Regulation S under the U.S. Securities Act) with respect to the Common Shares.

 

(x)                                 Listing and Maintenance Requirements. The Corporation’s Common Shares are listed on the TSX and the Corporation has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the listing of the Common Shares nor has the Corporation received any notification that any Person is contemplating terminating such listing. The Corporation has not, in the 12 months preceding the date hereof, received notice from the TSX to the effect that the Corporation is not in compliance with the listing or maintenance requirements of the TSX. The Corporation is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

(y)                                 Takeover Protections. The Corporation has not entered into a shareholders rights plan agreement or put in place a shareholders rights plan.

 

(z)                                  Indebtedness. The Permanent Information Record sets forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Corporation, or for which the

 

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Corporation has commitments. For the purposes of this Agreement, “Indebtedness” shall mean: (a) any liabilities for borrowed money or amounts owed in excess of C$50,000 (other than trade accounts payable and accrued expenses incurred in the ordinary course of business); (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of C$50,000 due under leases required to be capitalized in accordance with GAAP. The Corporation is not in default with respect to any Indebtedness.

 

(aa)                          Tax Status. With such exceptions as are not material to the Corporation, or except as may otherwise be set forth or contemplated in the Permanent Information Record: (a) the Corporation has duly and on a timely basis filed all tax returns required to be filed by it, has paid all taxes due and payable by it and has paid all assessments and reassessments and all other taxes, governmental charges, penalties, interest and other fines due and payable by it and which are claimed by any governmental authority to be due or owing and adequate provision has been made for taxes payable for any completed fiscal period for which tax returns are not yet required to be filed; (b) all filed tax returns are complete and accurate in all material respects; (c) there are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any tax return or payment of any tax, governmental charge or deficiency by the Corporation; (d) there are no actions, suits, proceedings, investigations or claims threatened or pending against the Corporation in respect of taxes, governmental charges or assessments; and (e) there are no matters under discussion with any governmental authority relating to taxes, governmental charges or assessments asserted by any such authority.

 

(bb)                          No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Corporation to arise, between the accountants and lawyers formerly or presently employed by the Corporation and the Corporation is current with respect to any fees owed to its accountants and lawyers.

 

(cc)                            PFIC. If the Corporation is a passive foreign investment company during any year in which a Purchaser who is a U.S. person, as defined in the U.S. Internal Revenue Code, holds Common Shares, at such Purchaser’s request, the Corporation will provide the Purchaser with the information needed to report income and gain pursuant to a qualifying electing fund election.

 

(dd)                          Representations and Warranties. The Corporation acknowledges and agrees that the Purchaser has made no representations and warranties with respect to the Offering, the Debentures and the Units other than as specifically set forth in this Agreement.

 

3.2                               Representations, Warranties and Covenants of the Purchaser. The Purchaser hereby represents, warrants and covenants to the Corporation and acknowledges that the Corporation is relying thereon that:

 

(a)                                 It has been independently advised as to restrictions with respect to trading in the Securities imposed by applicable securities legislation in the jurisdiction in which it resides and any applicable restricted period imposed in respect of the Securities by such securities legislation, and it is aware of the risks and other characteristics of the Securities and of the fact that it may not be able to resell such securities except in accordance with applicable securities legislation and regulatory policy and compliance with the other requirements of applicable law.

 

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(b)                                 It has not received nor has it requested, nor does it have any need to receive, any prospectus or offering memorandum which has been prepared for delivery to, and review by, prospective purchasers in order to assist them in making an investment decision in respect of the Debentures and the Units.

 

(c)                                  Except as set forth herein (including the Disclosure Schedules), it has relied solely upon the Permanent Information Record and not upon any verbal or written representation as to fact or otherwise made by or on behalf of the Corporation or any other Person.

 

(d)                                 It is resident in the jurisdiction set out on the face on the cover page hereof and such address was not created and is not being used for the sole purpose of acquiring the Debentures and the Units, and it is not purchasing with a view to the resale or distribution of all or any of the Securities in violation of any applicable Securities Laws.

 

(e)                                  The Purchaser is purchasing the Securities as principal or is deemed to be purchasing as principal under NI 45-106 and is an “accredited investor” as that term is defined in NI 45-106 for the reason that one (1) of the categories set forth in Schedule 3.2(e) attached hereto correctly and in all respects describes the Purchaser, and the Purchaser has so indicated by checking the box opposite such category on Schedule 3.2(e), and any such Purchaser, by signing this Agreement, is certifying that the statements made by checking the appropriate accredited investor category in Schedule 3.2(e) are true and that it was not created or is not used solely to purchase or hold securities as an accredited investor as described in paragraph (m) of the definition of “accredited investor”.

 

(f)                                   If the Purchaser is a U.S. Person or is present in the United States either at the time an offer of the Securities is made to it or when it gives the buy order for the Securities by executing and delivering this Agreement to the Corporation:

 

(i) it is an “accredited investor” (as defined in Rule 501(a) under the U.S. Securities Act) and as indicated in Schedule 3.2(f);

 

(ii) is acquiring the Securities for its own account and for investment purposes and not with a view to any resale or other disposition in violation of U.S. securities laws;

 

(iii) it consents to the Corporation’s stop transfer order, either on the Corporation’s own books or with a transfer agent or registrar, to implement the restrictions on transfer set forth and described herein;

 

(iv) it has no present contract, undertaking, arrangement or agreement to sell, transfer or grant any participation to any other Person with respect to the Securities;

 

(v) it has received copies of all the information it has requested from the Corporation that it considers necessary or appropriate for deciding whether to purchase the Securities or to verify the information contained in the Permanent Information Record without causing the Corporation unreasonable effort or expense to deliver such information and has been afforded the opportunity to ask such questions as it deemed necessary of, and to receive answers from, representatives of the Corporation concerning the terms and conditions of the Offering or the Securities;

 

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(vi) understands and acknowledges that at the Closing Date, the Corporation will deliver certificates representing the Securities to it registered in its name and that such certificates evidencing the Common Shares, any Warrant Shares and any Debenture Shares and all certificates issued in exchange therefor or in substitution thereof, shall bear the following legend, until such time as no longer required under the U.S. Securities Act or applicable state securities laws: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR UNDER ANY U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF METHYLGENE INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SALE OF SUCH SECURITIES ONLY, WHETHER DIRECTLY OR INDIRECTLY: (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; OR (C) PURSUANT TO (I) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE OR (II) ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, PROVIDED THAT A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR SECURITIES LAWS OF ANY APPLICABLE JURISDICTION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY”, MAY BE OBTAINED FROM COMPUTERSHARE INVESTOR SERVICES INC. UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE CORPORATION AND COMPUTERSHARE INVESTOR SERVICES INC, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT;

 

and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, certificates representing the Debentures and the Warrants and all certificates issued in exchange therefor or in substitution thereof, shall bear the following legend: THIS DEBENTURE/WARRANT AND THE SECURITIES DELIVERABLE UPON CONVERSION/EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS DEBENTURE/WARRANT MAY NOT BE CONVERTED/EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS DEBENTURE/WARRANT AND THE SECURITIES DELIVERABLE UPON CONVERSION/EXERCISE THEREOF HAVE BEEN

 

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REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THIS DEBENTURE/WARRANT MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, OR (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT;

 

provided that, if the Securities are being sold under paragraph 3.2(f)(viii)(b) below, and provided that the Corporation is a “foreign issuer” within the meaning of Regulation S under the U.S. Securities Act at the time of sale, the applicable legend may be removed by providing a declaration to Computershare Investor Services Inc., as registrar and transfer agent or warrant agent, in such form as Computershare Investor Services Inc. or the Corporation may from time to time prescribe; provided further, that if any Common Shares, Warrant Shares or Debenture Shares are being sold under paragraph 3.2(f)(viii)(c)(i) below, the applicable legend may be removed by delivery to Computershare Investor Services Inc. of an opinion of counsel, of recognized standing reasonably satisfactory to the Corporation, to the effect that, or such certification or other evidence as the Corporation and Computershare Investor Services Inc. may reasonably require to determine that, such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws;

 

(vii)                           it understands and acknowledges that the Securities have not been and will not be registered under the U.S. Securities Act, or the securities laws of any state in the United States, based on an exemption from such registration and that the Corporation’s reliance upon such exemption is predicated in part upon its representations contained herein. It further understands and acknowledges that the Securities may not be resold unless subsequently registered under the U.S. Securities Act or an exemption from such registration is available, that: (a) the Corporation is under no obligation to register any Shares under the U.S. Securities Act; and (b) has no present intention of filing a registration statement under the U.S. Securities Act in respect of the Shares;

 

(viii)                        it understands that the Securities are “restricted securities” as defined in Rule 144 under the U.S. Securities Act and it will, in the absence of an effective registration statement covering the sale of the Securities, only dispose of any Securities: (a) to the Corporation; (b) outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act; or (c) in the case of the Common Shares, Warrant Shares or Debenture Shares, pursuant to (i) the exemption from registration provided by Rule 144 under the U.S. Securities Act, if available, or (ii) another available exemption from the registration requirements of the U.S. Securities Act, subject to such procedures, including provision of a legal opinion of seller’s counsel, as either the seller of the Securities or the Corporation deems necessary to document compliance with the U.S. Securities Act, and in each case in accordance with any applicable state securities laws in the United States or securities laws of any other applicable jurisdiction;

 

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(ix) it acknowledges that it has not purchased the Debentures and the Units as a result of any general solicitation or general advertising within the meaning of Regulation D under the U.S. Securities Act, including any advertisement, article, notice, or other communication published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees were invited by general solicitation or general advertising; and

 

(x) it understands that the Corporation will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements in determining its eligibility to purchase the Securities, and it agrees that, if any of the acknowledgements, representations and agreements made by it, or deemed to have been made by it by its purchase of the Securities, is no longer accurate, it shall promptly notify the Corporation.

 

(g)                                  If the Purchaser is not making the representations and warranties in subsection (f), the Purchaser (i) is not a U.S. Person and is not acquiring the Securities for the account or benefit of a U.S. Person and (ii) the offer to it of the Securities was not made in the United States and it was outside the United States when it executed and delivered this Agreement to the Corporation.

 

(h)                                 If not an individual, the Purchaser has been duly incorporated or created, as the case may be, and is valid and subsisting under the laws of its jurisdiction of incorporation or creation and has good and sufficient power, authority and right to enter into and deliver this Agreement and to perform its obligations hereunder.

 

(i)                                      This Agreement has been duly and validly authorized, executed and delivered by and constitutes a legal, valid, binding and enforceable obligation of the Purchaser, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally or by general principles of equity, the Purchaser has the legal capacity and competence to enter into and be bound by this Agreement and, if the Purchaser is not an individual, all necessary approvals of its directors, shareholders or otherwise have been given and obtained.

 

(j)                                    It understands that the sale and delivery of the Debentures and the Units is conditional upon such offering and sale being exempt from the requirements as to the filing of a prospectus or a registration statement and as to the delivery of an offering memorandum or upon the issuance of such orders, consents or approvals as may be required to permit such sale without the requirement of filing a prospectus or delivering an offering memorandum.

 

(k)                                 If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, the Purchaser will execute, deliver, file and otherwise use commercially reasonable efforts to assist the Corporation in filing, such reports, undertakings and other documents with respect to the Offering as may be required.

 

(l)                                     The Purchaser is capable of assessing the proposed investment as a result of the Purchaser’s financial experience or as a result of advice received from a registered person other than the Corporation or any affiliates thereof.

 

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(m)                             The Purchaser acknowledges that its subscription hereunder is part of the Offering and that the Corporation proposes to enter into securities purchase agreements with certain other Investors and expects to complete the sale of Units to them.

 

(n)                                 This subscription by the Purchaser is subject to the acceptance of the Corporation and is effective only upon such acceptance.

 

(o)                                 The Purchaser has been advised to consult its legal advisors in connection with applicable statutory hold periods and resale restrictions and it (or such others on behalf of whom it is contracting hereunder) is solely responsible (and the Corporation is not in any way responsible) for compliance with applicable hold periods or resale restrictions.

 

(p)                                 The Purchaser’s ability to transfer the Securities is limited by, among other things, applicable Securities Laws and by the provisions of the certificates representing the Debentures and the Warrants.

 

(q)                                 The certificates representing the Debentures, Common Shares, Warrants and, if issued prior to that date which is four (4) months and one (1) day following the Closing Date, the Warrant Shares will bear, as of the Closing Date, legends as required by and in accordance with Regulation 45-102 respecting Resale of Securities (Québec) and the rules of the TSX.

 

(r)                                    The funds which will be advanced by the Purchaser to the Corporation or its agent hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) Act (Canada) (the “PCMLA”) and the Purchaser acknowledges that the Corporation may in the future be required by law to disclose the Purchaser’s name and other information relating to this Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PCMLA. To the best of its knowledge: (a) none of the subscription funds to be provided by the Purchaser: (i) have been or will be derived from or related to any activity that is deemed criminal under the law of Canada, the United States, or any other jurisdiction; or (ii) are being tendered on behalf of a Person who has not been identified to the Purchaser; and (b) it shall promptly notify the Corporation if the Purchaser discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith.

 

(s)                                   The Purchaser acknowledges that this Agreement requires the Purchaser to provide certain personal information to the Corporation. Such information is being collected by the Corporation for the purposes of completing the Offering, which includes, without limitation, determining the Purchaser’s eligibility to purchase the Debentures and the Units under applicable Securities Laws, preparing and registering certificates representing the Securities to be issued to the Purchaser and completing filings required by any stock exchange or securities regulatory authority. The Purchaser’s personal information may be disclosed by the Corporation to: (i) stock exchanges or securities regulatory authorities; (ii) the Corporation’s registrar and transfer agent; and (iii) any of the other parties involved in the Offering, including legal counsel and may be included in record books in connection with the Offering. By executing this Agreement, the Purchaser is deemed to be consenting to the foregoing collection, use and disclosure of the Purchaser’s personal information. The Purchaser also consents to the filing of copies or originals of any documents as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby.

 

(t)                                    For Purchasers of Securities in Ontario, the Purchaser (i) has been notified by the Corporation (A) that the Corporation is required to provide information (“Personal

 

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Information”) pertaining to the Purchaser required to be disclosed in Schedule 1 of Form 45-106F1 under NI 45-106 (including its name, address, telephone number and the number and value of Purchased Shares purchased), which Form 45-106F1 is required to be filed by the Corporation under NI 45-106, (B) that the Personal Information will be delivered to the Ontario Securities Commission (the “OSC”) in accordance with NI 45-106, (C) that such Personal Information is being collected indirectly by the OSC under the authority granted to it pursuant to Securities Laws in Ontario, (D) that such Personal Information is being collected for the purposes of the administration and enforcement of Securities Laws in Ontario, and (E) that the public official in Ontario who can answer questions about the OSC’s indirect collection of the Personal Information is the Administrative Support Clerk at the OSC, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8, Telephone: (416) 593-3684, and (ii) has authorized the indirect collection of the Personal Information by the OSC. Further, by purchasing the Securities, the Purchaser acknowledges that its name and other specified information, including the number of the Securities it has purchased, may be disclosed to other Canadian securities regulatory authorities and may become available to the public in accordance with the requirements of applicable laws. The Purchaser consents to the disclosure of that information.

 

(u)                                 It is aware of the characteristics of the Debentures and the Units, of the speculative nature of this subscription and of the fact that the Securities may not be resold or otherwise disposed of except in accordance with the provisions of the applicable securities legislation.

 

(v)                                 It is familiar with the aims and objectives of the Corporation and has been informed of the nature of the Corporation’s activities.

 

(w)                               The Purchaser acknowledges and agrees that the Corporation has made no representations or warranties with respect to the Offering and the Debentures and the Units other than as specifically set forth in this Agreement.

 

ARTICLE 4

OTHER AGREEMENTS OF THE PARTIES

 

4.1                               Pre-Emptive Right. In the event that the Corporation proposes to issue any class or series of the equity securities of the Corporation, any voting securities of the Corporation, or any securities convertible or exchangeable into, or entitling purchase of, any of the foregoing (the “Covered Securities” and, as such securities may be offered and/or issued from time to time by the Corporation, collectively “Offered Securities”), the Corporation shall provide written notice (a “Pre-emption Notice”) to Investors having purchased at least C$3,000,000 worth of Units pursuant to the Offering (the “Pre-emptive Right Investors”) specifying the terms and conditions of the proposed issue (the “Covered Offering”), including the amount of money to be raised, the type of security to be issued, the price per security to be issued and the target completion date. In that event, each Pre-emptive Right Investor shall then have the right, by written notice to the Corporation (the “Notice of Exercise of Pre- emptive Rights”) within four (4) Business Days from the date of receipt of the Pre-emption Notice, in the case of a Covered Offering that is a Private Placement, or within two (2) Business Days from the date of the receipt of the Pre-emption Notice in the case of a Covered Offering that is a Public Offering, to subscribe, upon the terms and conditions set forth in the Pre-emption Notice, for up to the number of Offered Securities which is equal to the number of the Offered Securities offered in the Covered Offering in proportion to the aggregate holding of Covered Securities by the Pre-emptive Right Investor in relation to the total number of Covered Securities issued and outstanding immediately prior to the issuance of Offered Securities (the “Pre-emptive Rights”) for a period until the earlier of: (i) the date that is 24 months following the Closing Date in the event that the Corporation reports initial topline results for the

 

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second to report VVC Phase 2a Trial for MGCD290 on or before the date that is 21 months following the Closing Date; (ii) the date that is three (3) months following the date that the Corporation reports initial topline results from the second to report Phase 2a Trial for MGCD290 in the event that the Corporation reports initial topline results for the second to report Phase 2a Trial for MGCD290 after the date that is 21 months following the Closing Date; or (iii) the date that is 48 months following the Closing Date. The Pre-emptive Rights shall not apply to issuances of Offered Securities pursuant to (i) the Corporation’s stock option plan; (ii) collaboration agreements entered into by the Corporation; (iii) Public Offerings at a price per security at least 100% greater than the Subscription Price; or (iv) the exercise of the Warrants. A Pre-emptive Right Investor shall not be permitted to exercise its Pre-emptive Rights if such exercise would result in such Pre-emptive Right Investor beneficially holding, as defined in section 1.8 of Regulation 62-104 respecting Take-Over Bids and Issuer Bids (Québec), an aggregate number of Common Shares representing more than 19.9% of the issued and outstanding Common Shares immediately after giving effect to such exercise.

 

4.2         Additional Rights. The Co-Lead Investors shall have a right, but not the obligation, to acquire any Offered Securities that are subject to the Pre-emptive Rights but which are not otherwise purchased by the other Pre-emptive Right Investors (the “Additional Rights”). Each of the Co-Lead Investors may exercise its Additional Rights by stating in its Notice of Exercise of Pre-emptive Rights (i) that it shall acquire up to its pro rata share of the Offered Securities which are not otherwise purchased by the other Pre-emptive Right Investors; and (ii) the exact number of Offered Securities to be acquired. Should the Notice of Exercise of Pre-emptive Rights of any Co-Lead Investor not include the information specified in the preceding sentence, any such Co-Lead Investor shall be deemed to waive its Additional Rights. In the event that one of the Co-Lead Investors does not exercise its Additional Rights, the Co- Lead Investor which has exercised its Additional Rights shall have the right, but not the obligation, to acquire the remaining Offered Securities that are subject to the Pre-emptive Rights but that are not otherwise purchased by the other Pre-emptive Right Investors. A Co-Lead Investor shall not be permitted to exercise its Additional Rights if such exercise would result in such Co-Lead Investor beneficially holding, as defined in section 1.8 of Regulation 62-104 respecting Take-Over Bids and Issuer Bids (Québec), an aggregate number of Common Shares representing more than 19.9% of the issued and outstanding Common Shares immediately after giving effect to such exercise.

 

4.3         Rights to Appoint an Observer or a Director. Each of the Co-Lead Investors shall, for a period of two (2) years following the Closing Date, have the right, but not the obligation to appoint one (1) observer to the Board who shall each have the right to receive notice of and attend the meetings of the Board, and shall each have the right to address the Board at any of its meetings, but who shall not have any right to vote thereat. In addition to appointing an observer, each of the Co-Lead Investors shall, for that same period of two (2) years following the Closing Date, have the right, but not the obligation, to nominate one (1) person to the Board; provided, however that if a Co-Lead Investor’s nominated Board member is not independent from the Co-Lead Investor in question, such Co-Lead Investor’s right to appoint one (1) observer to the Board shall terminate upon the appointment of such nominee to the Board. In the event that a Co-Lead Investors’ nominated Board member resigns his/her Board seat, the right of that Co-Lead Investor to appoint or nominate, as the case may be, an observer or a director to the Board shall continue for the remainder of the two (2) year period following the Closing Date.

 

4.4         Securities Laws Disclosure; Publicity. The Corporation shall, within 10 days following the Closing Date, issue a Material Change Report disclosing the material terms of the transactions contemplated hereby. Neither the Corporation nor the Purchaser shall issue any such press release or otherwise make any such public statement in respect of this Offering without prior consultation of the Co- Lead Investors, in the case of the Corporation and the Investors and without the prior consent of the Corporation, in the case of the Purchaser, regarding such public statement or communication, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other

 

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party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Corporation shall not publicly disclose the name of the Purchaser without the prior consent of the Purchaser, except: (i) for any public statement or communication incorporating by reference or otherwise the information contained in the Material Change Report described in this Section 4.4; (ii) as required by the U.S. Securities Act; and (iii) to the extent such disclosure is required by Securities Law or the rules and policies of the TSX or otherwise as described in Sections 3.2(r), 3.2(s) and 3.2(t) above, in which case the Corporation shall provide the Purchaser with prior notice of such disclosure permitted under sub- clause (ii) or (iii) to the extent that such prior notice is permitted by law.

 

4.5         Use of Proceeds. The Corporation shall use the net proceeds from the sale of the Securities hereunder for the purposes of working capital, research, product development and general corporate purposes as set forth in Schedule 4.5 hereto.

 

4.6         Survival of Representations and Warranties. The representations and warranties of the parties contained herein shall survive the date hereof for a period of twelve months from the date hereof except that (i) in the event of fraud, they shall survive indefinitely and (ii) the representations and warranties set forth in Section 3.1(aa) will survive the date hereof for a period of six (6) years from the date hereof and shall in no way be affected by any investigation made by one of the parties.

 

4.7         Indemnification of Purchaser. Subject to the provisions of this Section 4.7, the Corporation will indemnify and hold the Purchaser, its Affiliates and their respective directors, officers, shareholders, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to: (a) any breach of any of the representations, warranties, covenants or agreements made by the Corporation in the Transaction Documents; or (b) any action instituted against a Purchaser Party by any shareholder of the Corporation who is not an Affiliate of the Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of the Purchaser’s representation, warranties or covenants under the Transaction Documents or any conduct by the Purchaser which constitutes fraud, gross negligence or wilful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Corporation in writing, and the Corporation shall have the right to assume the defence thereof with counsel of its own choosing. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defence thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that: (i) the employment thereof has been specifically authorized by the Corporation in writing; (ii) the Corporation has failed after a reasonable period of time to assume such defence and to employ counsel; or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Corporation and the position of such Purchaser Party. The Corporation will not be liable to any Purchaser Party under this Agreement: (i) for any settlement by a Purchaser Party effected without the Corporation’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent that a court of competent jurisdiction in a final judgment from which no appeal can be made shall determine that such Purchaser Party breached, defaulted under or failed to comply with any material representation, warranty, term, condition or covenant of this Agreement.

 

4.8         Indemnification of Corporation. Subject to the provisions of this Section 4.8, the Purchaser will indemnify and hold the Corporation, its Affiliates and their respective directors, officers, shareholders, partners, employees and agents (each, a “Corporation Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of

 

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investigation that any such Corporation Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Purchaser in this Agreement or in the other Transaction Documents (unless such action is based upon a breach of the Corporation’s representation, warranties or covenants under the Transaction Documents or any conduct by the Corporation which constitutes fraud, gross negligence or wilful misconduct). If any action shall be brought against any Corporation Party in respect of which indemnity may be sought pursuant to this Agreement, such Corporation Party shall promptly notify the Purchaser in writing, and the Purchaser shall have the right to assume the defence thereof with counsel of its own choosing. Any Corporation Party shall have the right to employ separate counsel in any such action and participate in the defence thereof, but the fees and expenses of such counsel shall be at the expense of such Corporation Party except to the extent that: (i) the employment thereof has been specifically authorized by the Purchaser in writing; (ii) the Purchaser has failed after a reasonable period of time to assume such defence and to employ counsel; or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Purchaser and the position of such Corporation Party. The Purchaser will not be liable to any Corporation Party under this Agreement: (i) for any settlement by a Corporation Party effected without the Purchaser’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent that a court of competent jurisdiction in a final judgment from which no appeal can be made shall determine that such Corporation Party breached, defaulted under or failed to comply with any material representation, warranty, term, condition or covenant of this Agreement.

 

4.9         Acknowledgment Regarding Purchaser’s Purchase of Securities. The Corporation acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby. The Corporation further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Corporation (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Investors’ purchase of the Securities. The Corporation further represents to the Purchaser that the Corporation’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Corporation and its representatives.

 

ARTICLE 5

MISCELLANEOUS

 

5.1         Fees and Expenses. The Corporation has agreed to reimburse each of the Co-Lead Investors up to C$50,000 concurrent with the Closing upon presentation of detailed invoices in respect of legal and other costs incurred by the Co-Lead Investors in respect of the Offering. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Corporation shall pay all expenses and transfer agent fees and other taxes and duties levied in connection with the delivery of any Securities.

 

5.2         Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3         Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of:

 

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(a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 4:30 p.m. (Montreal time) on a Business Day; (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 4:30 p.m. (Montreal time) on any Business Day; (c) the second Business Day following the date of mailing, if sent by a recognized overnight courier service; or (d) upon actual receipt by the party to whom such notice is required to be given. Notwithstanding anything herein to the contrary, in the event notice is sent by facsimile transmission, the sending party shall also send such notification by e-mail if the receiving party has included an e-mail address below or on their respective signature page. The address for such notices and communications shall be as follows:

 

	
If   to Corporation, to:
    	
MethylGene   Inc.
    
	
 
    	
7210   Frederick-Banting
    
	
 
    	
Suite 100
    
	
 
    	
Montreal,   Québec
    
	
 
    	
H4S   2A1 Canada
    
	
 
    	
 
    
	
 
    	
Attention:   Mr. Charles Grubsztajn
    
	
 
    	
President   and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
Facsimile:   (514) 337-4994
    
	
 
    	
E-mail   address: grubsztajnc@methylgene.com
    
	
 
    	
 
    
	
 
    	
and   a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Attention:   Mr. Klaus Kepper
    
	
 
    	
Vice   President, Finance and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
Facsimile:   (514) 337-4994
    
	
 
    	
E-mail   address: kepperk@methylgene.com
    
	
 
    	
 
    
	
With   a copy (which shall
    	
 
    
	
not   constitute notice) to:
    	
Davies   Ward Phillips & Vineberg LLP
    
	
 
    	
1501   McGill College Avenue
    
	
 
    	
Suite 2600
    
	
 
    	
Montreal,   Québec
    
	
 
    	
H3A   3N9 Canada
    
	
 
    	
 
    
	
 
    	
Attention:   Olivier Désilets
    
	
 
    	
 
    
	
 
    	
Facsimile:   (514) 841-6499
    
	
 
    	
E-mail   address: odesilets@dwpv.com
    
	
 
    	
 
    
	
If   to a Purchaser:
    	
To   the address set forth under such Purchaser’s name on the face   page hereof;
    


 

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

 

5.4         Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Corporation and each Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this

 

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Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.5         Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

5.6         Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The parties may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party, except that each party shall be entitled to assign this Agreement without having to obtain the other party’s consent to a transferee who is acquiring all or substantially all the assets of such party and provided that the Corporation may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser prior to the Closing.

 

5.7         No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7.

 

5.8         Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the laws of the Province of Québec, without regard to the principles of conflicts of law thereof.

 

5.9         Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

 

5.10      Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

5.11      Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

 

5.12      Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Corporation will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may

 

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not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defence that a remedy at law would be adequate.

 

5.13      Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are joint between such Purchasers and not solidary (being the equivalent, in the Province of Québec, to obligations that are several and not joint in jurisdictions other than Québec) with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents.

 

5.14      Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

 

5.15      Language. The parties hereby request that this Agreement and any related documents be drafted only in the English language. Les parties requièrent par les présentes que la présente convention ainsi que tous les documents y afférents soient rédigés en langue anglaise seulement.

 

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SCHEDULE A

 

Common Shares Purchase Warrants

 











 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE AUGUST [2], 2011.

 

THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THIS WARRANT MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, OR (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

WARRANT CERTIFICATE Warrants to

 

Purchase Common Shares of

 

METHYLGENE INC.

 

	
WARRANT

CERTIFICATE   NO. 2011-[    ]
    	
[         ]   WARRANTS entitling the holder to acquire, subject to adjustment, one common   share for each whole Warrant represented hereby.
    


 

This certifies that, for value received, [       ] (the “Holder”) has acquired and is the registered holder of [       ] warrants (the “Warrants”) of MethylGene Inc. (the “Corporation”), giving the Holder the right to purchase, upon and subject to the terms and conditions hereinafter referred to, [      ] common shares of the Corporation (the “Common Shares”) at a price equal to

$0.1492 per share (the “Exercise Price Per Warrant”) on or before 5:00 P.M. (Eastern time) on

 

April [1], 2016 (the “Exercise Period”).

 

1.                  The aforesaid right to purchase Common Shares may only be exercised by the Holder within the time required hereinbefore set out, in whole or in part, by (a) surrendering to the Corporation at the address for notice to the Corporation set out in Section 11, or at any other address which from time to time is the principal place of business of the Corporation, the Warrant Certificate, (b) duly completing in the manner indicated and executing the exercise notice in substantially the form attached hereto (the “Exercise Notice”), and (c) paying the

 











 

appropriate purchase price in Canadian dollars for the Common Shares subscribed for together with requisite share transfer tax, if any, either by certified cheque or bank draft payable at par to the order of the Corporation. Upon compliance by the Holder with the exercise procedures in respect of a Warrant Certificate set forth above in items (a), (b) and (c) (the “Exercise Date”), the number of Common Shares subscribed for shall be deemed to have been issued and the person to whom such Common Shares are to be issued shall be deemed to have become the holder of record of such Common Shares on the Exercise Date. Within five days of the Exercise Date, the Corporation shall direct Computershare Investor Services Inc. (or any substitute transfer agent)) to deliver, or shall itself deliver, to the Holder a share certificate for the appropriate number of Common Shares to which the Holder is entitled.

 

Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, exercise the Warrants in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Corporation upon such exercise in payment of the aggregate Exercise Price Per Warrant (and in exchange for the surrender of the right to receive upon such exercise the Common Shares in excess of the “Net Number” of Common Shares, as described below), elect instead to receive upon such exercise the “Net Number” of Common Shares determined according to the following formula:

 

	
Net   Number =
    	
(A x B) - (A x C)
    
	
 
    	
B
    


 

For purposes of the foregoing formula:

 

A= the total number of Common Shares with respect to which this Warrant Certificate is then being exercised.

 

B= the arithmetic average of the closing price of the Common Shares on the TSX during the five trading days immediately preceding the date of the Exercise Notice.

 

C= the Exercise Price then in effect for the applicable Common Shares at the time of such exercise.

 

If the Holder of this Warrant Certificate subscribes for a lesser number of Common Shares than the number of Common Shares referred to in this Warrant Certificate, the said Holder will be entitled to receive a further Warrant Certificate in respect of Common Shares referred to in this Warrant Certificate not subscribed for.

 

To the extent these Warrants have not previously been exercised as to all of the Common Shares subject hereto, and if the arithmetic average of the closing price of the Common Shares on the TSX during the five trading days immediately preceding the last day of the Exercise Period is greater than the Exercise Price Per Warrant, these Warrants shall be deemed automatically exercised pursuant to this Section 1 (even if not surrendered) immediately prior the expiry of the Exercise Period. To the extent these Warrants or any portion thereof are deemed automatically exercised pursuant to this paragraph, the Corporation agrees to promptly notify the

 

2











 

Holder of the number of Common Shares, if any, that the Holder is to receive by reason of such automatic exercise.

 

[INSERT BLOCKER RIDER, IF APPLICABLE]

 

2.                  Any certificate representing the Holder’s Common Shares issued upon the exercise of these Warrants prior to August [2] 2011 will bear the following legend(s):

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE AUGUST [2], 2011.

 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR UNDER ANY U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF METHYLGENE INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SALE OF SUCH SECURITIES ONLY, WHETHER DIRECTLY OR INDIRECTLY: (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; OR (C) PURSUANT TO (I) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE OR (II) ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, PROVIDED THAT A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR SECURITIES LAW OF ANY APPLICABLE JURISDICTION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY”, MAY BE OBTAINED FROM COMPUTERSHARE INVESTOR SERVICES INC. UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE CORPORATION AND COMPUTERSHARE INVESTOR SERVICES INC, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT.”

 

3.                  The holding of a Warrant does not constitute the Holder a shareholder of the Corporation, nor entitle the holder to any right or interest in respect thereof except as expressly provided in this Warrant Certificate.

 

4.                  The Holder of this Warrant Certificate upon surrender hereof to the Corporation at its principal place of business, may exchange this Warrant Certificate for other Warrant

 

3












 

Certificates entitling the bearer to purchase in the aggregate the same number of Common Shares referred to in this Warrant Certificate.

 

5.                  The Holder hereof, by acceptance of this Warrant Certificate, agrees that this Warrant Certificate and all rights hereunder are not transferable or assignable, in whole or in part, except: (a) to the Corporation, or (b) outside the United States in accordance with rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations. The Warrants evidenced by this Warrant Certificate may only be transferred on the register to be kept at the address for notice to the Corporation set out in Section 11, or at any other address which from time to time is the principal place of business of the Corporation, by delivery of a duly executed notice transfer form in the form attached hereto as Exhibit A by the Holder or its attorney to be appointed by an instrument in writing in form and execution satisfactory to the Corporation in compliance with such reasonable requirements as the Corporation may prescribe.

 

6.                  Subject in all cases to the TSX’s approval, the number of Common Shares to which the Holder is entitled upon exercise of the Warrants and the Exercise Price Per Warrant shall be subject to adjustment from time to time as follows:

 

(a) if and whenever at any time from the date hereof and prior to the expiry of the Exercise Period, the Corporation shall:

 

(i)                                   subdivide its outstanding Common Shares into a greater number of shares;

 

(ii)                                consolidate its outstanding Common Shares into a smaller number of shares; or

 

(iii)                             fix a record date for the issuance of Common Shares or securities convertible into Common Shares by way of stock dividend or other distribution;

 

the number of Common Shares to which the Holder is entitled upon exercise of the Warrants shall be adjusted, at no cost to the Holder, immediately after such record date or the effective date of such subdivision, consolidation, stock dividend or other distribution by multiplying the number of Common Shares theretofore obtainable on the exercise thereof by the fraction of which:

 

(A)                             the numerator shall be the total number of Common Shares outstanding, including the Common Shares issuable from convertible securities that are distributed, immediately after such date, and

 

(B)                             the denominator shall be the total number of Common Shares outstanding immediately prior to such date,

 

and the Exercise Price Per Warrant shall be proportionately adjusted such that the aggregate Exercise Price Per Warrant of this Warrant Certificate shall remain unchanged and

 

4











 

such adjustments shall be made successively whenever any event referred to in this Subsection shall occur (and all adjustments in this Subsection are cumulative). Any such issuance of Common Shares by way of stock dividend shall be deemed to have been made on the record date for such stock dividend;

 

(b) if and whenever at any time from the date hereof and ending at the expiry of the Exercise Period, the Corporation shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price (as defined below) on such record date, then the Exercise Price Per Warrant will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exercise Price Per Warrant in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this paragraph are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price Per Warrant will then be readjusted to the Exercise Price Per Warrant which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. For the purposes of this Subsection, “Current Market Price” shall mean the volume weighted average trading price of the Common Shares on the TSX (or such other exchange on which the Common Shares are traded) for the five trading days immediately preceding the relevant date;

 

(c) if and whenever at any time from the date hereof and prior to the expiry of the Exercise Period, the Corporation shall issue or distribute to the holders of all or substantially all of the outstanding Common Shares or set a record date for the issuance or distribution to such holders of any securities of the Corporation including rights, options or warrants to acquire Common Shares or securities convertible into or exchangeable for Common Shares or property or assets including evidences of indebtedness, the holder of any Warrant who thereafter shall exercise his right to subscribe for Common Shares hereunder shall be entitled to receive, at no cost to such holder, and shall accept for the same aggregate consideration, in addition to the Common Shares to which he was theretofore entitled upon such exercise, the kind and amount of shares or other securities or property which such holder would have been entitled to receive as a result of such issue or distribution as if, on the effective date thereof, he had been the registered

 

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holder of the number of Common Shares to which he was theretofore entitled upon such exercise;

 

(d) if and whenever at any time from the date hereof and ending on the expiry of the Exercise Period, there is (i) any reclassification of or amendment to the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation (other than as described above); (ii) any consolidation, amalgamation, arrangement, merger or other form of business combination of the Corporation with or into any other corporation resulting in any reclassification of the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation; or (iii) any sale, lease, exchange or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to another corporation or entity, then, in each such event, each holder of any Warrant which is thereafter exercised will be entitled to receive, and shall accept, in lieu of the number of Common Shares to which such holder was theretofore entitled upon such exercise, the kind and number or amount of shares or other securities or property which such holder would have been entitled to receive as a result of such event if, on the effective date thereof, such holder had been the registered holder of the number of Common Shares to which such holder was theretofore entitled upon such exercise;

 

(e) appropriate adjustments shall be made as a result of any such subdivision, consolidation, issue or distribution to the rights and interests of the Holder thereafter so that the provisions of this Article shall thereafter apply correspondingly to any shares, other securities or other property thereafter deliverable upon the exercise of any Warrant and any such adjustments shall be made by and set forth in an agreement supplemental hereto approved by the directors and shall for all purposes be conclusively deemed to be an appropriate adjustment;

 

(f) in any case in which this Section shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Warrant exercising his subscription rights after such record date the additional Common Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder’s right to receive such additional Common Shares, other securities or property, as the case may be, upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares, other securities or property, as the case may be, declared in favour of holders of record of Common Shares, other securities or property, as the case may be, on and after the date of exercise or such later date as such holder would but for the provisions of this Subsection, have become the holder of record of such additional Common Shares, other securities or property, as the case may be, pursuant to the due exercise of the Warrants held by such holder;

 

(g) all shares of any class or other securities or property which the Holder is at the time in question entitled to receive on the full exercise of his Warrant, whether or not as a result of adjustments made pursuant to this Section shall, for the purposes of the interpretation of this Agreement, be deemed to be Common Shares which the Holder is entitled to subscribe for pursuant to the exercise of such Warrant;

 

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(h) the adjustments provided for in this Section 6 are cumulative and shall, in the case of adjustments to the Exercise Price Per Warrant, be computed to the nearest one-tenth of one cent and shall be made successively whenever an event referred to therein shall occur, subject to the following: (i) no adjustments in the Exercise Price Per Warrant shall be required unless such adjustment would result in a change of at least 1% in the then prevailing Exercise Price Per Warrant and no adjustment shall be made in the number of Common Shares purchasable upon exercise of Warrants unless it would result in a change of at least one one-hundredth of a share; provided, however, that any adjustments which by reason of this Section 6 are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and (ii) if a dispute shall at any time arise with respect to adjustments provided for in this Section 6, such dispute shall be conclusively determined by the Corporation’s auditors, or if they are unable or unwilling to act, by such other firm of independent chartered or public accountants as may be selected by action by the board of directors of the Corporation, and any such determination shall be binding upon the Corporation, the Holder and shareholders of the Corporation. In the event that any such determination is made, the Corporation shall deliver a certificate to the Holder signed by such auditors or accountants describing such determination.

 

7.                  The Corporation hereby represents and warrants that it is authorized to create and issue the Warrants and covenants and agrees that it will cause the Common Shares from time to time subscribed for and purchased in the manner provided in this Warrant Certificate and the certificate or certificates representing such Common Shares to be issued and that, at all times prior to the expiry of the Exercise Period, there will remain unissued a sufficient number of Common Shares to satisfy the right of purchase provided for in this Warrant Certificate. All Common Shares which are issued upon the exercise of the right of purchase provided in this Warrant Certificate, upon payment therefor of the amount at which such Common Shares may be purchased pursuant to the provisions of this Warrant Certificate, shall be and be deemed to be fully paid and non-assessable shares and free from all taxes, liens and charges with respect to the issue thereof. The Corporation hereby represents and warrants that this Warrant Certificate is a valid and enforceable obligation of the Corporation, enforceable in accordance with the provisions of this Warrant Certificate.

 

8.                  Forthwith following the issuance of this Warrant Certificate, the Corporation will apply for the listing of the Common Shares issuable pursuant to this Warrant Certificate on each securities exchange on which the Common Shares are then listed.

 

9.                  The Corporation will not be obligated to issue any fraction of a share on the exercise of Warrants. If the Holder would, on the exercise of Warrants, otherwise have acquired a total number of shares that includes a fraction of a share, the Corporation will pay to the Holder, by cheque, in lieu of and in satisfaction for any right to such fractional share, an amount equal to the equivalent fraction of the market value of such share on the business day immediately preceding the date of such payment.

 

10.                Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of this Warrant Certificate and, if requested by the Corporation, upon delivery of a bond of indemnity satisfactory to the Corporation (or, in the case of mutilation, upon surrender of this Warrant Certificate), the Corporation will issue to the Holder a replacement certificate (containing the same terms and conditions as this Warrant Certificate).

 

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11.                All notices or other communications to be given under this Warrant Certificate shall be delivered by hand or by telecopier and, if delivered by hand, shall be deemed to have been given on the delivery date and, if sent by telecopier, on the date of transmission if sent before 5:00 p.m. on a business day or, if such day is not a business day, on the first business day following the date of transmission.

 

Notices to the Corporation shall be addressed to:

 

7210 Frederick-Banting

Suite 100

Montreal, Québec H4S 2A1

Canada

 

Attention: Chief Financial Officer

Facsimile: (514) 337-0550

 

Notices to the Holder shall be addressed to the address of the Holder set out in the register kept at the address for notice to the Corporation set out in this Section 11, or at any other address which from time to time is the principal place of business of the Corporation.

 

The Corporation and the Holder may change its address for service by notice in writing to the other of them specifying its new address for service under this Warrant Certificate.

 

12.                Time will be of the essence hereof.

 

13.                All monies quoted in this Warrant Certificate shall be stated and paid in lawful money of Canada unless otherwise stated.

 

14.                This Warrant Certificate shall be construed in accordance with the laws of the Province of Québec and the federal laws of Canada applicable therein.

 

15.                The parties hereto acknowledge and confirm that they have requested that this Warrant Certificate as well as all notices and other documents contemplated hereby be drawn up in the English language. Les parties aux présentes reconnaissent et confirment qu’elles ont exigé que la présente convention ainsi que tous les avis et documents qui s’y rattachent soient rédigés en langue anglaise.

 

THIS WARRANT AND THE SECURITIES DELIVERABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). OTHER THAN AN ORIGINAL U.S. PURCHASER, THIS WARRANT MAY NOT BE EXERCISED BY ANY U.S. PERSON, BY ANY PERSON IN THE UNITED STATES OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON OR A PERSON IN THE UNITED STATES. AS USED HEREIN, THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS ASCRIBED TO THEM IN REGULATION S UNDER THE U.S. SECURITIES ACT AND “ORIGINAL U.S. PURCHASER” MEANS THE ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A) OF REGULATION D UNDER THE U.S. SECURITIES ACT WHO FIRST PURCHASED THIS WARRANT.

 

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IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly authorized officer as of the          day of April, 2011.

 

	
 
    	
 
    
	
 
    	
METHYLGENE INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:   
    
	
 
    	
Title:
    


 











 

EXHIBIT “A”  

 

TRANSFER FORM

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

 

	
 
    	
 
    
	
(full name of   Transferee)
    	
(full address of   Transferee)
    


 

                                                         Warrants of MethylGene Inc. registered in the name of the undersigned on the records of MethylGene Inc. represented by the Warrant Certificate attached and irrevocably appoints                                                  the attorney of the undersigned to transfer the said securities on the books or register with full power of substitution.

 

DATED the                         day of                 ,              .

 

	
 
    	
 
    
	
 
    	
(Signature of   Registered Warrantholder)
    


 

 

Instructions:

 

1.                                    The signature of the Warrantholder must be the signature of the person appearing on the face of this Warrant Certificate.

 

2.                                    If the Transfer Form is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a judiciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Agent and the Corporation.

 











 

EXHIBIT “B”

 

NOTICE OF EXERCISE OF WARRANT FORM

 

(To be executed only upon exercise of Warrants)

 

Capitalized terms referred to but not defined herein have such meanings herein as are given thereto in the accompanying Warrant Certificate.

 

The undersigned registered owner of the accompanying Warrant Certificate hereby elects to exercise                   of the Warrants represented thereby on and subject to the terms and conditions incorporated by reference in the accompanying Warrant Certificate

 

The undersigned hereby certifies that the undersigned is either (i) the Original U.S. Purchaser or (ii) not a U.S. Person or a person in the United States, and is not acquiring any of the Shares issuable upon the exercise of the Warrants for the account or benefit of a U.S. Person or a person in the United States, and none of the persons listed below is a U.S. Person or a person in the United States, unless such person is the Original U.S. Purchaser. In addition to this exercise form, an Original U.S. Purchaser must also provide an executed letter, substantially in the form attached as Exhibit “C” to the Warrant. For purposes hereof “United States” and “U.S. Person” shall have the meanings given to such terms in Regulation S under United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and “Original U.S. Purchaser” means the accredited investor within the meaning of Rule 501(a) of Regulation D under the U.S. Securities Act who first purchased the Warrants.

 

The Holder intends that payment of the Exercise Price shall be made as (check one):

 

o           a “Cash Exercise”; or

 

o           a “Cashless Exercise”.

 

In the event that the Holder has elected a Cash Exercise, the Holder shall pay to the Corporation the aggregate purchase price of $                         in connection with such exercise, the whole in accordance with the terms of the Warrant Certificate.

 

The undersigned hereby directs that the Common Shares acquired by it as a result of such exercise be registered as follows:

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    


 

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Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(Signature of Registered   Owner)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address
    


 

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EXHIBIT “C”

 

Form of Letter to be Delivered by

Original U.S. Purchaser

 upon Exercise of Warrants

 




 

MethylGene Inc.

7220 Frederick-Banting Street

Suite 200

St-Laurent, QC H4S 2A1

Canada

 

- and to -

 

Computershare Investor Services Inc.

1500 University Street

Suite 700

Montréal, QC H3A 3S8

Canada

 

Dear Sirs:

 

I am/We are delivering this letter in connection with the purchase of common shares (the “Shares”) of MethylGene Inc. (the “Corporation”), a corporation existing under the laws of Canada, upon the exercise of warrants of the Corporation (“Warrants”), dated as of April [1], 2011.

 

We hereby confirm that:

 

(a)                                                                            I am/we are an “accredited investor” within the meaning of Rule 501 (a) of Regulation D under the United States Securities Act of 1933 (the “U.S. Securities Act”);

 

(b)                                                                            I am/we are purchasing the Shares for my/our own account;

 

(c)                                                                             I/we have such knowledge and experience in financial and business matters that I/we am/are capable of evaluating the merits and risks of purchasing the Shares;

 

(d)                                                                            I/we am/are not acquiring the Shares with a view to distribution thereof or with any present intention of offering or selling any of the Shares, except (A) to the Corporation, (B) outside the United States in accordance with Rule 904 under the U.S. Securities Act or (C) (1) or (2) in accordance with (A) Rule 144 under the U.S. Securities Act, if applicable, or (B) another

 

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available exemption from registration under the U.S. Securities Act and in each instance compliance with applicable state securities laws;

 

(e)                                                                             I/we acknowledge that I/we have had access to such financial and other information as I/we deem necessary in connection with my/our decision to purchase the Shares; and

 

(f)                                                                              I/we acknowledge that I/we are not purchasing the Shares as a result of any general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

 

I/We understand that the Shares are being offered in a transaction not involving any public offering within the United States within the meaning of the U.S. Securities Act and that the Shares have not been and will not be registered under the U.S. Securities Act. I/We further understand that any Shares acquired by me/us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of paragraph (d) above.

 

I/We acknowledge that you will rely upon my/our confirmations, acknowledgments and agreements set forth herein, and I/we agree to notify you promptly in writing if any of my/our representations or warranties herein ceases to be accurate or complete.

 

 

	
 
    	
(Name   of Purchaser)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    


 

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SCHEDULEB

 

Unsecured Convertible Debentures

 











 

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JULY 25, 2011

 

THIS DEBENTURE AND THE SECURITIES DELIVERABLE UPON CONVERSION THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS DEBENTURE MAY NOT BE CONVERTED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS DEBENTURE AND THE SECURITIES DELIVERABLE UPON CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THIS DEBENTURE MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE BORROWER, OR (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

Debenture No. ·

 

MethylGene Inc. (amalgamated under the laws of Canada)

 

UNSECURED CONVERTIBLE DEBENTURE

 

	
 
    	
CDN $382,599
    	
 
    	
March [24], 2011
    


 

MethylGene Inc. (the “Borrower”) for value received, hereby acknowledges itself indebted to and unconditionally promises to pay to or to the order of [Investor I / Investor II] (“·” and, together with any assignee of · in accordance with the terms hereof, and their respective successors and assigns, the “Holder”) on demand on the earlier of the Maturity Date (as hereinafter defined) and such earlier date as all, but not less than all, of the Principal Amount (as hereinafter defined) hereof may otherwise become due in accordance with the provisions of this Debenture, the aggregate principal sum of THREE HUNDRED EIGHTY-TWO THOUSAND FIVE HUNDRED NINETY NINE DOLLARS ($382,599) (the “Principal Amount”) and interest accrued thereon in accordance with Section 1.1 hereof advanced to the Borrower by the Holder in accordance with the terms hereof, in lawful money of Canada, on presentation and surrender of this Debenture to the Borrower at its registered office.

 

Unless otherwise indicated, capitalized terms used in this Debenture shall have the respective meanings attributed thereto in Schedule A.

 











 

ARTICLE 1

PAYMENTS

 

1.1.                                                    Interest

 

Interest shall be payable by the Borrower to the Holder in respect of the outstanding Principal Amount at an annual rate of 3% per annum (calculated on a 360 day basis) compounded monthly and payable on the last Business Day of each calendar month until the Maturity Date. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360.

 

1.2.                                                    Mandatory Repayment of Principal Amount

 

Unless payment or conversion is otherwise required or made earlier in accordance with the terms and conditions of this Debenture, on the Maturity Date the full Principal Amount of this Debenture together with interest accrued and unpaid thereon shall be due and payable in a single instalment.

 

1.3.                                                    Optional Prepayment

 

The Borrower may only prepay the Principal Amount of this Debenture and pay the interest accrued thereon with the prior written consent of the Holder.

 

1.4.                                                    Payments Generally

 

Unless otherwise specifically permitted in this Debenture, all payments made pursuant to this Debenture (in respect of principal or otherwise) shall be made by the Borrower to the Holder by way of certified cheque, bank draft or wire transfer by or on behalf of the Borrower to the account specified therefor by the Holder no later than 5:00 p.m. (Montreal time) on the due date therefor. Any payments received after such time shall be considered, for all purposes, as having been made on the next following Business Day unless the Holder otherwise agrees in writing.

 

1.5.                                                    Payments - No Deduction

 

All payments made in respect of this Debenture (including in respect of principal or otherwise) shall be made in full without set-off or counterclaim, and free of and without deduction or withholding for any present or future Taxes, except as required by Applicable Law.

 

1.6.                                                    Extension of Maturity Date

 

At its sole discretion, the Holder shall be entitled to extend the Maturity Date, in 30- day increments, to a date that is up to six (6) months from May 23, 2011, upon five (5) days prior written notice to the Borrower. In the event that the Holder extends the Maturity Date in accordance with the terms of this Section 1.6, the Maturity Date shall be changed to such later date.

 

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1.7.                                                    Taxes

 

All payments hereunder, whether on account of principal, interest (including amounts deemed to be interest under Applicable Law) or otherwise, shall be made free and clear of and without deduction or withholding for any and all Taxes (excluding any Taxes imposed on or measured by reference to the net income or net profits of the Holder, capital taxes or franchise taxes) (such taxes, other than such excluded taxes, being “Indemnifiable Taxes”) unless required by Applicable Law. If any such deduction or withholding of Indemnifiable Taxes is required by such Applicable Law, the payment shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to any additional amounts paid under this Section 1.7), the Holder shall receive an amount equal to the amount it would have received if no such deduction or withholding had been made. Borrower shall furnish to the Holder the original or a certified copy of a receipt, if available, or other reasonably acceptable document to the Holder evidencing payment of Indemnifiable Taxes made by it within 30 days after the date of any payment of such Indemnifiable Taxes.

 

ARTICLE 2

CONVERSION OF DEBENTURE

 

2.1.                                             Optional Conversion Right

 

At any time when this Debenture is not fully repaid or otherwise automatically converted upon the completion of the Financing Transaction pursuant to Section 2.2 hereof, upon the terms and subject to the conditions of this Article, the Holder shall have the right (the “Conversion Right”), at its option, to convert all, or any portion, of the Principal Amount (but not the accrued interest thereon) into Units at a price per security equal to the Subscription Price. Any interest accrued on the Principal Amount shall be payable in cash by the Borrower to the Holder on the Date of Conversion.

 

2.2.                                             Automatic Conversion

 

The outstanding Principal Amount of this Debenture (but not the accrued interest thereon) shall, immediately prior to, and on the date of closing of the Financing Transaction (the “Financing Transaction Completion Date”) be automatically converted into Units at a conversion price equal to the Subscription Price. Any interest accrued on the Principal Amount shall be payable in cash by the Borrower to the Holder on the Date of Conversion.

 

2.3.                                             Manner of Exercise of Conversion Right and Option

 

The following rules apply with respect to the conversion of any amount payable in accordance with this Debenture:

 

	
2.3.1
    	
 
    	
to   exercise the Conversion Right, the Holder shall surrender this Debenture at   the office of the Borrower in the City of Montreal together with written   notice (which shall be irrevocable) in a form satisfactory to the Borrower,   acting reasonably, duly executed by the Holder, stating that the Holder   elects to convert the Principal Amount (but no accrued interest);
    


 

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2.3.2
    	
 
    	
upon   automatic conversion pursuant to Section 2.2, the Holder shall surrender   this Debenture at the office of the Borrower in the City of Montreal;
    
	
 
    	
 
    	
 
    
	
2.3.3
    	
 
    	
in   the case of an exercise of the Conversion Right, the surrender of this   Debenture accompanied by the written notice referred to in Subsection 2.3.1   or, in the case of the automatic conversion pursuant to Section 2.2   hereof, the surrender of this Debenture on the Financing Transaction   Completion Date, shall be deemed to constitute a contract between the Holder   and the Borrower whereby: (i) the Holder subscribes for the number of   Units which the Holder shall be entitled to receive on such conversion and   the Borrower shall issue such Units to the Holder as fully paid and   non-assessable securities in the capital of the Borrower; (ii) the   Holder will, at the Borrower’s request in writing and at the cost and expense   of the Borrower, release the Borrower from all liability to pay the Principal   Amount of this Debenture and any accrued interest, if any; and (iii) the   Borrower agrees that the surrender of this Debenture for conversion or the   automatic conversion pursuant to Section 2.2 hereof constitutes full   payment of the subscription price for the Units;
    
	
 
    	
 
    	
 
    
	
2.3.4
    	
 
    	
this   Debenture will be deemed to be surrendered for conversion on the date (the “Date of Conversion”) on which it is so   surrendered in accordance with the provisions of this Article 2 or upon   automatic conversion pursuant to Section 2.2 hereof and, in the event   that this Debenture is surrendered by mail or other means of delivery, on the   date on which it is received by the Borrower during regular business hours;
    
	
 
    	
 
    	
 
    
	
2.3.5
    	
 
    	
the   Holder will be entitled to be entered in the books of the Borrower as at the   applicable Date of Conversion as the holder of the number of Units into which   this Debenture has been converted in accordance with the provisions of this   Article and, as soon as practicable thereafter, the Borrower will deliver   to the Holder certificates representing Common Shares and Warrants for such   Units entered; and
    
	
 
    	
 
    	
 
    
	
2.3.6
    	
 
    	
with   effect as of and from the Date of Conversion, the Borrower will cancel this   Debenture and, upon automatic conversion pursuant to Section 2.2 hereof   and notwithstanding Subsection 2.3.2 hereof, the Holder agrees that its   rights under this Debenture shall be automatically extinguished and that the   interest thereon will cease accruing from the Date of Conversion.
    


 

2.4.                                                    No Requirement to Issue Fractional Securities

 

The Borrower is not required to issue fractional Units upon the conversion of this Debenture. If any fractional interest in a security of the Borrower would, but for the provisions of this Section 2.4, be deliverable upon the conversion of any Principal Amount of this Debenture, the number of Units to which the Holder is entitled upon conversion will be rounded down to the next whole number.

 

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2.5.                                             Borrower to Reserve Securities

 

The Borrower covenants with the Holder that it will at all times reserve and keep available out of its authorized securities, solely for the purpose of issue upon conversion of this Debenture, such number of Units as will then be issuable upon the conversion of the Principal Amount outstanding under this Debenture. The Borrower covenants with the Holder that all Units which will be so issuable, will, on surrender and conversion of this Debenture in accordance with the terms hereof, be duly and validly issued as fully paid and non-assessable securities in the capital of the Borrower.

 

2.6.                                             Adjustment Provisions

 

If, at any time prior to the date on which this Debenture is repaid in full or converted in accordance with the terms hereof, the Borrower:

 

	
2.6.1
    	
 
    	
undertakes   any reclassification or other change in its share capital or in case of the   consolidation, merger, reorganization or amalgamation of the Borrower with or   into any other company or entity which results in any reclassification of the   shares of the Borrower, or in case of any transfer of the undertaking or   assets of the Borrower as an entirety or substantially as an entirety to   another person or entity in which the shareholders of the Borrower are   entitled to receive shares, other securities or property;
    
	
 
    	
 
    	
 
    
	
2.6.2
    	
 
    	
subdivides   any of its shares into a greater number of shares;
    
	
 
    	
 
    	
 
    
	
2.6.3
    	
 
    	
consolidates   any of its shares into a lesser number of shares; or
    
	
 
    	
 
    	
 
    
	
2.6.4
    	
 
    	
issue   shares or convertible securities or property to holders of shares by way of a   distribution on the shares payable in such shares or convertible securities;
    


 

(each, a “Reorganization”)

 

the Holder shall, after the effective date of such Reorganization and upon the conversion of this Debenture, be entitled to receive, and shall accept in lieu of the number of Units to which the Holder was theretofore entitled upon such exercise, the kind and amount of shares and other securities or property which the Holder would have been entitled to receive as a result of such Reorganization if, on the effective date thereof, the Holder had been the registered holder of the number of Units to which the Holder was theretofore entitled upon such conversion. If necessary, appropriate adjustments shall be made in the application of the provisions set forth in this Section 2.6 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this section shall thereafter correspondingly be made applicable as nearly as may be reasonable in relation to any shares or other securities or property thereafter deliverable upon the conversion of this Debenture.

 

5











 

2.7.                                                    Legends

 

Any certificate representing the Common Shares and Warrants comprising the Units issued pursuant to this Article 2 shall bear the legends set forth in, and shall be subject to the restrictions on transfer and exercise set forth in, the Securities Purchase Agreement.

 

ARTICLE 3

SECURITY

 

3.1.                                                    Security

 

This Debenture is the Borrower’s general unsecured senior obligations and ranks pari passu with the Borrower’s existing and future senior unsecured indebtedness, and ranks senior to all the Borrower’s subordinated indebtedness. This Debenture is effectively subordinated to all the Borrower’s secured indebtedness, if any, to the extent of the value of the assets securing such indebtedness. For so long as the Borrower has any Obligations outstanding, Borrower shall not incur any indebtedness that ranks senior to, or pari passu with this Debenture.

 

ARTICLE 4

DEFAULT

 

4.1.                                                    Events of Default

 

The occurrence of any of the following events shall constitute an “Event of Default”:

 

	
4.1.1
    	
 
    	
if   the Borrower defaults in payment of any interest due or any other amount due   hereunder and, after notice in writing has been given by the Holder to the   Borrower as hereinafter provided for, specifying such default and requiring   the Borrower to put an end to the same, the Borrower shall fail to cure such   default within a period of five (5) Business Days, unless the Holder   shall have agreed to a longer period, and in such event, within the period   agreed to by the Holder;
    
	
 
    	
 
    	
 
    
	
4.1.2
    	
 
    	
if   an order shall be made or an effective resolution is passed for the   winding-up, liquidation of either one of the Borrower or in the event of any   liquidation of either one of the Borrower by operation of law; or
    
	
 
    	
 
    	
 
    
	
4.1.3
    	
 
    	
if   the Borrower shall neglect to observe or perform any Obligation or other   obligation, covenant or condition contained in this Debenture to be observed   or performed by it and, after notice in writing has been given by the Holder   to the Borrower as hereinafter provided for, specifying such default and   requiring the Borrower to put an end to the same, the Borrower shall fail to   cure such default within a period of five (5) Business Days, unless the   Holder shall have agreed to a longer period, and in such event, within the   period agreed to by the Holder.
    


 

4.2.                                                    Acceleration on Default

 

In the case of any Event of Default, the Principal Amount of and interest on the Debenture then outstanding shall forthwith become immediately due and payable to the Holder, and the

 

6











 

Borrower shall forthwith pay to the Holder the Principal Amount of and any and all accrued and unpaid interest on the Debenture from the date of the said Event of Default until payment is received by the Holder. Such payment when made shall be deemed to have been made in discharge of the Borrower’s obligations hereunder.

 

4.3.                                                    Notice of Events of Default

 

The Borrower shall promptly notify the Holder of an Event of Default or any event which, with notice or lapse of time or both, would constitute an Event of Default hereunder.

 

Where notice of the occurrence of an Event of Default has been given and the Event of Default is thereafter cured, notice in writing that the Event of Default is no longer continuing shall be given by the Borrower to the Holder within a reasonable time, but not exceeding ten (10) days, after the Borrower becomes aware that the Event of Default has been cured.

 

ARTICLE 5

GENERAL

 

5.1.                                                    Replacement of Debenture

 

	
5.1.1
    	
 
    	
In   case this Debenture shall become mutilated or be lost, destroyed or stolen,   the Borrower shall issue, and thereupon deliver, a new Debenture of like   tenor as the one mutilated, lost, destroyed or stolen in exchange for and   upon surrender and cancellation of such mutilated Debenture or in lieu of and   in substitution for such lost, destroyed or stolen Debenture, and the new   Debenture shall be entitled to the benefit hereof and rank equally in accordance   with its terms with all other Debentures.
    
	
 
    	
 
    	
 
    
	
5.1.2
    	
 
    	
The   applicant for the issue of a new Debenture pursuant to this section shall   bear the cost of the issue thereof and in case of loss, destruction or theft   shall, as a condition precedent to the issue thereof, furnish to the Borrower   a certificate of one of its officers attesting of the ownership and of the   loss, destruction or theft of the Debenture so lost, destroyed or stolen and   such applicant shall pay the reasonable charges of the Borrower in connection   therewith.
    


 

5.2.                                                    Schedules, etc.

 

The following schedule is attached to, and forms part of, this Debenture:

 

	
Schedule   A
    	
-
    	
Definitions.
    


 

5.3.                                                    Amendment and Waiver

 

No amendment or waiver of any provision of this Debenture or consent to any departure by the Borrower from any provision thereof is effective unless it is in writing and signed by the Holder. Such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.

 

7











 

5.4.                                                    Invalidity, etc.

 

Each of the provisions contained in this Debenture is distinct and severable and a declaration of invalidity, illegality or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof.

 

5.5.                                                    Governing Law

 

This Debenture shall be governed by and construed in accordance with the laws of the Province of Québec and the federal laws of Canada applicable therein.

 

5.6.                                                    Actions on Days Other Than Business Days

 

Except as otherwise specifically provided herein, where any payment is required to be made or any other action is required to be taken on a particular day and such day is not a Business Day and, as a result, such payment cannot be made or action cannot be taken on such day, then this Debenture shall be deemed to provide that such payment shall be made or such action shall be taken on the first Business Day after such day.

 

5.7.                                                    Reliance and Non-Merger

 

All covenants, agreements, representations and warranties of the Borrower made herein or in any other Transaction Document to which such Person is a party or in any certificate or other document signed by any of their respective directors or officers and delivered by or on behalf of the Borrower pursuant hereto or thereto are material, shall be deemed to have been relied upon by the Holder notwithstanding any investigation heretofore or hereafter made by the Holder or counsel to or any employee or other representative of any of the Holder and shall survive the execution and delivery of this Debenture and the other Transaction Documents until the Borrower shall have satisfied and performed all of their obligations under the Transaction Documents.

 

5.8.                                                    Notices

 

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the day of sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below. This section shall also govern notice of change of address. Notices and other communications shall be addressed as follows:

 

if to the Borrower, at:

 

7210 Frederick-Banting, Suite 100

Montreal, Québec H4S 2A1

Telecopier:                                 (514) 337-4994

Attention:                                      Vice President, Finance and Chief Financial Officer

 

8












 

with a copy (but which shall not constitute notice) to:

 

Davies Ward Phillips & Vineberg LLP

1501 McGill College Avenue, 26th Floor

Montreal, Québec H3A 3N9

Telecopier:                                 (514) 841-6499

Attention:                                      Olivier Désilets

 

if to·, at:

 

·

Telecopier:                                 ·

Attention:                                      ·

 

with a copy (but which shall not constitute notice) to:

 

·

 

or, for each party, to any other address or any other telecopier number which may be designated by such party in a written notice transmitted to the other parties.

 

5.9.                                                                         Entire Agreement

 

This Debenture, together with the Securities Purchase Agreement, constitutes the entire agreement between the parties pertaining to the subject matter described therein. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Debenture or in the Securities Purchase Agreement.

 

5.10.                                                                  Assignment

 

5.10.1                                    This Debenture shall enure to the benefit of the Holder and be binding upon the Holder and the Borrower, in each case together with their respective successors and any permitted assignees of some or all of the parties’ rights or obligations under this Debenture.

 

5.10.2                                    The Borrower shall not assign all or any part of their obligations under this Debenture without the prior written consent of the Holder.

 

5.11.                                                                  Currency

 

Except as otherwise specifically stated, all amounts referred to in this Debenture are stated and are to be paid in lawful money of Canada.

 

9











 

5.12.                                                                  Counterparts

 

This Debenture may be signed in counterpart and by facsimile, all counterparts together constituting the whole of this Debenture.

 

[The signature page follows immediately]

 

10











 

IN WITNESS WHEREOF the parties have executed this Debenture this 24th day of March, 2011.

 

	
METHYLGENE INC.
    	
·
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    	
Name:   
    	
 
    
	
 
    	
Title:
    	
Title:
    	
 
    
						


 

11











 

SCHEDULE A

Definitions

 

For the purposes of this Debenture:

 

“Applicable Law” means, in respect of any Person, property, transaction, event or course of conduct, all applicable laws, statutes, rules, by-laws and regulations, regulatory policies and all applicable official directives, orders, judgments and decrees of Governmental Authorities;

 

“Borrower” has the meaning attributed thereto in the first paragraph of this Debenture;

 

“Business Day” means any day other than a Saturday or Sunday on which Canadian chartered banks are open for business in Montreal, Québec;

 

“Common Shares” has the meaning attributed thereto in the Securities Purchase Agreement; “Conversion Right” has the meaning attributed thereto in Section 2.1;

 

“Date of Conversion” has the meaning attributed thereto in Subsection 2.3.4;

 

“Debenture” means this unsecured convertible debenture and all schedules attached hereto, as same may be amended, restated or replaced from time to time; the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Debenture as a whole and not to any particular article, section, schedule, or other portion hereof;

 

“Event of Default” has the meaning attributed thereto in Section 4.1;

 

“Financing Transaction” means, in the aggregate, the financing transactions contemplated by the terms of the Securities Purchase Agreement;

 

“Financing Transaction Completion Date” has the meaning attributed thereto in Section 2.2;

 

“Governmental Authority” means any government, parliament, legislature, or any regulatory authority, agency, commission or board of any government, parliament or legislature, or any court or (without limitation to the foregoing) any other law, regulation or rule-making entity (including, without limitation, any stock exchange, securities regulatory authority, central bank, fiscal or monetary authority or authority regulating banks), having jurisdiction in the relevant circumstances;

 

“Holder” has the meaning attributed thereto in the first paragraph of this Debenture; “Indemnifiable Taxes” has the meaning attributed thereto in Section 1.7;

 

“Maturity Date” means May 23, 2011, or such earlier date as the Principal Amount of this Debenture and any accrued but unpaid interest thereon may become due hereunder, or such later date in accordance with Section 1.6 hereof;

 

12











 

“Obligations” means all indebtedness, liabilities and other obligations of the Borrower to the Holder hereunder, in each case, whether actual or contingent, direct or indirect, matured or not, now existing or hereafter arising;

 

“Principal Amount” has the meaning attributed to such term in the first paragraph of this Debenture, as decreased pursuant to the terms and conditions of this Debenture;

 

“Person” has the meaning attributed thereto in the Securities Purchase Agreement;

 

“Reorganization” has the meaning attributed thereto in Section 2.6;

 

“Securities Purchase Agreement” means the Securities Purchase Agreement dated the date hereof between the Borrower, on the one hand, and the Holder, on the other hand, including the “Terms and Conditions of Subscription for Common Shares and Warrants of MethylGene Inc.” and schedules thereto, which are incorporated therein;

 

“Subscription Price” has the meaning ascribed thereto in the Securities Purchase Agreement;

 

“Taxes” includes any taxes, duties, assessments, imposts and levies imposed by any Governmental Authority and includes all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, withholding, business, property, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping and all employment insurance, health insurance and Canada, Québec and other government pension plan and other employer plan premiums, contributions or withholdings;

 

“Transaction Documents” means the Securities Purchase Agreement and the Warrants;

 

“Units” has the meaning attributed thereto in the Securities Purchase Agreement; and

 

“Warrants” has the meaning attributed thereto in the Securities Purchase Agreement.

 

13












 

SCHEDULE 1

Permitted Liens

 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
1.
    	
 
    	
06-0248983-0009



May 5, 2006

 

November 4, 2011
    	
 
    	
Rights of ownership of the lessor
    	
 
    	
Lessor:   

Citicorp   Vendor Finance Ltd.; Citicorp Finance Vendeur Ltée 

 

Lessee:   

MethylGene   Inc.
    	
 
    	
1-COPIER   PANASONIC WORKIO DP6030 1-MODULE DE FINITION 2 CASES WITH ALL ATTACHMENTS,   ACCESSORIES AND PROCEEDS THEREOF INCLUDING INSURANCE PROCEEDS AND INDEMNITIES.
    	
 
    	
Deed   under private writing dated May 4, 2006. 

 

Lease   term is 66 months. The quarterly lease payment is $1,676.09 plus applicable   taxes
    
	
2.
    	
 
    	
10-0047659-0003

 

January 28, 2010

 

January 26, 2014
    	
 
    	
Rights resulting from a lease and assignment of rights
    	
 
    	
Lessor:   

Panasonic   Document Systems Direct 

 

Lessee:   

MethylGene   Inc. 

 

Assignee:   

De   Lage Landen Financial Services Canada Inc.
    	
 
    	
Copier   - Digital Copieur - Numerique ALL GOODS SUPPLIED BY THE SECURED PARTY TO THE   DEBTOR, TOGETHER WITH ALL ATTACHMENTS, ACCESSORIES, ACCESSIONS, REPLACEMENTS,   SUBSTITUTIONS, ADDITIONS AND IMPROVEMENTS TO THE FOREGOING. PROCEEDS: GOODS,   CHATTEL PAPER, SECURITIES, ACCOUNTS, INVENTORY, DOCUMENTS OF TITLE,   INSTRUMENTS, MONEY, CROPS, LICENCES AND INTANGIBLES.
    	
 
    	
Deed   under private writing dated January 26, 2010.
    
	
3.
    	
 
    	
10-0320513-0001 

 

May 19, 2010 

 

May 19, 2020
    	
 
    	
Conventional hypothec without delivery 

 

$215,000
    	
 
    	
Creditor:   

GE   Q-Tech Real Estate Holdings Inc. 

 

Debtors:   

7503547   Canada Inc.
    	
 
    	
The   universality of all of 7503547 Canada Inc.(the “Grantor”) Movable Property,   present or future, corporeal or incorporeal, situated in, on about or near   the Premises. 

Definitions   

“Movable   Property” means all movable property, furniture, stock-in-trade, inventory,   trade fixtures and equipment of whatsoever nature or kind, present or future,   situated in, on, about or near the Premises, including, without limitation,   sums of money, shares, bonds, other securities, works of art, books and   records and all indemnities payable pursuant to and rights resulting from all   contracts of insurance relating to the aforesaid property. “Premises” means   those certain premises measuring approximately 9,302 square feet, located on   the second floor of the building bearing the civic address: 7220   Frederick-Banting in the City of Saint-Laurent, in the Province of Quebec,   the whole as more specifically described in the Lease.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
4.
    	
 
    	
10-0320513-0002 

 

May 19, 2010 

 

May 19, 2020
    	
 
    	
Conventional hypothec without delivery 

 

$215,000
    	
 
    	
Creditor:   

GE   Q-Tech Real Estate Holdings Inc. 

 

Debtors:   

7503547   Canada Inc.
    	
 
    	
The   universality of all of 7503547 Canada Inc.(the “Grantor”) Movable Property,   present or future, corporeal or incorporeal, situated in, on about or near   the Premises. 

Definitions   

“Movable   Property” means all movable property, furniture, stock-in-trade, inventory,   trade fixtures and equipment of whatsoever nature or kind, present or future,   situated in, on, about or near the Premises, including, without limitation,   sums of money, shares, bonds, other securities, works of art, books and   records and all indemnities payable pursuant to and rights resulting from all   contracts of insurance relating to the aforesaid property, but excluding any   rights in and to any intellectual property owned by or licensed to the   Grantor or in which the Grantor has any rights, including, without   limitation, patents, trade-marks, inventions, copyrights and rights under   license agreements, distribution agreements and manufacturing agreements.   “Premises” means those certain premises measuring approximately 9,900 square   feet, located on the second floor of the building bearing the civic address:   7210 Frederick-Banting in the City of Saint-Laurent, in the Province of   Quebec, the whole as more specifically described in the Lease.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

2











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
5.
    	
 
    	
10-0320513-0003 

 

May 19, 2010

 

May 19, 2020
    	
 
    	
Conventional hypothec without delivery 

 

$346,000
    	
 
    	
Creditor:   

GE   Q-Tech Real Estate Holdings Inc.

 

Debtors:   

7503547   Canada Inc.
    	
 
    	
The   universality of all of 7503547 Canada Inc.(the “Grantor”) Movable Property,   present or future, corporeal or incorporeal, situated in, on about or near   the Premises. 

Definitions   

“Movable   Property” means all movable property, furniture, stock-in-trade, inventory,   trade fixtures and equipment of whatsoever nature or kind, present or future,   situated in, on, about or near the Premises, including, without limitation,   sums of money, shares, bonds, other securities, works of art, books and   records and all indemnities payable pursuant to and rights resulting from all   contracts of insurance relating to the aforesaid property, but excluding any   rights in and to any intellectual property owned by or licensed to the   Grantor or in which the Grantor has any rights, including, without   limitation, patents, trade-marks, inventions, copyrights and rights under   license agreements, distribution agreements and manufacturing agreements.   “Premises” means those certain premises measuring approximately 11,092 square   feet, located on the first floor of the building bearing the civic address:   2525, Marie-Curie Street in the City of Saint-Laurent, in the Province of   Quebec, the whole as more specifically described in the Lease.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

3











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
6.
    	
 
    	
10-0328883-0001 

 

May 25, 2010 

 

May 19, 2010
    	
 
    	
Conventional hypothec without delivery 

 

$66,000
    	
 
    	
Creditor:   

The   Toronto- Dominion Bank — 03611C 

 

Debtor:   

MethylGene   Inc.
    	
 
    	
$55,004.00   BANKERS ACCEPTANCES ISSUED BY THE TORONTO-DOMINION BANK All securities, which   may or may not be listed above, lodged or delivered to the creditor in   substitution therefore and/or as an additional security, which are and shall   be held by the creditor as continuing collateral security, all securities   which may be issued in case of a sale, repurchase, conversion, cancellation   or any other transformation of the above-described assets; all securities   which may be delivered to the Creditor from time to time; and the repurchase   value or any other rights related to these assets. All fruits and revenues,   present and future, emanating from the above charged property, negotiable   instruments, bills, commercial paper, securities, monies, compensation for   expropriation given or paid following a sale, repurchase, distribution or any   other operation concerning any property hereby charged in favour of the   creditor or which has been charged under any other deed.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

4











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
7.
    	
 
    	
10-0328883-0002 

 

May 25, 2010 

 

May 19, 2010
    	
 
    	
Conventional hypothec without delivery 

 

$1,200,000
    	
 
    	
Creditor:   

The   Toronto- Dominion Bank — 03611C 

 

Debtor:   

MethylGene   Inc.
    	
 
    	
$1,000,070.00   BANKERS ACCEPTANCES ISSUED BY THE TORONTO-DOMINION BANK All securities, which   may or may not be listed above, lodged or delivered to the creditor in   substitution therefore and/or as an additional security, which are and shall   be held by the creditor as continuing collateral security, all securities   which may be issued in case of a sale, repurchase, conversion, cancellation   or any other transformation of the above-described assets; all securities   which may be delivered to the Creditor from time to time; and the repurchase   value or any other rights related to these assets. All fruits and revenues,   present and future, emanating from the above charged property, negotiable   instruments, bills, commercial paper, securities, monies, compensation for   expropriation given or paid following a sale, repurchase, distribution or any   other operation concerning any property hereby charged in favour of the   creditor or which has been charged under any other deed.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

5











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
8.
    	
 
    	
10-0328883-0003



May 25, 2010



May 19, 2010
    	
 
    	
Conventional hypothec without delivery



$415,200
    	
 
    	
Creditor:   

The   Toronto- Dominion Bank — 03611C 

 

Debtor:   

MethylGene   Inc.
    	
 
    	
$346,025.00   BANKERS ACCEPTANCES ISSUED BY THE TORONTO-DOMINION BANK All securities, which   may or may not be listed above, lodged or delivered to the creditor in   substitution therefore and/or as an additional security, which are and shall   be held by the creditor as continuing collateral security, all securities   which may be issued in case of a sale, repurchase, conversion, cancellation   or any other transformation of the above-described assets; all securities   which may be delivered to the Creditor from time to time; and the repurchase   value or any other rights related to these assets. All fruits and revenues,   present and future, emanating from the above charged property, negotiable   instruments, bills, commercial paper, securities, monies, compensation for   expropriation given or paid following a sale, repurchase, distribution or any   other operation concerning any property hereby charged in favour of the   creditor or which has been charged under any other deed.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

6











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
9.
    	
 
    	
10-0328883-0004



May 25, 2010 

 

May 19, 2010
    	
 
    	
Conventional hypothec without delivery



$240,000.00
    	
 
    	
Creditor:
   The Toronto- Dominion Bank — 03611C

 

Debtor:
   MethylGene Inc.
    	
 
    	
$200,014.00   BANKERS ACCEPTANCES ISSUED BY THE TORONTO-DOMINION BANK All securities, which   may or may not be listed above, lodged or delivered to the creditor in   substitution therefore and/or as an additional security, which are and shall   be held by the creditor as continuing collateral security, all securities   which may be issued in case of a sale, repurchase, conversion, cancellation   or any other transformation of the above-described assets; all securities   which may be delivered to the Creditor from time to time; and the repurchase   value or any other rights related to these assets. All fruits and revenues,   present and future, emanating from the above charged property, negotiable   instruments, bills, commercial paper, securities, monies, compensation for   expropriation given or paid following a sale, repurchase, distribution or any   other operation concerning any property hereby charged in favour of the   creditor or which has been charged under any other deed.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

7











 

	
 
    	
 
    	
Registration
   number
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registration Date
    	
 
    	
Nature
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Expiration Date
    	
 
    	
Amount
    	
 
    	
Parties
    	
 
    	
Description of Property (Summary)
    	
 
    	
Comments
    
	
10.
    	
 
    	
10-0328883-0005


   May 25, 2010

 

May 19, 2010
    	
 
    	
Conventional
   hypothec without delivery



$60,750.00
    	
 
    	
Creditor:
   The Toronto-Dominion Bank —03611C 

 

Debtor:   

MethylGene   Inc.
    	
 
    	
$50,629.00   BANKERS ACCEPTANCES ISSUED BY THE TORONTO-DOMINION BANK All securities, which   may or may not be listed above, lodged or delivered to the creditor in   substitution therefore and/or as an additional security, which are and shall   be held by the creditor as continuing collateral security, all securities   which may be issued in case of a sale, repurchase, conversion, cancellation   or any other transformation of the above-described assets; all securities   which may be delivered to the Creditor from time to time; and the repurchase   value or any other rights related to these assets. All fruits and revenues,   present and future, emanating from the above charged property, negotiable   instruments, bills, commercial paper, securities, monies, compensation for   expropriation given or paid following a sale, repurchase, distribution or any   other operation concerning any property hereby charged in favour of the   creditor or which has been charged under any other deed.
    	
 
    	
Deed   under private writing dated May 19, 2010.
    


 

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SCHEDULE 2.3(c)(vi) 

 

Corporation Counsel Opinion 

 

See attached.

 











 

SCHEDULE 3.1(g)

 

Capitalization of the Corporation

 

Issued and outstanding Common Shares: 40,418,580

 

Authorized stock options: 4,072,175

 

Issued stock options: 1,545,976

 











 

SCHEDULE 3.1(j) 

 

Litigation

 

Certain directors and officers of the Corporation have been imposed fees for late filings of insider reports.

 











 

SCHEDULE 3.2(e) 

 

ACCREDITED INVESTOR

 

The Purchaser, and (if applicable) each beneficial purchaser on whose behalf it is contracting under this Securities Purchase Agreement, is an “accredited investor”, as such term is defined in National Instrument 45-106 – Prospectus and Registration Exemptions, for the reason that it is (please check the applicable category):

 

o                                    (a)                                 a Canadian financial institution, or an authorized foreign bank named in Schedule III of the Bank Act (Canada);

 

o                                    (b)                                 the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);

 

o                                    (c)                                  a subsidiary of any person referred to in paragraph (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;

 

o                                    (d)                                 a person registered under the securities legislation of a jurisdiction of Canada, as an advisor or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);

 

o                                    (e)                                  an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada, as a representative of a person referred to in paragraph (d);

 

o                                    (f)                                   the government of Canada or a jurisdiction of Canada, or any Crown corporation, agency or wholly-owned entity of the government of Canada or a jurisdiction of Canada;

 

o                                    (g)                                  a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;

 

o                                    (h)                                 any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

 

o                                    (i)                                     a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;

 

o                                    (j)                                    an individual who, either alone or with a spouse, beneficially owns, directly or indirectly, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds C$1,000,000;

 

o                                    (k)                                 an individual whose net income before taxes exceeded C$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded C$300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

 

o                                    (l)                                     an individual who, either alone or with a spouse, has net assets of at least C$5,000,000; 

 

o                                    (m)                             a person, other than an individual or investment fund, that has net assets of at least C$5,000,000 as shown on its most recently prepared financial statements;

 

o                                    (n)                                 an investment fund that distributes or has distributed its securities only to:

 











 

(i)   a person that is or was an accredited investor at the time of the distribution;

 

(ii)  a person that acquires or acquired the securities as principal, with an acquisition cost to the person of not less than C$150,000 paid in cash at the time of the trade, or where such person holds securities of the investment fund with an acquisition cost or net asset value of not less than C$150,000 as at the date of a subsequent trade in further securities of the same class or series; or

 

(iii) a person described in paragraph (i) or (ii) who is a security holder of an investment fund and acquires or acquired the following securities of an investment fund, if the trades are permitted by the plan of the investment fund: (A) securities of the investment fund if dividends or distributions out of earnings, surplus, capital or other sources payable in respect of the investment fund’s securities are applied to the purchase of the security that is of the same class or series as the securities to which the dividends or distributions out of earnings, surplus, capital or other sources are attributable; or (B) securities of the investment fund if the security holder makes optional cash payments to purchase the security of the investment fund that is of the same class or series of securities described in (A) that trade on a marketplace and the aggregate number of securities issued under the optimal cash payment did not exceed, in any financial year of the investment fund during which the trade takes place, 2% of the issued and outstanding securities of the class to which the plan relates as at the beginning of the financial year;

 

o                                    (o)                                 an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

 

o                                    (p)                                 a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;

 

o                                    (q)                                 a person acting on behalf of a fully managed account managed by that person, if that person (i) is registered or authorized to carry on business as an advisor or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and (ii) in Ontario, is purchasing a security that is not a security of an investment fund;

 

o                                    (r)                                    a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility advisor or an advisor registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;

 

o                                    (s)                                   an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (d) and paragraph (i) in form and function;

 

o                                    (t)                                    a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;

 

o                                    (u)                                 an investment fund that is advised by a person registered as an advisor or a person that is exempt from registration as an advisor; or

 

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o                                    (v)                                 a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator, as an accredited investor or, in Alberta or British Columbia, an exempt purchaser.

 

For the purposes hereof, all reference to “C$” in this Schedule 3.2(e) are to Canadian dollars unless otherwise specified and the following definitions are included for convenience:

 

“financial assets” means cash, securities or a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

“fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

 

“investment fund” means a mutual fund or a non-redeemable investment fund, and, for greater certainty in British Columbia, includes an employee venture capital corporation that does not have a restricted constitution, and is registered under Part 2 of the Employee Investment Act (British Columbia), and whose business objective is making multiple investments and a venture capital corporation registered under Part 1 of the Small Business Venture Capital Act (British Columbia), whose business objective is making multiple investments;

 

“person” includes (a) an individual; (b) a corporation; (c) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and (d) an individual or other person in that person’s capacity as trustee, executor, administrator or personal or other legal representative; and

 

“related liabilities” means: (a) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets; or (b) liabilities that are secured by financial assets.

 

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SCHEDULE 3.2(f)

 

U.S. ACCREDITED INVESTOR

 

(PLEASE CHECK THE APPLICABLE CATEGORY)

 

“Accredited Investor” means any entity that comes within any of the following categories at the time of the sale of the Securities to such person or entity:

 

o                                   Any bank as defined in section 3(a)(2) of the U.S. Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity;

 

o                                   any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934;

 

o                                   Any insurance company as defined in section 2(a)(13) of the U.S. Securities Act;

 

o                                   Any investment company registered under the Investment Company Act of 1940 or any business development company as defined in section 2(a)(48) of that Act;

 

o                                   Any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;

 

o                                   Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of U.S.$5,000,000;

 

o                                   Any employee benefit plan within the meaning of title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or if the employee benefit plan has total assets in excess of U.S.$5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

o                                   Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;

 

o                                   Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of U.S.$5,000,000;

 

o                                   Any trust, with total assets in excess of U.S.$5,000,000 not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii);

 

o                                   Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds U.S.$ 1,000,000, excluding the value of the primary residence of such natural person, calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property;

 











 

o                                   Any natural person who had individual income in excess of U.S.$ 200,000 in each of the two most recent years or joint income with that person’s spouse in excess of U.S.$ 300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

o                                   Any director, executive officer, or general partner of the issuer of the securities being sold, or any director, executive officer, or general partner of a general partner of that issuer; or

 

o                                   Any entity in which all of the equity owners are accredited investors. (If this box is checked, each equity owner of the Purchaser may be required to complete and execute a separate Securities Purchase Agreement.

 

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SCHEDULE 4.5

 

Use of Proceeds

 

Conduct both acute and chronic VVC Phase 2a Trial for MGCD290 and phase 2a trial for 265 programs; and general corporate purposes.