DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

 

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant  ☒

Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

ZYMEWORKS INC.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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LOGO

PROXY STATEMENT FOR SPECIAL MEETING OF ZYMEWORKS INC.

PROSPECTUS FOR SHARES OF COMMON STOCK

OF ZYMEWORKS DELAWARE INC.

PROPOSED REDOMICILE TRANSACTION — YOUR VOTE IS IMPORTANT

 

 

As previously announced on July 15, 2022, Zymeworks Inc. (“Zymeworks”), a company continued under the Business Corporations Act (British Columbia) (the “BCBCA”), is proposing and submitting to the holders of common shares of Zymeworks (the “Zymeworks Common Shares” and the holders thereof, the “Zymeworks Shareholders”), the holders of pre-funded warrants to purchase Zymeworks Common Shares (the “Zymeworks Warrants” and the holders thereof, the “Zymeworks Warrantholders”) and the holders of equity incentive awards of Zymeworks (“Zymeworks Incentive Awards” and the holders thereof, the “Zymeworks Incentive Awardholders”, and together with the Zymeworks Shareholders and the Zymeworks Warrantholders, the “Zymeworks Securityholders”) for approval, a corporate redomicile transaction of Zymeworks that is described in detail below. In order to implement the corporate redomicile transaction, a special meeting of Zymeworks Securityholders (the “Special Meeting”) will be held on October 7, 2022, at the Pearl Room, Fairmont Pacific Rim, 1038 Canada Place, Vancouver, BC V6C 0B9, at 9 a.m., Pacific time.

At the Special Meeting, Zymeworks Securityholders will be asked to consider a resolution (the “Redomicile Resolution”) to approve a series of transactions, including a corporate redomicile (collectively, the “Redomicile Transactions”), which will include a proposed plan of arrangement under the BCBCA that provides for, among other things, (a) the issuance to Zymeworks Shareholders, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, of either (i) shares of Zymeworks Delaware Inc., a Delaware corporation, (“Parent”) common stock, par value $0.00001 per share (the “Delaware Common Stock”) on a one-for-one basis, or (ii) exchangeable shares (the “Exchangeable Shares” and recipients thereof, the “Exchangeable Shareholders”) in the capital of Zymeworks ExchangeCo Ltd., a company existing under the laws of the Province of British Columbia and a direct wholly-owned subsidiary of Callco (“ExchangeCo”), on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them) (the “Mixed Election”), subject to a cap on the aggregate number of Exchangeable Shares that is equal to 18% of (1) the number of Zymeworks Common Shares issued and outstanding, less (2) the number of Zymeworks Common Shares held by any Zymeworks Shareholders who exercise their Dissent Rights (as defined in the Proxy Statement/Prospectus) (the “Exchangeable Share Cap”); (b) the entry by Parent, Zymeworks CallCo ULC, an unlimited liability company existing under the laws of the Province of British Columbia and a direct, wholly-owned subsidiary of Parent (“Callco”) and ExchangeCo into the Exchangeable Share Support Agreement (the “Support Agreement”); and (c) the entry by Parent, ExchangeCo, Callco and Computershare Trust Company of Canada, a trust company existing under the laws of Canada (the “Share Trustee”) into the Voting and Exchange Trust Agreement (the “Trust Agreement”) for the benefit of the Exchangeable Shareholders. After the Redomicile Transactions are complete, Zymeworks Shareholders will hold one share of Delaware Common Stock or one Exchangeable Share, as applicable, for each Zymeworks Common Share owned immediately prior to the Redomicile Transactions (with the aggregate number of Exchangeable Shares that is equal to or less than the Exchangeable Share Cap). If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware


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Common Stock under a Mixed Election. The Share Trustee will hold one share of Parent preferred stock, par value $0.00001 per share (the “Special Voting Stock”), which will be held by the Share Trustee under the terms of the Trust Agreement, and which shall have certain variable voting rights as further described in the Proxy Statement/Prospectus. Zymeworks Incentive Awardholders will hold Parent Incentive Awards (as defined in the Proxy Statement/Prospectus) identical to the Zymeworks Incentive Awards in all material respects but in respect of Delaware Common Stock in the place and stead of Zymeworks Common Shares, and Zymeworks Warrantholders will be entitled to receive Delaware Common Stock instead of Zymeworks Common Shares under their Zymeworks Warrants. The directors and officers of Parent will continue to be the same as the directors and officers of Zymeworks immediately prior to the Redomicile Transactions. Parent will indirectly hold through subsidiaries the business, assets and liabilities of Zymeworks immediately prior to the Redomicile Transactions.

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans (as defined in the Proxy Statement/Prospectus) and each outstanding Zymeworks Incentive Award. The assumed Zymeworks Incentive Awards will remain subject to the terms and conditions of the existing Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of Delaware Common Stock rather than Zymeworks Common Shares. Parent will also assume the outstanding Zymeworks Warrants, except that the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares.

The board of directors of Zymeworks (the “Zymeworks Board”) recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

The Zymeworks Board believes that the opportunity to enhance long-term value for shareholders will be greater as a Delaware corporation than as a British Columbia corporation. The Zymeworks Board believes that the U.S. investor base, in addition to representing a majority of current Zymeworks Shareholders, represents the greatest source of potential additional investment. Due to the fact that Zymeworks is a British Columbia corporation, certain U.S. institutional investors and state-level investment vehicles are prohibited from investing in Zymeworks Common Shares or are limited in the size of such investment. Although the converse can also apply with respect to certain Canadian institutional investors (i.e., Canadian institutional investors may face prohibitions or limitations on investing in U.S. corporations or may have adopted internal policies limiting such holdings), the Zymeworks Board believes that becoming a Delaware corporation would provide greater opportunities to expand the institutional investor base, which would provide opportunities for increased value of Zymeworks Common Shares. In addition, as a Delaware corporation, Parent may be eligible for inclusion in certain leading indices, such as the Russell and S&P indices, which could also increase demand for Parent shares through passive investment by certain index funds. Moreover, the Zymeworks Board believes that, if zanidatamab is approved, the United States will be a key geography for the commercialization of zanidatamab, and that a significant portion of counterparties in potential monetization opportunities for the Company’s early-stage product candidates are located in the United States. Being a Delaware corporation could simplify commercialization efforts by reducing some of the cross-border legal, regulatory and tax complexities related to such efforts. Lastly, the Zymeworks Board believes being incorporated in Delaware may provide greater comparability to other U.S. public companies, many of which are incorporated in Delaware, including many of Zymeworks’ peer group companies. For additional information on these and the other factors considered by the Zymeworks Board, see section titled “The Redomicile Transactions and the Plan of Arrangement — Reasons for the Redomicile Transactions”.

Shares of Delaware Common Stock are anticipated to be listed for trading on the NYSE immediately prior to when the Redomicile Transactions become effective under the Plan of Arrangement and the Transaction Agreement (the “Effective Date”). See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”.

For Zymeworks Shareholders, much will remain unchanged following the Redomicile Transactions. The stockholders of Parent will be the same persons and entities who were Zymeworks Shareholders immediately prior to the Redomicile Transactions, other than Dissenting Shareholders (as defined herein) and holders of Exchangeable Shares prior to exchanging them for Delaware Common Stock. However, given the differences between the laws of British Columbia and Delaware law, your rights as a shareholder of Zymeworks and a


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stockholder of Parent and/or shareholder of ExchangeCo will be different. In addition, there are differences between Zymeworks’ existing articles and the amended and restated certificate of incorporation that Parent expects to adopt at or prior to the time of the Redomicile Transactions (the “Parent Certificate of Incorporation”) and the amended and restated bylaws that Parent intends to adopt at or prior to the time of the Redomicile Transactions (the “Parent Bylaws”) as they will be in effect upon the completion of the Redomicile Transactions. Similarly, for Exchangeable Shareholders, there are differences between Zymeworks’ existing articles and the articles of ExchangeCo. See section titled “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”, “Description of Parent Capital Stock” and “Description of Exchangeable Shares and Related Agreements”.

The Zymeworks Board weighed the estimated corporate tax liability arising from the Redomicile Transactions and, with the assistance of professional advisors and based on and subject to current assumptions, does not anticipate it will incur material corporate-level Canadian or United States federal income tax resulting from the Redomicile Transactions. Parent’s effective tax rate may be affected by the Redomicile Transactions or by changes in tax laws. See section titled “Risk FactorsParent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions”.

The Redomicile Transactions may have different tax consequences for Zymeworks Shareholders resident in Canada and elsewhere, including the United States. In addition, there may be different income tax treatment that applies to Canadian Holders (and other non-U.S. holders) and U.S. holders of shares of Delaware Common Stock or Exchangeable Shares in respect of dividend and withholding taxes, as compared to the tax consequences that apply in respect of holding Zymeworks Common Shares. The Canadian federal income tax consequences of the Redomicile Transactions for Zymeworks Shareholders will depend on a number of factors. See section titled “The Redomicile Transactions and the Plan of Arrangement — Particulars of the Redomicile Transactions” and “Material Canadian Federal Income Tax Considerations”. As described in more detail in the section of the Proxy Statement/Prospectus entitled “Material Canadian Federal Income Tax Considerations”, there are circumstances where the disposition of Zymeworks Common Shares pursuant to the Redomicile Transactions may be a taxable transaction to a Zymeworks Shareholder for Canadian federal income tax purposes. The U.S. federal income tax consequences of the Redomicile Transactions to U.S. holders will also depend on a number of factors. See section titled “Material U.S. Federal Income Tax Considerations”. Zymeworks Shareholders are urged to carefully read the sections of the Proxy Statement/Prospectus entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations”, as applicable, and to consult with their own tax and other advisors.

Subject to the satisfaction or waiver of all other conditions precedent, if both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately, approve the Redomicile Resolution, it is anticipated that the Redomicile Transactions will be completed as soon as practicable following the approval of the Supreme Court of British Columbia (the “Court”) in respect of the Arrangement.

This Proxy Statement/Prospectus is dated September 2, 2022 and is first being mailed on or about September 7, 2022 to Zymeworks Securityholders of record as of August 24, 2022.

We urge you to read this Proxy Statement/Prospectus and the documents incorporated by reference herein carefully and in their entirety. In particular, you should consider the matters discussed in the section entitled “Risk Factors”, beginning on page 30 of this Proxy Statement/Prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission or Canadian securities regulatory authority has approved or disapproved of the securities to be issued in connection with the Redomicile Transactions described in this Proxy Statement/Prospectus or determined if this Proxy Statement/Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.


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LOGO

September 2, 2022

Dear Zymeworks Securityholders:

You are invited to attend a special meeting (the “Special Meeting”) of the holders of common shares (the “Zymeworks Common Shares” and the holders thereof, the “Zymeworks Shareholders”), the holders of pre-funded warrants to purchase Zymeworks Common Shares (the “Zymeworks Warrants” and the holders thereof, the “Zymeworks Warrantholders”) and the holders of equity incentive awards (“Zymeworks Incentive Awards” and the holders thereof, the “Zymeworks Incentive Awardholders”, and together with the Zymeworks Shareholders and the Zymeworks Warrantholders, the “Zymeworks Securityholders”) of Zymeworks Inc. (“Zymeworks”) to be held on October 7, 2022, at the Pearl Room, Fairmont Pacific Rim, 1038 Canada Place, Vancouver, BC V6C 0B9, at 9 a.m. Pacific time.

The Redomicile Transactions

At the Special Meeting, Zymeworks Securityholders will be asked to consider a resolution (the “Redomicile Resolution”) to approve a series of transactions, including a corporate redomicile (collectively, the “Redomicile Transactions”), which will include a proposed plan of arrangement under the BCBCA that provides for, among other things, (a) the issuance to Zymeworks Shareholders, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, of either (i) shares of Zymeworks Delaware Inc., a Delaware corporation, (“Parent”) common stock, par value $0.00001 per share (the “Delaware Common Stock”) on a one-for-one basis, or (ii) exchangeable shares (the “Exchangeable Shares” and recipients thereof, the “Exchangeable Shareholders”) in the capital of Zymeworks ExchangeCo Ltd., a company existing under the laws of the Province of British Columbia and a direct wholly-owned subsidiary of Callco (“ExchangeCo”), on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them) (the “Mixed Election”), but subject to a cap on the aggregate number of Exchangeable Shares that is equal to 18% of (1) the number of Zymeworks Common Shares issued and outstanding, less (2) the number of Zymeworks Common Shares held by any Zymeworks Shareholders who exercise their Dissent Rights, (the “Exchangeable Share Cap”); (b) the entry by Parent, Zymeworks CallCo ULC, an unlimited liability company existing under the laws of the Province of British Columbia and a direct, wholly-owned subsidiary of Parent (“Callco”) and ExchangeCo into the Exchangeable Share Support Agreement (the “Support Agreement”); and (c) the entry by Parent, ExchangeCo, Callco and Computershare Trust Company of Canada, a trust company existing under the laws of Canada (the “Share Trustee”) into the Voting and Exchange Trust Agreement (the “Trust Agreement”) for the benefit of the Exchangeable Shareholders. After the Redomicile Transactions are complete, Zymeworks Shareholders will hold one share of Delaware Common Stock or one Exchangeable Share, as applicable, for each Zymeworks Common Share owned immediately prior to the Redomicile Transactions (with the aggregate number of Exchangeable Shares that is equal to or less than the Exchangeable Share Cap). If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election. The Share Trustee will hold one share of Parent preferred stock, par value $0.00001 per share (the “Special Voting Stock”), which will be held by the Share Trustee under the terms of the Trust Agreement, and which shall have certain variable voting rights as further described in this Proxy Statement/Prospectus. Zymeworks Incentive Awardholders will hold Parent Incentive Awards identical to the Zymeworks Incentive Awards in all material respects but in respect of Delaware Common Stock in the place and stead of Zymeworks Common Shares, and Zymeworks Warrantholders will be entitled to receive Delaware Common Stock instead of Zymeworks Common Shares under their Zymeworks Warrants. The directors and officers of Parent will continue to be the same as the directors and officers of Zymeworks immediately prior to the Redomicile Transactions. Parent will indirectly hold through subsidiaries the business, assets and liabilities of Zymeworks immediately prior to the Redomicile Transactions.

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans (as defined in this Proxy Statement/Prospectus) and each outstanding Zymeworks Incentive Award. The assumed Zymeworks Incentive Awards will remain subject to the terms and conditions of the existing Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of Delaware Common Stock rather


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than Zymeworks Common Shares. Parent will also assume the outstanding Zymeworks Warrants, except that the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares.

Board of Directors Recommendation

The board of directors of Zymeworks (the “Zymeworks Board”) recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution. In making its determination, the Zymeworks Board considered a number of factors as described in the Proxy Statement/Prospectus under “The Redomicile Transactions and the Plan of Arrangement — Reasons for the Redomicile Transactions”.

Tax Treatment for Zymeworks Shareholders

The Redomicile Transactions may have different tax consequences for Zymeworks Shareholders resident in Canada and elsewhere, including the United States. In addition, there may be different income tax treatment that applies to Canadian (and other non-U.S. holders) and U.S. resident holders of shares of Delaware Common Stock or Exchangeable Shares in respect of dividend and withholding taxes, as compared to the tax consequences that apply in respect of holding Zymeworks Common Shares. Zymeworks Shareholders are urged to carefully read the sections of the Proxy Statement/Prospectus entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations” and to consult with their own tax and other advisors.

Redomicile Transactions Completion Date

Subject to the satisfaction or waiver of all other conditions precedent, if both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately, approve the Redomicile Resolution, it is anticipated that the Redomicile Transactions will be completed as soon as practicable following the approval of the Supreme Court of British Columbia in respect of the Arrangement.

Please refer to the Proxy Statement/Prospectus for a more detailed description of the Redomicile Transactions and a more detailed description of Zymeworks’ reasons for the Redomicile Transactions and the risk factors relating to the Redomicile Transactions. Please give the Proxy Statement/Prospectus your careful consideration and consult your financial, tax or other professional advisors regarding the consequences of the Redomicile Transactions to you. Unless otherwise specified, capitalized terms used but not defined in this letter have the respective meanings set forth in the Proxy Statement/Prospectus.

The Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

Voting Your Zymeworks Common Shares, Zymeworks Warrants and/or Zymeworks Incentive Awards

Your vote is very important regardless of the number of Zymeworks Common Shares, Zymeworks Warrants and/or Zymeworks Incentive Awards that you own. Enclosed with this letter is the Notice of Special Meeting and Proxy Statement/Prospectus and a form of proxy or voting instruction form.

If you are unable to attend the Special Meeting in person please complete and deliver either the enclosed form of proxy or voting instruction form, as applicable, on the Internet, or by telephone, mail or fax, so that it is received prior to 9 a.m. Pacific time on October 5, 2022, to ensure your representation at the Special Meeting.

Making an election to receive Exchangeable Shares (for Eligible Holders only)

Zymeworks Shareholders who are Eligible Holders may elect to receive consideration that includes Exchangeable Shares (subject to the Exchangeable Share Cap) with respect to such Zymeworks Shareholders’ Zymeworks Common Shares. An Eligible Holder who elects to receive Exchangeable Shares and makes a valid tax election with ExchangeCo may generally defer all or a part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

Each Registered Shareholder who is an Eligible Holder will have the right to elect to receive Exchangeable Shares or a mix of Exchangeable Shares and Delaware Common Stock (subject to the Exchangeable Share Cap), by delivering a duly completed Letter of Transmittal and Election Form to the Depositary prior to the Election Deadline, being 5:00 p.m. (Vancouver time) on the date before the Special Meeting. Eligible Holders who do not make an election before the Election Deadline, or for whom their election is not properly made with respect to their Zymeworks Common Shares, will receive Delaware Common Stock.


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Beneficial Shareholders whose Zymeworks Common Shares are registered in the name of an intermediary should contact that intermediary for instructions on making an election with respect to the Consideration that they wish to receive.

Assistance or Additional Information

If you require assistance with voting your Zymeworks Common Shares, Zymeworks Warrants and/or Zymeworks Incentive Awards, or if you are an Eligible Holder and have any questions about the information contained in the Letter of Transmittal and Election Form or wish to receive an electronic copy of the tax election package by e-mail, please contact Zymeworks’ strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors:

LOGO

Kingsdale Advisors

130 King Street West, Suite 2950

Toronto, Ontario M5X 1E2

Call Toll-Free (within North America): 1-855-476-7981

Call Collect (outside North America): 1-416-867-2272

Email at contactus@kingsdaleadvisors.com

On behalf of Zymeworks, I would like to thank you for your continuing support.

Sincerely,

/s/ Kenneth Galbraith

Kenneth Galbraith

Chair & CEO


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NOTICE OF SPECIAL MEETING OF SECURITYHOLDERS

NOTICE IS HEREBY GIVEN that, pursuant to an interim order of the Supreme Court of British Columbia (the “Court”) dated August 29, 2022, made pursuant to Section 291 of the Business Corporations Act (British Columbia) (the “BCBCA”), as the same may be amended, modified, supplemented or varied by the Court (the “Interim Order”), a special meeting (such meeting and any adjournments and postponements thereof referred to as the “Special Meeting”) of holders of common shares (“Zymeworks Common Shares” and the holders thereof, the “Zymeworks Shareholders”), the holders of pre-funded warrants to purchase Zymeworks Common Shares (the “Zymeworks Warrants” and the holders thereof, the “Zymeworks Warrantholders”) and holders of equity incentive awards (“Zymeworks Incentive Awards” and the holders thereof, the “Zymeworks Incentive Awardholders”, and together with the Zymeworks Shareholders and the Zymeworks Warrantholders, the “Zymeworks Securityholders”) of Zymeworks Inc. (“Zymeworks”) will be held on October 7, 2022, at the Pearl Room, Fairmont Pacific Rim, 1038 Canada Place, Vancouver, BC V6C 0B9, at 9 a.m. Pacific time, for the following purposes:

1. to consider and, if deemed advisable, to approve, with or without variation, a special resolution of the Zymeworks Securityholders (the “Redomicile Resolution”) to approve a series of transactions, including a corporate redomicile (collectively, the “Redomicile Transactions”), which will include a proposed plan of arrangement under the BCBCA that provides for, among other things, (a) the issuance to Zymeworks Shareholders, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, of either (i) shares of Zymeworks Delaware Inc., a Delaware corporation, (“Parent”) common stock, par value $0.00001 per share (the “Delaware Common Stock”) on a one-for-one basis, or (ii) exchangeable shares (the “Exchangeable Shares” and recipients thereof, the “Exchangeable Shareholders”) in the capital of Zymeworks ExchangeCo Ltd., a company existing under the laws of the Province of British Columbia and a direct wholly-owned subsidiary of Callco (“ExchangeCo”), on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them) (the “Mixed Election”), but subject to a cap on the aggregate number of Exchangeable Shares that is equal to 18% of (1) the number of Zymeworks Common Shares issued and outstanding, less (2) the number of Zymeworks Common Shares held by any Zymeworks Shareholders who exercise their Dissent Rights (the “Exchangeable Share Cap”); (b) the entry by Parent, Zymeworks CallCo ULC, an unlimited liability company existing under the laws of the Province of British Columbia and a direct, wholly-owned subsidiary of Parent (“Callco”) and ExchangeCo into the Exchangeable Share Support Agreement (the “Support Agreement”); and (c) the entry by Parent, ExchangeCo, Callco and Computershare Trust Company of Canada, a trust company existing under the laws of Canada (the “Share Trustee”) into the Voting and Exchange Trust Agreement (the “Trust Agreement”) for the benefit of the Exchangeable Shareholders, as more particularly described in the accompanying proxy statement/prospectus of Zymeworks dated September 2, 2022 (as may be amended, supplemented or otherwise modified from time to time) (the “Proxy Statement/Prospectus”); and

2. to transact such other business as may properly come before the Special Meeting or any adjournment thereof.

This notice of special meeting of Zymeworks Securityholders (the “Notice of Special Meeting”) and the accompanying Proxy Statement/Prospectus are available on Zymeworks’ website at www.zymeworks.com, on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.

Pursuant to the Interim Order, the close of business on August 24, 2022 is the record date for determining Zymeworks Securityholders who are entitled to attend and vote at the Special Meeting (the “Record Date”). Only Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders whose names have been entered in the registers of Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, respectively, as of the Record Date are entitled to receive notice of and vote at the Special Meeting.

Zymeworks Securityholders who are unable to attend the Special Meeting are encouraged to complete, sign and return the enclosed form of proxy. To be valid, proxies must be deposited with Computershare Investor Services Inc., Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, before 9 a.m. (Pacific


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time) on October 5, 2022, or if the Special Meeting is adjourned or postponed, no later than 9 a.m. (Pacific time) on the second business day preceding the day to which the Special Meeting is adjourned or postponed. Notwithstanding the foregoing, the Chair of the Special Meeting has the discretion to accept proxies received after such deadline and the time limit for deposit of proxies may be waived or extended by the Chair of the Special Meeting at his or her discretion, without notice.

If you are a beneficial (non-registered) Zymeworks Shareholder, the intermediary (usually a bank, trust company, broker, securities dealer or other financial institution) through which you hold your Zymeworks Common Shares will send you instructions on how to vote your Zymeworks Common Shares. Please follow the instructions on your voting instruction form.

Zymeworks Securityholders who are planning to return the form of proxy or voting instruction form are encouraged to review the Proxy Statement/Prospectus carefully before submitting such form.

Pursuant to the Interim Order, registered Zymeworks Shareholders as of the Record Date have been granted the right to dissent with respect to the Redomicile Resolution and, if the Redomicile Transactions become effective, to be paid the fair value of their Zymeworks Common Shares in accordance with the provisions of Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the plan of arrangement, which will effect the Arrangement under the BCBCA (the “Plan of Arrangement”) and any other order of the Court. Registered Zymeworks Shareholders who wish to dissent must provide a written objection to the Redomicile Resolution (a “Dissent Notice”) to Zymeworks, c/o Blake, Cassels & Graydon LLP, 595 Burrard Street, Suite 2600, Vancouver BC V7X 1L3, Attention: Sean Boyle and Alexandra Luchenko, which Dissent Notice must be received by October 5, 2022, or such day that is two Business Days immediately preceding the date that any adjournment or postponement of the Special Meeting is reconvened, and must otherwise strictly comply with the dissent procedures prescribed by the BCBCA, as may be modified and supplemented by the Interim Order, the Plan of Arrangement and any other order of the Court. A Zymeworks Shareholder’s right to dissent is more particularly described in the Proxy Statement/Prospectus under the heading “The Redomicile Transactions and the Plan of Arrangement — Dissent Rights”. A copy of the Plan of Arrangement is attached as Exhibit A to the Transaction Agreement, which is set forth in Appendix B to the Proxy Statement/Prospectus. Copies of the text of Division 2 of Part 8 of the BCBCA and the Interim Order are set forth in Appendices C and D, respectively, to the Proxy Statement/Prospectus.

Persons who are beneficial owners of Zymeworks Common Shares registered in the name of a broker, bank, trust company or other intermediary or nominee (an “Intermediary”) who wish to dissent should be aware that only registered Zymeworks Shareholders are entitled to dissent. Accordingly, a beneficial owner of Zymeworks Common Shares desiring to exercise this right must make arrangements for the Zymeworks Common Shares beneficially owned by such Zymeworks Shareholder to be registered in the Zymeworks Shareholder’s name prior to the time the Dissent Notice is required to be received by Zymeworks, or, alternatively, make arrangements for the registered holder of such Zymeworks Common Shares to dissent on the Zymeworks Shareholder’s behalf. A Zymeworks Shareholder that votes in favor of the Redomicile Resolution will not be entitled to dissent rights but a Zymeworks Shareholder’s failure to vote against the Redomicile Resolution will not constitute a waiver of such shareholder’s dissent rights and a vote against the Redomicile Resolution will not be deemed to satisfy notice requirements under the BCBCA with respect to dissent rights.

It is strongly suggested that any Zymeworks Shareholder wishing to dissent seek independent legal advice, as the failure to strictly comply with the requirements set forth in Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement and any other order of the Court, may result in the loss of any right of dissent.

The Proxy Statement/Prospectus provides additional information relating to the matters to be dealt with at the Special Meeting and is deemed to form part of this Notice of Special Meeting. Any adjourned or postponed meeting resulting from an adjournment or postponement of the Special Meeting will be held at a time and place to be specified either by the Zymeworks before the Special Meeting or by the Chair at the Special Meeting.


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If you have any questions about the information contained in this Notice of Special Meeting and the accompanying Proxy Statement/Prospectus, require assistance in voting your Zymeworks Common Shares, or if you are an Eligible Holder and have any questions about the information contained in the Letter of Transmittal and Election Form or wish to receive an electronic copy of the tax election package by e-mail, please contact Zymeworks’ strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors:

 

 

LOGO

Kingsdale Advisors

130 King Street West, Suite 2950

Toronto, Ontario M5X 1E2

Call Toll-Free (within North America): 1-855-476-7981

Call Collect (outside North America): 1-416-867-2272

Email at contactus@kingsdaleadvisors.com

DATED at Vancouver, British Columbia, this second day of September, 2022.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Kenneth Galbraith

Kenneth Galbraith

Chair & CEO


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ADDITIONAL INFORMATION

Zymeworks files annual, quarterly and current reports, proxy statements and other business and financial information with the U.S. Securities and Exchange Commission (the “SEC”). Financial information about Zymeworks is provided in its consolidated financial statements as at December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 and accompanying management’s discussion and analysis (“MD&A”) for the year ended December 31, 2021 and in Zymeworks’ unaudited consolidated financial statements for the three and six months ended June 30, 2022 and accompanying MD&A for the three and six months ended June 30, 2022. Zymeworks files reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at www.sec.gov containing this information. Such information is also available under Zymeworks’ profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. You can also obtain these documents, free of charge, from Zymeworks at www.zymeworks.com, under the heading “Investors & Media”. The information contained on, or that may be accessed through, Zymeworks’ website is not incorporated by reference into, and is not a part of, this Proxy Statement/Prospectus.

Parent, which is currently a wholly-owned subsidiary of Zymeworks, has filed a registration statement on Form S-4 with respect to shares of Delaware Common Stock expected to be issued in connection with the Redomicile Transactions, which includes shares expected to be issued at closing, shares issuable upon the exercise of outstanding options to be assumed at closing, shares issuable upon the settlement of restricted stock units to be assumed at closing, shares issuable upon the exercise of Zymeworks Warrants to be assumed at closing, shares issuable upon the grant and subsequent exercise or settlement of equity incentive awards granted pursuant to the Zymeworks Incentive Plans, and shares issuable upon the exchange of Exchangeable Shares. This Proxy Statement/Prospectus forms a part of the registration statement. As permitted by SEC rules, this Proxy Statement/Prospectus does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read a copy of the registration statement, including any amendments, schedules and exhibits at the SEC’s website mentioned above. Statements contained in this Proxy Statement/Prospectus as to the contents of any contract or other documents referred to in this Proxy Statement/Prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable agreement or other document filed as an exhibit to the registration statement. This Proxy Statement/Prospectus incorporates important business and financial information about Zymeworks from documents that are not attached to this Proxy Statement/Prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this Proxy Statement/Prospectus, including copies of financial statements and MD&A, free of charge by requesting them in writing or by telephone from Zymeworks or from its strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors:

 

 

LOGO

Kingsdale Advisors

130 King Street West, Suite 2950

Toronto, Ontario M5X 1E2

Call Toll-Free (within North America): 1-855-476-7981

Call Collect (outside North America): 1-416-867-2272

Email at contactus@kingsdaleadvisors.com

If you would like to request any documents, please do so by October 3, 2022 in order to receive them before the Special Meeting.

For a more detailed description of the information incorporated by reference into this Proxy Statement/Prospectus and how you may obtain it, see section titled “Where You Can Find More Information”.


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TABLE OF CONTENTS

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     i  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     ii  

INFORMATION CONTAINED IN PROXY STATEMENT/PROSPECTUS

     viii  

QUESTIONS AND ANSWERS ABOUT THE REDOMICILE TRANSACTIONS AND THE MEETING

     1  

SUMMARY

     16  

RISK FACTORS

     30  

VOTING INFORMATION

     41  

THE REDOMICILE TRANSACTIONS AND THE PLAN OF ARRANGEMENT

     46  

SUMMARY OF THE TRANSACTION AGREEMENT

     62  

DESCRIPTION OF EXCHANGEABLE SHARES AND RELATED AGREEMENTS

     65  

INFORMATION CONCERNING PARENT, EXCHANGECO AND CALLCO

     78  

INFORMATION CONCERNING ZYMEWORKS

     83  

LEGAL MATTERS

     86  

EXPERTS

     87  

MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

     88  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     100  

DESCRIPTION OF PARENT CAPITAL STOCK

     108  

COMPARISON OF RIGHTS OF ZYMEWORKS SHAREHOLDERS, EXCHANGEABLE SHAREHOLDERS AND PARENT STOCKHOLDERS

     115  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND DIRECTORS OF ZYMEWORKS

     154  

STOCKHOLDER PROPOSALS AND NOMINATIONS

     157  

WHERE YOU CAN FIND MORE INFORMATION

     158  

APPROVAL

     160  

GLOSSARY

     161  

APPENDIX A — REDOMICILE RESOLUTION

     A-1  

APPENDIX B — RESTATED AND AMENDED TRANSACTION AGREEMENT

     B-1  

APPENDIX C — DIVISION 2 OF PART 8 OF THE BCBCA

     C-1  

APPENDIX D — INTERIM ORDER

     D-1  

APPENDIX E — NOTICE OF HEARING OF PETITION

     E-1  

APPENDIX F — FORM OF ZYMEWORKS DELAWARE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     F-1  

APPENDIX G — FORM OF ZYMEWORKS DELAWARE AMENDED AND RESTATED BYLAWS

     G-1  

APPENDIX H — PRELIMINARY PROXY CARD

     H-1  


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This Proxy Statement/Prospectus, which forms part of a registration statement on Form S-4 filed with the SEC, constitutes a prospectus under the U.S. Securities Act with respect to shares of Delaware Common Stock of Parent expected to be issued to Zymeworks Shareholders in connection with the Redomicile Transactions, which includes shares expected to be issued at closing, shares issuable upon the exercise of outstanding options to be assumed at closing, shares issuable upon the settlement of restricted stock units to be assumed at closing, shares issuable upon the exercise of Zymeworks Warrants to be assumed at closing, shares issuable upon the grant and subsequent exercise or settlement of equity incentive awards granted pursuant to the Zymeworks Incentive Plans, and shares issuable upon the exchange of Exchangeable Shares. This Proxy Statement/Prospectus also constitutes a notice of meeting with respect to the Special Meeting.

You should rely only on the information contained in or incorporated by reference into this Proxy Statement/Prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this Proxy Statement/Prospectus. This Proxy Statement/Prospectus is dated September 2, 2022, and you should assume that the information contained in this Proxy Statement/Prospectus is accurate only as of such date. You should also assume that the information incorporated by reference into this Proxy Statement/Prospectus is only accurate as of the date of such information.

This Proxy Statement/Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement/Prospectus includes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws, or collectively, forward-looking statements. Forward-looking statements include statements that may relate to Zymeworks’ plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings “Information Concerning Zymeworks”, “Information Concerning Parent”, “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”, “Business”, “Risk Factors” and “Managements Discussion and Analysis of Financial Condition and Results of Operations” in this Proxy Statement/Prospectus, including the documents incorporated by reference herein. Forward-looking statements can often be identified by the use of terminology such as “subject to”, “believe”, “anticipate”, “plan”, “expect”, “intend”, “estimate”, “project”, “may”, “will”, “should”, “would”, “could”, “can”, the negatives thereof, variations thereon and similar expressions, or by discussions of strategy. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. In particular, these forward-looking statements include, but are not limited to, statements about:

 

   

anticipated benefits of the Redomicile Transactions;

 

   

the likelihood of the Redomicile Transactions being completed;

 

   

the anticipated outcomes of the Redomicile Transactions;

 

   

the principal steps of the Redomicile Transactions (including the Arrangement);

 

   

the anticipated tax impact of the Redomicile Transactions on Zymeworks, Parent and Zymeworks Shareholders;

 

   

the timing of the Special Meeting and Final Order;

 

   

Required Securityholder Approvals and regulatory and stock exchange approval of the Redomicile Transactions and Court approval in respect of the Arrangement;

 

   

the anticipated last day of trading Zymeworks Common Shares on the NYSE and the anticipated trading of the shares of Delaware Common Stock on the NYSE;

 

   

the anticipated Effective Date;

 

   

the timing of the implementation of the Redomicile Transactions and its potential benefits, risks and costs;

 

   

the opportunity to enhance long-term value for stockholders as a U.S. company;

 

   

the ability to attract passive investment capital in the U.S. and size of such increased investment;

 

   

the benefits of Delaware law in connection with negotiations with potential acquirors;

 

   

the benefits of being a U.S. corporation on efforts to commercialize zanidatamab and the potential monetization of early-stage product candidates;

 

   

operations in Canada and the United States following the Redomicile Transactions;

 

   

perception of Zymeworks by investors, analysts, customers, lenders or potential strategic partners;

 

   

the planned corporate, capital, governance and oversight structures of Parent and Zymeworks before and following the Redomicile Transactions;

 

   

the size of Zymeworks’ addressable markets and its ability to commercialize product candidates;

 

   

the achievement of advances in and expansion of Zymeworks’ therapeutic platforms and antibody engineering expertise;

 

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the likelihood of product candidate development and clinical trial progression, initiation or success;

 

   

Zymeworks’ ability to predict and manage government regulation;

 

   

Zymeworks’ ability to negotiate any required amendments to its contractual relationships to reflect the Redomicile Transactions; and

 

   

the impact of the COVID-19 pandemic on Zymeworks’ business and operations.

All forward-looking statements, including, without limitation, those related to Zymeworks’ examination of historical operating trends, are based upon Zymeworks’ current expectations and various assumptions. Certain assumptions made in preparing the forward-looking statements include:

 

   

Parent’s eligibility for inclusion in certain indices following the Redomicile Transactions;

 

   

the ability to commercialize zanidatamab in the United States and potentially monetize early-stage product candidates;

 

   

the familiarity of potential future counterparties with Delaware law;

 

   

Zymeworks’ ability to achieve the benefits of the restructuring announced in January 2022 and to manage the size of its organization effectively;

 

   

the absence of material adverse changes in Zymeworks’ industry or the global economy;

 

   

Zymeworks’ ability to understand and predict trends in its industry and markets;

 

   

Zymeworks’ ability to maintain good business relationships with its strategic partners;

 

   

Zymeworks’ ability to comply with current and future regulatory standards;

 

   

Zymeworks’ ability to protect its intellectual property rights;

 

   

Zymeworks’ continued compliance with third-party license terms and the non-infringement of third-party intellectual property rights;

 

   

Zymeworks’ ability to manage and integrate acquisitions;

 

   

Zymeworks’ ability to retain key personnel; and

 

   

Zymeworks’ ability to raise sufficient debt or equity financing to support its continued growth.

Zymeworks believes there is a reasonable basis for its expectations and beliefs, but they are inherently uncertain. Zymeworks and Parent may not realize Zymeworks’ expectations, and its beliefs may not prove correct. Actual results could differ materially from those described or implied by such forward-looking statements. The following uncertainties and factors, among others (including those set forth under “Risk Factors”), could affect future performance and cause actual results to differ materially from those matters expressed in or implied by forward-looking statements:

 

   

changes in the rights of Zymeworks Shareholders as a result of the Redomicile Transactions;

 

   

provisions that could discourage a takeover of Parent in Parent’s organizational documents and under the General Corporation Law of the State of Delaware (“DGCL”);

 

   

potential limitations to stockholders’ ability to obtain a favorable judicial forum for disputes with Parent or its directors or officers or other matters pertaining to Parent’s internal affairs due to Parent’s organizational documents designating the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders;

 

   

volatility in the market price for the shares of Delaware Common Stock;

 

   

zanidatamab may not be approved for commercialization in the United States or any other jurisdictions;

 

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counterparties for potential monetization transactions may not exist or may not be interested in Zymeworks’ early-stage product candidates;

 

   

Parent’s ability to enter into new arrangements on favorable terms;

 

   

issuance of additional shares of Delaware Common Stock may cause dilution;

 

   

failure to obtain the Required Securityholder Approvals, Court, regulatory, stock exchange and other third-party approvals in a timely manner or on conditions acceptable to Zymeworks or the failure of the Redomicile Transactions to be completed for any other reason (or to be completed in a timely manner);

 

   

failure to achieve the perceived benefits of the Redomicile Transactions and the Redomicile Transactions causing disruption to Zymeworks’ business;

 

   

the inability to have shares of Delaware Common Stock included in U.S. stock market indices;

 

   

the inability to attract the expected level of increased U.S. institutional investor interest following the Redomicile Transactions;

 

   

unanticipated adverse tax consequences to Zymeworks, Parent and the Zymeworks Shareholders in connection with the Redomicile Transactions;

 

   

the incurrence of material Canadian federal income tax and/or material U.S. federal income tax as a result of the Redomicile Transactions of certain of its assets;

 

   

the possibility that incremental U.S. or Canadian tax will be imposed on Zymeworks or Parent following the Redomicile Transactions;

 

   

changes in tax laws, regulations or future assessments;

 

   

allocation of time and incurrence of costs (including non-recurring costs) associated with the Redomicile Transactions beyond those estimated;

 

   

Zymeworks may choose to defer or abandon the Redomicile Transactions;

 

   

negative publicity resulting from the Redomicile Transactions and its potential effect on Zymeworks’ business and the market price of Zymeworks Common Shares and the shares of Delaware Common Stock of Parent;

 

   

risk of triggering certain provisions in agreements to which Zymeworks is a party as a result of the Redomicile Transactions;

 

   

payments in connection with the exercise of Dissent Rights may impact Parent’s financial resources;

 

   

limitations of enforcement of rights against Parent in Canada;

 

   

the impact of the announcement and pendency of the Redomicile Transactions on Zymeworks’ business, results of operations, and financial conditions;

 

   

Zymeworks’ ability to obtain regulatory approval for its product candidates without significant delays;

 

   

the predictive value of Zymeworks’ current or planned clinical trials;

 

   

delays with respect to the development and commercialization of Zymeworks’ product candidates, which may cause increased costs or delay receipt of product revenue;

 

   

Zymeworks’ or any of its partners’ ability to enroll subjects in clinical trials and thereby complete trials on a timely basis;

 

   

the design or Zymeworks’ execution of clinical trials may not support regulatory approval, including where clinical trials are conducted outside the United States;

 

   

the extent to which Zymeworks’ business may be adversely affected by the COVID-19 pandemic;

 

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global economic and political conditions, including as a result of the Russian invasion of Ukraine, and the related impact on our business and the markets generally;

 

   

the Fast Track and Breakthrough Therapy designations for any of Zymeworks’ product candidates may not expedite regulatory review or approval;

 

   

the U.S. Food and Drug Administration (the “FDA”) may not accept data from trials Zymeworks conducts outside the United States;

 

   

disruptions at the FDA and other government agencies caused by funding shortages or global health concerns;

 

   

Zymeworks’ discretion to discontinue or reprioritize the development of any of Zymeworks’ product candidates;

 

   

the potential for Zymeworks’ product candidates to have undesirable side effects;

 

   

no regulatory agency has made a determination that any of Zymeworks’ product candidates are safe or effective for use by the general public or for any indication;

 

   

Zymeworks’ ability to face significant competition, including biosimilar products;

 

   

the likelihood of broad market acceptance of Zymeworks’ product candidates;

 

   

Zymeworks’ ability to obtain Orphan Drug Designation or exclusivity for some or all of its product candidates;

 

   

Zymeworks’ ability to commercialize products outside of the United States;

 

   

the outcome of reimbursement decisions by third-party payors relating to Zymeworks’ products;

 

   

Zymeworks’ expectations with respect to the market opportunities for any product that it or its strategic partners develop;

 

   

Zymeworks’ ability to pursue product candidates that may be profitable or have a high likelihood of success;

 

   

Zymeworks’ ability to use its therapeutic platforms to build a pipeline of product candidates;

 

   

Zymeworks’ ability to meet the requirements of ongoing regulatory review;

 

   

the threat of product liability lawsuits against Zymeworks or any of its strategic partners;

 

   

changes in product candidate manufacturing or formulation that may result in additional costs or delay;

 

   

the potential disruption of Zymeworks’ business and dilution of its shareholdings associated with acquisitions and joint ventures;

 

   

the potential for governments to impose strict price controls;

 

   

the risk of security breaches and incidents or data loss, which could compromise sensitive business or health information;

 

   

current and future legislation that may increase the difficulty and cost of commercializing Zymeworks’ product candidates;

 

   

economic, political, regulatory and other risks associated with international operations;

 

   

Zymeworks’ exposure to legal and reputational penalties as a result of any of its current and future relationships with various third parties;

 

   

Zymeworks’ ability to comply with export control and import laws and regulations;

 

   

Zymeworks’ history of significant losses since inception;

 

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Zymeworks’ ability to generate revenue from product sales and achieve profitability;

 

   

Zymeworks’ requirement for substantial additional funding;

 

   

the potential dilution to Zymeworks Shareholders associated with future financings;

 

   

restrictions on Zymeworks’ ability to seek financing, which may be imposed by future debt;

 

   

Zymeworks’ ability to maintain existing and future strategic partnerships;

 

   

Zymeworks’ ability to realize the anticipated benefits of its strategic partnerships;

 

   

Zymeworks’ ability to secure future strategic partners;

 

   

Zymeworks’ reliance on third-party manufacturers to produce its product candidate supplies and on other third parties to provide supplies and store, monitor and transport bulk drug substance and drug product;

 

   

Zymeworks’ reliance on third parties to oversee clinical trials of its product candidates and, in some cases, maintain regulatory files for those product candidates;

 

   

Zymeworks’ reliance on third parties for various operational and administrative aspects of its business including its reliance on third parties’ cloud-based software platforms;

 

   

Zymeworks’ ability to operate without infringing the patents and other proprietary rights of third parties;

 

   

Zymeworks’ ability to obtain and enforce patent protection for its product candidates and related technology;

 

   

Zymeworks’ patents could be found invalid or unenforceable if challenged;

 

   

Zymeworks’ intellectual property rights may not necessarily provide it with competitive advantages;

 

   

Zymeworks may become involved in expensive and time-consuming patent lawsuits;

 

   

the risk that the duration of Zymeworks’ patents will not adequately protect its competitive position;

 

   

Zymeworks’ ability to obtain protection under the Drug Price Competition and Patent Term Restoration Act of 1984 and similar legislation;

 

   

Zymeworks may be unable to protect the confidentiality of its proprietary information;

 

   

Zymeworks’ ability to comply with procedural and administrative requirements relating to its patents;

 

   

the risk of claims challenging the inventorship of Zymeworks’ patents and other intellectual property;

 

   

Zymeworks’ intellectual property rights for some of its product candidates are dependent on the abilities of third parties to assert and defend such rights;

 

   

patent reform legislation and court decisions can diminish the value of patents in general, thereby impairing Zymeworks’ ability to protect its products;

 

   

Zymeworks may not be able to protect its intellectual property rights throughout the world;

 

   

Zymeworks will require FDA approval for any proposed product candidate names and any failure or delay associated with such approval may adversely affect its business;

 

   

Zymeworks’ election to rely on reduced reporting and disclosure requirements available to smaller reporting companies may make our common shares less attractive to investors;

 

   

the risk of employee misconduct including noncompliance with regulatory standards and insider trading;

 

   

Zymeworks’ ability to market its products in a manner that does not violate the law and subject it to civil or criminal penalties;

 

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if Zymeworks does not comply with laws regulating the protection of the environment and health and human safety, its business could be adversely affected;

 

   

Zymeworks’ ability to retain key executives and attract and retain qualified personnel;

 

   

Zymeworks’ exposure to potential securities class action litigation; and

 

   

if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about Zymeworks’ business, its share price and trading volume could decline.

Consequently, forward-looking statements should be regarded solely as Zymeworks’ and Parent’s current plans, estimates and beliefs. You should not place undue reliance on forward-looking statements. Neither Zymeworks nor Parent can guarantee future results, events, levels of activity, performance or achievements. Neither Zymeworks nor Parent undertake and each specifically declines any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events, except as required by law. The Risk Factors contained or incorporated by reference in this Proxy Statement/Prospectus are not guarantees that no such conditions exist as of the date of this Proxy Statement/Prospectus and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

In addition, statements that “we believe” and similar statements reflect Zymeworks’ and Parent’s beliefs and opinions on the relevant subject. These statements are based upon information available to them as of the date of this Proxy Statement/Prospectus, and although Zymeworks and Parent believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and the statements should not be read to indicate that either Zymeworks or Parent has conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Zymeworks owns or has rights to trademarks, service marks or trade names that it uses in connection with the operation of its business. In addition, Zymeworks’ names, logos and website names and addresses are Zymeworks’ service marks or trademarks. Azymetric, Zymeworks, ZymeCAD, EFECT, ZymeLink and the phrase “Building Better Biologics” are Zymeworks’ registered trademarks. The other trademarks, trade names and service marks appearing in this Proxy Statement/Prospectus are the property of its respective owners. Solely for convenience, the trademarks, service marks, tradenames and copyrights referred to in this Proxy Statement/Prospectus are listed without the ©, ® and TM symbols, but Zymeworks will assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensors to these trademarks, service marks and tradenames.

All amounts in this Proxy Statement/Prospectus are expressed in U.S. dollars, except where otherwise indicated. References to “$” and “US$” are to U.S. dollars and references to “C$” are to Canadian dollars.

Except as otherwise indicated, references in this Proxy Statement/Prospectus to “Zymeworks”, the “Company”, “we”, “us” and “our” refer to the business and operations of Zymeworks Inc. and its subsidiaries, which will be the business of Parent and its subsidiaries after the Redomicile Transactions, if approved.

 

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INFORMATION CONTAINED IN PROXY STATEMENT/PROSPECTUS

Management is soliciting proxies of all Zymeworks Securityholders primarily by mail and electronic means, supplemented by telephone or other contact by employees of Zymeworks (who will receive no additional compensation) and all such costs will be borne by Zymeworks. Zymeworks has also retained Kingsdale Advisors as its strategic shareholder advisor, proxy solicitation agent and information agent (the “Proxy Solicitor”) to assist in the solicitation of proxies. For these proxy solicitation services, Kingsdale Advisors will receive an estimated fee of approximately CDN$60,000, plus reimbursement of reasonable out-of-pocket expenses and fees for any additional services. Zymeworks will also reimburse brokers, banks and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of Zymeworks Common Shares and obtaining their proxies.

This Proxy Statement/Prospectus and proxy-related materials are being sent to all Zymeworks Securityholders. Zymeworks does not send proxy-related materials directly to beneficial (non-registered) Zymeworks Shareholders and is not relying on the notice-and-access provisions of applicable securities laws for delivery of proxy-related materials to Zymeworks Shareholders. Zymeworks will deliver proxy-related materials to nominees, custodians and fiduciaries, and they will be asked to promptly forward them to the beneficial (non-registered) Zymeworks Shareholders. Zymeworks will reimburse such nominees, custodians and fiduciaries for their expenses in sending proxy-related materials to the beneficial (non-registered) Zymeworks Shareholders and obtaining their proxies. If you are a beneficial (non-registered) Zymeworks Shareholder, your nominee should send you a voting instruction form or form of proxy with this Proxy Statement/Prospectus. Zymeworks has also elected to pay for the delivery of its proxy-related materials to objecting beneficial (non-registered) Zymeworks Shareholders.

Zymeworks has not authorized any person to give any information or to make any representation in connection with the Redomicile Transactions or any other matters to be considered at the Special Meeting other than those contained in this Proxy Statement/Prospectus. If any such information or representation is given or made, such information or representation should not be relied upon as having been authorized or as being accurate. For greater certainty, the information contained in, or that can be accessed through, Zymeworks’ website is not incorporated into this Proxy Statement/Prospectus.

This Proxy Statement/Prospectus does not constitute an offer to sell, buy or exchange or a solicitation of an offer to sell, buy or exchange any securities, or the solicitation of any vote, proxy or approval, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.

Zymeworks Securityholders should not construe the contents of this Proxy Statement/Prospectus as legal, tax or financial advice and should consult with their own legal, tax, financial and other professional advisors.

All summaries of, and references to, the Transaction Agreement and the Plan of Arrangement in this Proxy Statement/Prospectus are qualified in their entirety by the complete text thereof, which is set forth in Appendix B to the Proxy Statement/Prospectus. Zymeworks Securityholders are urged to read carefully the full text of the Transaction Agreement and the Plan of Arrangement.

 

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If you have any questions about the information contained in this Proxy Statement/Prospectus, require assistance in voting your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards or if you are an Eligible Holder and have any questions about the information contained in the Letter of Transmittal and Election Form or wish to receive an electronic copy of the tax election package by e-mail, please contact Zymeworks’ strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors:

 

 

LOGO

Kingsdale Advisors

130 King Street West, Suite 2950

Toronto, Ontario M5X 1E2

Call Toll-Free (within North America): 1-855-476-7981

Call Collect (outside North America): 1-416-867-2272

Email at contactus@kingsdaleadvisors.com

Except as otherwise indicated, references in this Proxy Statement/Prospectus to “Zymeworks”, the “Company”, “we”, “us” and “our” refer to the business and operations of Zymeworks Inc. and its subsidiaries, which will be the business of Parent and its subsidiaries after the Redomicile Transactions, if approved.

Except as otherwise stated, the information contained in this Proxy Statement/Prospectus is given as of September 2, 2022.

Notice Regarding Tax Consequences of Redomicile Transactions

Zymeworks Shareholders should be aware that the disposition of Zymeworks Common Shares pursuant to the Redomicile Transactions, and the acquisition, holding and disposition of shares of Delaware Common Stock or Exchangeable Shares may have tax consequences in Canada, the United States and/or in the jurisdictions in which the Zymeworks Shareholders are resident which may not be described fully herein. The tax consequences to such Zymeworks Shareholders of the Redomicile Transactions and of holding Delaware Common Stock or Exchangeable Shares is dependent on their individual circumstances, including (but not limited to) their jurisdiction of residence. It is recommended that Zymeworks Shareholders consult their own tax advisors in this regard.

Currency and Exchange Rates

The following table shows, for the periods and dates indicated, certain information regarding the Canadian dollar-to-U.S. dollar exchange rate. The information is based on the Bank of Canada’s closing Canadian dollar-to-U.S. dollar exchange rate. Such exchange rate on August 29, 2022 was US$1.00 = C$1.3009.

 

    Period End     Average(1)     Low     High  

Six months ended June 30, 2022 (C$ per US$)

    1.2886       1.2715       1.2451       1.3039  

Year ended December 31, (C$ per US$)

       

2021

    1.2678       1.2535       1.2040       1.2942  

2020

    1.2732       1.3415       1.2718       1.4496  

Note:

(1)

The average of the daily exchange rates during the relevant period.

Except as otherwise stated, in this Proxy Statement/Prospectus, all dollar amounts are expressed in United States dollars.

Defined Terms

This Proxy Statement/Prospectus contains defined terms. For a glossary of defined terms used herein, see section titled “Glossary”.

 

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QUESTIONS AND ANSWERS ABOUT THE REDOMICILE TRANSACTIONS AND THE MEETING

The following questions and answers are intended to briefly address some commonly asked questions regarding the Redomicile Transactions and the Special Meeting. These questions and answers may not address all questions that may be important to you. To better understand these matters, and for a description of the legal terms governing the Redomicile Transactions, you should carefully read this entire Proxy Statement/Prospectus, including the attached appendices, as well as the documents that have been incorporated by reference into this Proxy Statement/Prospectus. For more information, see section titled “Information Contained in Proxy Statement/Prospectus”. Capitalized terms used but not otherwise defined in the questions and answers set forth below have the meanings set forth under the heading “Glossary”.

Q: Why am I receiving this Notice of Special Meeting and Proxy Statement/Prospectus?

You are receiving this Notice of Special Meeting and Proxy Statement/Prospectus because you are a Zymeworks Shareholder, Zymeworks Warrantholder or a Zymeworks Incentive Awardholder as of the Record Date. You are entitled to vote for the Redomicile Resolution at the Special Meeting to be held on October 7, 2022.

This Proxy Statement/Prospectus, which you should read carefully, contains important information about the proposed Redomicile Transactions and how to vote at the Special Meeting.

Q: When and where will the Special Meeting be held?

The Special Meeting will be held on October 7, 2022, at the Pearl Room, Fairmont Pacific Rim, 1038 Canada Place, Vancouver, BC V6C 0B9, at 9 a.m., Pacific time.

Q: What are the Redomicile Transactions?

On July 15, 2022, Zymeworks announced the proposed Redomicile Transactions, pursuant to which, among other things, (a) Zymeworks Shareholders will receive, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, either (i) shares of Delaware Common Stock, on a one-for-one basis, or (b) Exchangeable Shares on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them (the “Mixed Election”), subject to the Exchangeable Share Cap; (b) Parent, Callco and ExchangeCo will enter into the Support Agreement; and (c) Parent, Callco, ExchangeCo and Share Trustee will enter into the Trust Agreement for the benefit of the Exchangeable Shareholders.

Q: Does the Zymeworks Board recommend that I vote FOR the Redomicile Resolution?

Yes. The Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

Q: What are Zymeworks’ reasons for the Redomicile Transactions?

The Zymeworks Board, in determining that the Redomicile Transactions are in the best interests of Zymeworks, considered a number of factors as described under “The Redomicile Transactions and the Plan of Arrangement — Reasons for the Redomicile Transactions”, including:

 

   

Expand U.S. Institutional Investor Base — Due to the fact that Zymeworks is a British Columbia corporation, certain U.S. institutional investors and state-level investment vehicles are prohibited from investing in Zymeworks Common Shares or are limited in the size of such investment. Although the converse can also apply with respect to certain Canadian institutional investors (i.e., Canadian institutional investors may face prohibitions or limitations on investing in U.S. corporations or may have adopted internal policies limiting such holdings), the Zymeworks Board believes that becoming a Delaware corporation would provide greater opportunities to expand the institutional investor base, which would provide opportunities for increased value of Zymeworks Common Shares.

 

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Index Listing — As a Delaware corporation, Parent may be eligible for inclusion in certain leading indices, such as the Russell and S&P indices, which could also increase demand for Parent shares through passive investment by certain index funds.

 

   

Acquisition Proposals — Delaware law provides boards of directors with additional tools for negotiating with potential acquirors, which may assist the board in increasing the value to stockholders in any proposed strategic transactions.

 

   

U.S. Stockholder Base — U.S. investors have greater familiarity with Delaware corporate law and the Zymeworks Board believes this familiarity would make Zymeworks Common Shares a more attractive investment for such investors, which could provide opportunities for increased value to current shareholders.

 

   

Comparability to U.S. Public Companies — Parent is a Delaware corporation. While there are differences between the BCBCA and the DGCL and shareholders’ rights may be different under the DGCL than the BCBCA depending on the specific set of circumstances, the Zymeworks Board believes being incorporated in Delaware may provide greater comparability to other U.S. public companies, many of which are incorporated in Delaware, including many of Zymeworks’ peer group companies. See section titled “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

 

   

Commercialization of Zanidatamab — The Zymeworks Board believes that, if zanidatamab is approved, the United States will be a key geography for the commercialization of zanidatamab. Commercialization in the United States may require, among other things, hiring additional U.S. employees and entering into additional agreements with U.S. counterparties. The Zymeworks Board believes that being a Delaware corporation would simplify such efforts by reducing some of the cross-border legal, regulatory and tax complexities related to these efforts. Beyond these anticipated benefits relating to commercialization, the Zymeworks Board expects to be able to reduce certain administrative costs and complexities as a Delaware corporation.

 

   

Expand Opportunities for Future Monetization of Early-Stage Product Candidates — The Zymeworks Board may in the future consider monetization opportunities for the Company’s early-stage product candidates. A significant portion of potential counterparties for such transactions are located in the United States. The Zymeworks Board believes that being a Delaware corporation would make Zymeworks more attractive to potential counterparties because it may reduce the tax, legal and regulatory complexity inherent to cross-border transactions and the potential counterparties are familiar with Delaware corporate law.

 

   

Continuing Operations in Canada — The Redomicile Transactions would not prevent Parent from indirectly continuing a portion of its operations in Canada through its Canadian subsidiaries.

The Zymeworks Board considered a number of other factors pertaining to the Redomicile Transactions as generally supporting its decision to recommend the Redomicile Transactions, including, but not limited to, the following material factors:

 

   

Required Securityholder Approvals and Court Approval — The Redomicile Transactions will be submitted to a vote at the Special Meeting and must be approved by the affirmative vote of at least two-thirds of the votes cast at the Special Meeting on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately. In addition, the Redomicile Transactions are subject to review by the Court, which will consider, among other things, the fairness and reasonableness of the Redomicile Transactions, both from a substantive and a procedural point of view.

 

   

Tax Deferred Rollover — Zymeworks Shareholders who are Eligible Holders will have the opportunity to elect to receive consideration that includes Exchangeable Shares (subject to the Exchangeable Share Cap) with respect to their Zymeworks Common Shares and may generally make a

 

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valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

 

   

Market Familiarity with Redomicile Transactions — The Zymeworks Board believes the proposed structure of the Redomicile Transactions is similar to that adopted by other former Canadian companies and is familiar to investors.

 

   

U.S. GAAP Reporting — Immediately prior to the Redomicile Transactions, shares of Delaware Common Stock of Parent will be listed for trading on the NYSE. Parent will also continue to report consolidated financial results in U.S. dollars and in accordance with U.S. GAAP and will file reports with the SEC and relevant Canadian securities regulatory authorities.

 

   

Dissent Rights — Registered Shareholders will have the ability to exercise Dissent Rights in respect of the Redomicile Transactions and to be paid the fair value of their Zymeworks Common Shares.

 

   

Estimated Corporate Tax Liability — The Zymeworks Board weighed the estimated corporate tax liability arising from the Redomicile Transactions and, with the assistance of professional advisors and based on and subject to current assumptions, does not anticipate Zymeworks will incur material corporate-level Canadian or U.S. federal income tax resulting from the Redomicile Transactions. Parent’s effective tax rate may be affected by the Redomicile Transactions or by changes in tax laws. See section titled “Risk FactorsParent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions.”

In the course of their deliberations, the Zymeworks Board, in consultation with management and after considering information provided to management by Zymeworks’ legal, accounting and tax advisors, also considered a variety of risks (as described in greater detail under the heading “Risk Factors”) and other potentially negative factors relating to the Redomicile Transactions, including the following:

 

   

Conditions to the Redomicile Transactions — The Redomicile Transactions are conditional. The Redomicile Transactions are subject to, among other things, receipt of the Required Securityholder Approval and approval by the Court. Such conditions may not be satisfied.

 

   

Failure to Realize Benefits to the Redomicile Transactions — Zymeworks may fail to realize the perceived benefits of the Redomicile Transactions. For additional discussion of this risk, see the discussion under “Risk Factors”, including “— Zymeworks may fail to realize certain benefits of the Redomicile Transactions, including as a result of the shares of Delaware Common Stock not being included in a U.S. stock market index” and “The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds that are not permitted to hold shares of Delaware Common Stock under their internal guidelines.

 

   

Uncertainty — Zymeworks’ business may be impacted by the uncertainty associated with the Redomicile Transactions.

 

   

Costs — Zymeworks will allocate time and resources to effecting the Redomicile Transactions and incur non-recurring costs related to the Redomicile Transactions.

 

   

Redomicile Transactions May Be Deferred or Abandoned — Zymeworks may choose to defer or abandon the Redomicile Transactions.

 

   

Negative Publicity — Negative publicity resulting from the Redomicile Transactions could adversely affect Zymeworks’ business and the market price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

 

   

Impact on Agreements — Completion of the Redomicile Transactions may trigger certain provisions in agreements to which Zymeworks is a party.

 

   

Exercise of Dissent Rights — Payments in connection with the exercise of Dissent Rights by Zymeworks Shareholders may impact Parent’s financial resources.

 

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Limitation on Enforcement Against Parent in Canada — Enforcement of rights against Parent in Canada may be limited.

 

   

Tax Impact on Non-Eligible Holders and Eligible Holders if the Exchangeable Share Cap is Reached — The disposition of Zymeworks Common Shares in exchange for shares of Delaware Common Stock in connection with the Redomicile Transactions would be taxable to Zymeworks Shareholders who are residents of Canada other than Eligible Holders that elect to receive Exchangeable Shares (subject to the Exchangeable Share Cap) and make a valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement. If the Exchangeable Share Cap is reached, then the Exchangeable Shares will be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

Q: Will the business of Zymeworks change following the Redomicile Transactions?

No. Parent will continue to pursue through its subsidiaries Zymeworks’ business of the development of next-generation multifunctional biotherapeutics.

Q: Who will be the directors and executive officers of Parent following the Redomicile Transactions?

There will be no changes to the directors or executive officers as a result of the Redomicile Transactions. Once the Redomicile Transactions are complete, the same individuals at Zymeworks will serve in the same capacities at Parent. See section titled “Information Concerning Parent, ExchangeCo and Callco — Directors and Officers of Parent”.

Q: How will the directors and executive officers of Zymeworks vote?

The directors and executive officers of Zymeworks are in favor of the Redomicile Transactions and are expected to vote FOR the Redomicile Resolution.

As of the Record Date for the Special Meeting, the directors and executive officers of Zymeworks had the right to vote approximately 34,710 Zymeworks Common Shares, representing approximately 0.06% of the Zymeworks Common Shares then issued and outstanding and entitled to vote at the Special Meeting, no Zymeworks Warrants then issued and outstanding and entitled to vote at the Special Meeting and 2,225,972 Zymeworks Incentive Awards, representing approximately 27.38% of the Zymeworks Incentive Awards then issued and outstanding and entitled to vote at the Special Meeting.

Q: What will I receive for my Zymeworks Common Shares under the Redomicile Transactions?

Pursuant to the Transaction Agreement (including, in particular, the Plan of Arrangement), following completion of the Redomicile Transactions, Zymeworks Shareholders will receive either (a) the same number of shares of Delaware Common Stock that they previously held in Zymeworks Common Shares immediately prior to the Redomicile Transactions, or (b) in the case of Eligible Holders who have made a valid election with respect to their Zymeworks Common Shares, the same number of Exchangeable Shares, or the same number of a combination of Exchangeable Shares and Delaware Common Stock, subject to the Exchangeable Share Cap, that they previously held in Zymeworks Common Shares immediately prior to the Redomicile Transactions.

If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

 

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Q: How does the Support Agreement affect the Exchangeable Shares?

Pursuant to the Plan of Arrangement, Parent, ExchangeCo and Callco will enter into a Support Agreement that requires, among other things, that Parent issue shares of Delaware Common Stock as consideration when the holder calls for Exchangeable Shares to be retracted by ExchangeCo, when ExchangeCo redeems Exchangeable Shares from the holder, when Callco purchases Exchangeable Shares from the Exchangeable Shareholder under Callco’s overriding call rights, or when Parent purchases Exchangeable Shares from the Exchangeable Shareholder under the automatic exchange right upon a liquidation of Parent (which may be delegated by Parent to Callco).

Under the Support Agreement, Parent will reserve sufficient shares of Delaware Common Stock for this purpose and will agree to certain covenants to maintain an economic equivalence between the holders of Exchangeable Shares and holders of shares of Delaware Common Stock.

Q: Why are certain holders eligible to receive Exchangeable Shares in lieu of shares of Delaware Common Stock?

Subject to the following paragraph, Zymeworks Shareholders who are residents of Canada for purposes of the Tax Act (including Eligible Holders that do not make a valid tax election as discussed below) will generally realize a taxable disposition of their Zymeworks Common Shares.

Zymeworks Shareholders who are Eligible Holders may elect to receive consideration that includes Exchangeable Shares (subject to the Exchangeable Share Cap) with respect to such Zymeworks Shareholders’ Zymeworks Common Shares. An Eligible Holder who elects to receive Exchangeable Shares and makes a valid tax election with ExchangeCo may generally defer all or a part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

Q: What happens if the Exchangeable Share Cap is reached?

If the number of Exchangeable Shares to be issued to Eligible Holders exceeds the Exchangeable Share Cap, then the maximum number of Exchangeable Shares will be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holders will also be issued Delaware Common Stock under a Mixed Election.

Q: What are the requirements to qualify as an Eligible Holder?

An Eligible Holder is a Zymeworks Shareholder that is (a) a resident of Canada for purposes of the Tax Act and not exempt from tax under Part I of the Tax Act, or (b) a partnership, each member of which is a resident of Canada for purposes of the Tax Act and not exempt from tax under Part I of the Tax Act.

Q: Will the Redomicile Transactions dilute my economic interest?

No, your fully diluted relative economic ownership will not change as a result of the Redomicile Transactions. The issuance of Delaware Common Stock and Exchangeable Shares (which are exchangeable for Delaware Common Stock) to Zymeworks Shareholders is intended to maintain the same ownership of Parent following the Redomicile Transactions (other than those who validly exercise Dissent Rights and holders of Exchangeable Shares prior to exchanging them for Delaware Common Stock), and Parent will become the direct or indirect owner of all of the assets and liabilities of Zymeworks.

Q: Will the shares of Delaware Common Stock issued under the Redomicile Transactions be listed on an exchange?

Yes. Shares of Delaware Common Stock will be listed on the NYSE under the symbol ZYME. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”.

 

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Q: How do I receive shares of Delaware Common Stock or Exchangeable Shares in exchange for my Zymeworks Common Shares?

If you are a registered Zymeworks Shareholder as of the Record Date you will receive a Letter of Transmittal and Election Form. When duly completed, executed and returned, together with the certificate or certificates representing the holder’s Zymeworks Common Shares or surrender of book-entry Zymeworks Common Shares and any other required documents, the Letter of Transmittal will enable the holder to ultimately receive shares of Delaware Common Stock or Exchangeable Shares (subject to the Exchangeable Share Cap), as applicable, for their Zymeworks Common Shares.

Beneficial Shareholders will receive their shares of Delaware Common Stock and Exchangeable Shares, as applicable, through the intermediary through which their Zymeworks Common Shares are held.

Each Registered Shareholder who is an Eligible Holder will have the right to elect to receive Exchangeable Shares or a mix of Exchangeable Shares and Delaware Common Stock (subject to the Exchangeable Share Cap), by delivering a duly completed Letter of Transmittal and Election Form to the Depositary prior to the Election Deadline, being 5:00 p.m. (Vancouver time) on the date before the Special Meeting. Eligible Holders who do not make an election before the Election Deadline, or for whom their election is not properly made with respect to their Zymeworks Common Shares, will receive Delaware Common Stock.

Beneficial Shareholders whose Zymeworks Common Shares are registered in the name of an Intermediary should contact that Intermediary for instructions on making an election with respect to the Consideration that they wish to receive. See “The Redomicile Transactions and the Plan of Arrangement — Procedure for the Exchange of Shares”.

Zymeworks Shareholders who are not Eligible Holders will not have the right to make an election and will receive Delaware Common Stock.

IF YOU ARE A REGISTERED ZYMEWORKS SHAREHOLDER, YOU MUST SURRENDER YOUR ZYMEWORKS COMMON SHARES THROUGH A LETTER OF TRANSMITTAL AND ELECTION FORM BY THE DAY THAT IS THREE YEARS LESS ONE DAY FROM THE EFFECTIVE DATE IN ORDER TO RECEIVE THE SHARES OF DELAWARE COMMON STOCK OR EXCHANGEABLE SHARES TO WHICH YOU ARE ENTITLED UNDER THE PLAN OF ARRANGEMENT. ON SUCH DATE, ANY AND ALL CONSIDERATION TO WHICH SUCH FORMER HOLDER WAS ENTITLED WILL BE DEEMED TO HAVE BEEN CANCELLED AND NONE OF ZYMEWORKS, PARENT, EXCHANGECO OR ANY OTHER PERSON WILL HAVE ANY OBLIGATION TO ISSUE SUCH SHARES OF DELAWARE COMMON STOCK OR EXCHANGEABLE SHARES.

Q: How does an Eligible Holder make an election to receive Exchangeable Shares?

A Letter of Transmittal and Election Form will be mailed to each person who was a registered holder of Zymeworks Common Shares on the Record Date. Each Registered Shareholder must forward a duly completed and executed Letter of Transmittal and Election Form, with accompanying Zymeworks Common Share certificate(s) and/or such other documents and instruments as the Depositary may reasonably require, in order to receive the shares of Delaware Common Stock or Exchangeable Shares, as applicable, to which such Zymeworks Shareholder is entitled under the Redomicile Transactions. It is recommended that Zymeworks Shareholders complete, sign and return the Letter of Transmittal and Election Form and accompanying documents to the Depositary as soon as possible. All deposits of Zymeworks Common Shares made under a Letter of Transmittal and Election Form are irrevocable.

Each Registered Shareholder who is an Eligible Holder will have the right to elect to receive Exchangeable Shares or a mix of Exchangeable Shares and Delaware Common Stock (subject to the Exchangeable Share Cap),

 

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by delivering a duly completed Letter of Transmittal and Election Form to the Depositary prior to the Election Deadline, being 5:00 p.m. (Vancouver time) on the date before the Special Meeting. Eligible Holders who do not make an election before the Election Deadline, or for whom their election is not properly made with respect to their Zymeworks Common Shares, will receive Delaware Common Stock. For more information, see section titled “The Redomicile Transactions and the Plan of Arrangement— Letter of Transmittal and Election Form.

Beneficial Shareholders whose Zymeworks Common Shares are registered in the name of an Intermediary should contact that Intermediary for instructions on making an election with respect to the Consideration that they wish to receive.

Q: Can I sell my Zymeworks Common Shares on the NYSE for cash? Is there any restriction on selling Zymeworks Common Shares prior to completion of the Redomicile Transactions?

Zymeworks Common Shares will continue to trade on the NYSE through the business day immediately prior to the Effective Date. Immediately prior to the Effective Time, shares of Delaware Common Stock will be listed for trading on the NYSE. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”. Generally speaking, Registered Shareholders who have not delivered their Zymeworks Common Shares to the Depositary and beneficial owners of Zymeworks Common Shares whose shares are held through an Intermediary may sell their Zymeworks Common Shares through the facilities of the NYSE through the business day immediately prior to the Effective Date. Registered Shareholders will not be able to sell their Zymeworks Common Shares once they have delivered their Zymeworks Common Shares to the Depositary.

Q: Why am I being asked to approve the Redomicile Resolution, and what vote is required to approve the Redomicile Resolution?

To be effective, the Redomicile Resolution must be approved, with or without variation, by the affirmative vote of at least two-thirds of the votes cast on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately. See section titled “The Redomicile Transactions and the Plan of Arrangement — Required Securityholder Approvals”.

Q: Is the ability of Zymeworks to complete the Redomicile Transactions (including the Arrangement) subject to any approvals other than the Required Securityholder Approvals?

Yes. The Redomicile Transactions must also be approved by the Court and the Redomicile Transactions cannot proceed without such approval. The Court will be asked to make an order approving the Redomicile Transactions and to determine that the Redomicile Transactions are fair to Zymeworks Securityholders. Zymeworks will apply to the Court for this order if the Required Securityholder Approvals are obtained at the Special Meeting. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters”.

Q: What happens if the Redomicile Transactions are not completed?

If the Redomicile Transactions are not completed for any reason, Zymeworks Shareholders will not receive shares of Delaware Common Stock or Exchangeable Shares and Zymeworks will continue as a public company incorporated under the laws of British Columbia, with the Zymeworks Common Shares continuing to be listed for trading on the NYSE. The Depositary will return any shares previously delivered.

Q: How will the Redomicile Transactions affect the public disclosure Zymeworks provides to its shareholders?

Upon completion of the Redomicile Transactions, Parent will be subject to the same reporting requirements of the SEC, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of the NYSE as

 

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Zymeworks was before the Redomicile Transactions. Parent will be required to file periodic reports with the SEC on Forms 10-K, 10-Q and 8-K and comply with the proxy rules applicable to domestic issuers, as currently required of Zymeworks. Parent will also generally file with the relevant Canadian securities regulatory authorities copies of its documents filed with the SEC under the U.S. Exchange Act in order to meet its Canadian continuous disclosure obligations.

Q: What are the Original Rights? What happens to outstanding Original Rights in connection with the Redomicile Transactions?

On June 9, 2022, the Zymeworks Board authorized and declared a dividend distribution of one right (each, an “Original Right”) for each outstanding Zymeworks Common Share to Zymeworks Shareholders of record as of the close of business on June 21, 2022. Each Original Right entitles the registered holder to purchase from Zymeworks one one-thousandth of a Series A Participating Preferred Share, no par value (the “Series A Preferred Shares”), of Zymeworks at an exercise price of $74.00, subject to adjustment. The complete terms of the Original Rights are set forth in the Preferred Shares Rights Agreement (the “Zymeworks Rights Agreement”), dated as of June 9, 2022, between the Company and Computershare Trust Company, N.A., as rights agent.

The Zymeworks Board adopted the Zymeworks Rights Agreement to protect Zymeworks Shareholders from coercive or otherwise unfair takeover tactics. In general terms, the Zymeworks Rights Agreement imposes a significant penalty on any person or group that acquires 10% or more (or 20% or more in the case of certain institutional investors who report their holdings on Schedule 13G) of the Zymeworks Common Shares without the approval of the Zymeworks Board. The overall effect of the Zymeworks Rights Agreement and the issuance of the Original Rights may be to render more difficult or discourage a merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination involving Zymeworks that is not approved by the Zymeworks Board. However, neither the Zymeworks Rights Agreement nor the Original Rights should interfere with any merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination approved by the Zymeworks Board.

In connection with the Redomicile Transactions, the Zymeworks Rights Agreement with respect to the Original Rights will be terminated, and Parent will adopt a stockholder rights plan with respect to the Delaware Common Stock substantively similar in all material respects to the Zymeworks Rights Agreement (the “Delaware Rights Agreement”). Under the Delaware Rights Agreement, in connection with the consummation of the Redomicile Transactions, the Parent board of directors will authorize and declare a dividend distribution of one right (each, a “Delaware Right”) for each outstanding share of Delaware Common Stock that is issued in connection with the Redomicile Transactions. Each Delaware Right will entitle the registered holder to purchase from Parent one one-thousandth of a share of Series B Participating Preferred Stock of Parent at an exercise price of $74.00, subject to adjustment.

For more information with respect to the Zymeworks Rights Agreement, including a summary of its terms, please refer to Zymeworks’ Current Report on Form 8-K filed with the SEC on June 10, 2022. The Zymeworks Rights Agreement is also incorporated as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part. For more information on the Delaware Rights Agreement, please see a substantially final form thereof attached as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part.

Q: What happens to outstanding Zymeworks Incentive Awards in connection with the Redomicile Transactions?

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans, which will become Parent Incentive Plans, and each outstanding Zymeworks Incentive Award will be assumed and be deemed to be exchanged for a Parent Incentive Award. The assumed and exchanged Zymeworks Incentive Awards will remain subject to the terms and conditions of the Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of

 

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Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile Transactions and the Plan of Arrangement — Effect of the Redomicile Transactions on the Zymeworks Incentive Awards”.

Q: What happens to outstanding Zymeworks Warrants in connection with the Redomicile Transactions?

Parent will assume the Zymeworks Warrants in accordance with their terms, and the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile Transactions and the Plan of Arrangement — Effect of the Redomicile Transactions on the Zymeworks Warrants”.

Q: Are there risks associated with the Redomicile Transactions?

Yes. Before making a decision on whether and how to vote, you are urged to carefully read the section entitled “Risk Factors”.

Q: Are the Redomicile Transactions taxable transactions to Zymeworks Shareholders?

Canadian Federal Income Tax Considerations for Zymeworks Shareholders

Zymeworks Shareholders should carefully read the information in this Proxy Statement/Prospectus under “Material Canadian Federal Income Tax Considerations”, which qualifies the information set out below, and should consult their own tax advisors.

Subject to the following paragraph, Zymeworks Shareholders who are residents of Canada for purposes of the Tax Act (including Eligible Holders that do not make a valid tax election as discussed below or that are issued Delaware Common Stock) will generally realize a taxable disposition of their Zymeworks Common Shares.

Subject to the Exchangeable Share Cap, Zymeworks Shareholders who are Eligible Holders may elect to receive consideration that includes Exchangeable Shares with respect to their Zymeworks Common Shares. An Eligible Holder who elects to receive Exchangeable Shares and makes a valid tax election with ExchangeCo may generally defer all or a part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement, subject to the limitations in the Tax Act. See section titled “Material Canadian Federal Income Tax Considerations — Holders Resident in Canada — Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election” or the section titled “Material Canadian Federal Income Tax Considerations — Holders Resident in Canada — Exchange of Zymeworks Common Shares for Exchangeable Shares and Delaware Common Stock — Section 85 Election”.

Zymeworks Shareholders who are not residents of Canada for purposes of the Tax Act and that do not hold their Zymeworks Common Shares as “taxable Canadian property” will generally not be subject to tax under the Tax Act on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

Zymeworks Shareholders should consult with and rely on their own tax advisors for advice with respect to the Redomicile Transactions, including: (a) the income tax consequences to them of disposing of their Zymeworks Common Shares pursuant to the Redomicile Transactions and (b) holding and disposing of shares of Delaware Common Stock or Exchangeable Shares, all having regard to their own particular circumstances.

Zymeworks Incentive Award holders and Zymeworks Warrant holders should consult their own tax advisors for advice with respect to the Redomicile Transactions.

The brief summary provided above is qualified in its entirety by the section “Material Canadian Federal Income Tax Considerations” below, which provides a summary of the principal Canadian federal income tax considerations generally applicable to certain Zymeworks Shareholders as a result of the Redomicile

 

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Transactions and of the ownership and disposition of shares of Delaware Common Stock or Exchangeable Shares received pursuant to the Redomicile Transactions, including in respect of potential dividend and withholding taxes which may be different as compared to the tax consequences of holding Zymeworks Common Shares. Zymeworks Shareholders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Redomicile Transactions.

U.S. Federal Income Tax Considerations for Zymeworks Shareholders

The Redomicile Transactions are intended to qualify as an exchange described in Section 351 of the Code, and subject to the discussion under the caption heading “Material U.S. Federal Income Tax Considerations — PFIC Considerations” below, (a) no gain or loss will be recognized by a U.S. holder of Zymeworks Common Shares for U.S. federal income tax purposes on the exchange of its Zymeworks Common Shares for Delaware Common Stock in the Redomicile Transactions; (b) the aggregate tax basis of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will be equal to the aggregate tax basis of the Zymeworks Common Shares it exchanged in the Redomicile Transactions; and (c) the tax holding period of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will include the holding period of the Zymeworks Common Shares that it surrendered in exchange therefor in the Redomicile Transactions. The Redomicile Transactions may also qualify as a tax-free reorganization under Section 368(a) of the Code, in which case the tax consequences to U.S. holders will generally be similar to the tax treatment of the Redomicile Transactions under Section 351 of the Code. If the Redomicile Transactions fail to qualify as an exchange described in Section 351 of the Code or a tax-free reorganization under Section 368(a) of the Code, U.S. holders of Zymeworks Common Shares would be treated as if they sold their Zymeworks Common Shares in a fully taxable transaction.

The brief U.S. tax summary provided above is qualified in its entirety by the section “Material U.S. Federal Income Tax Considerations” below, which provides a summary of the material U.S. federal income tax considerations generally applicable to (a) U.S. holders participating in the Redomicile Transactions, and (b) to Non-U.S. holders regarding the ownership and disposition of shares of Delaware Common Stock received by Non-U.S. holders pursuant to the Redomicile Transactions. Zymeworks Shareholders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Redomicile Transactions as well as the tax consequences of the ownership and disposition of shares of Delaware Common Stock or Exchangeable Shares received pursuant to the Redomicile Transactions.

Q: What are the corporate tax consequences of the Redomicile Transactions?

Canadian Federal Income Tax Considerations

For Canadian federal income tax purposes, Zymeworks does not expect the Redomicile Transactions to give rise to corporate-level Canadian federal income tax for Zymeworks or Parent.

U.S. Federal Income Tax Considerations

For U.S. federal income tax purposes, Zymeworks does not expect the Redomicile Transactions to give rise to corporate-level U.S. federal income tax for Zymeworks or Parent.

Q: When will the Redomicile Transactions become effective?

Subject to the satisfaction or waiver of all other conditions precedent, if the Required Securityholder Approvals are obtained as described above, it is anticipated that the Redomicile Transactions will be completed as soon as practicable following the final approval of the Court of the Redomicile Transactions under the Final Order. It is also anticipated that the shares of Delaware Common Stock will be listed for trading on the NYSE immediately prior to the Effective Time. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”.

 

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Q: Who is entitled to vote at the Special Meeting?

Only Zymeworks Securityholders of record at the close of business on August 24, 2022 (the “Record Date”), are entitled to notice of the Special Meeting and to vote thereat or at any adjournment or postponement thereof. As of the close of business on the Record Date, 61,694,387 Zymeworks Common Shares, 4,794,224 Zymeworks Warrants and 8,131,042 Zymeworks Incentive Awards were issued and outstanding. Each issued and outstanding Zymeworks Common Share is entitled to one vote on each of the resolutions to be considered and voted on at the Special Meeting. Each Zymeworks Warrant and Zymeworks Incentive Award is entitled to one vote on the resolutions to be considered and voted on at the Special Meeting for each Zymeworks Common Share underlying the respective Zymeworks Warrant and Zymeworks Incentive Award, respectively, which will be voted together with the holders of the Zymeworks Common Shares.

Your vote is very important, regardless of the number of Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards that you own. Whether or not you expect to attend, you should authorize a proxyholder to vote your Zymeworks Common Shares, Zymeworks Warrants and Zymeworks Incentive Awards as promptly as possible so that your Zymeworks Common Shares, Zymeworks Warrants and Zymeworks Incentive Awards may be represented and voted at the Special Meeting.

Q: What is the quorum for the Special Meeting?

In order for business to be conducted at the Special Meeting, a quorum must be present. A quorum for the Special Meeting requires at least 30% of the Zymeworks Common Shares entitled to vote be present or represented by proxy and at least two persons entitled to vote at the Special Meeting be present or represented by proxy. While Zymeworks Warrantholders and Zymeworks Incentive Awardholders will be entitled to vote at the Special Meeting as described elsewhere in this Proxy Statement/Prospectus, there is no separate quorum requirement for them under the BCBCA.

Zymeworks Shareholders who submit a properly executed form of proxy or vote by telephone or the Internet will be considered part of the quorum.

Q: How do I vote my Zymeworks Common Shares, Zymeworks Warrants and Zymeworks Incentive Awards?

If you are a registered Zymeworks Shareholder or a Zymeworks Warrantholder or a Zymeworks Incentive Awardholder, there are a number of ways you can vote your Common Shares:

 

   

In Person: You may vote in person at the Special Meeting.

 

   

By Telephone: Zymeworks Securityholders located in Canada or in the United States may vote by telephone by calling 1-866-732-8683. You will need to enter the 15-digit control number provided on the form of proxy to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards over the phone.

 

   

By Internet: You may vote over the Internet by going to www.investorvote.com. You will need to enter the 15-digit control number provided on the form of proxy to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards over the internet.

 

   

Voting by telephone or on the Internet is fast, convenient and your vote is immediately confirmed and tabulated. If you choose to vote by telephone or on the Internet, instructions to do so are set forth on the form of proxy. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a control number, which appears on the form of proxy. These procedures allow Zymeworks Securityholders to appoint a proxy to vote their Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards and to confirm that their instructions have been properly recorded.

 

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By Mail: You may sign the enclosed form of proxy appointing the named persons or some other person you choose, who need not be a Zymeworks Shareholder, Zymeworks Warrantholder or Zymeworks Incentive Awardholder, to represent you as proxyholder and vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards at the Special Meeting. Return the form of proxy by mail to:

Computershare Investor Services

100 University Avenue, 8th Floor

Toronto, Ontario

M5J 2Y1

In addition, Zymeworks or its strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors, may utilize the Broadridge QuickVote service to assist non-registered Zymeworks Shareholders with voting their Common Shares over the telephone.

If you are a beneficial Zymeworks Shareholder, the Intermediary (usually a bank, trust company, broker, securities dealer or other financial institution) through which you hold your Zymeworks Common Shares will send you instructions on how to vote your Zymeworks Common Shares. Please follow the instructions on your voting instruction form.

Q: What will happen if I abstain from voting or fail to vote at the Special Meeting?

Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards that you own as the holder of record will be voted as you instruct on your proxy card. If you return your proxy with instructions to abstain from voting, such abstention has the legal effect of a vote “AGAINST” the Redomicile Resolution. For Zymeworks Shareholders, proxies with instructions to abstain from voting will be counted for purposes of determining whether a quorum is present at the Special Meeting.

If you do not timely return your proxy card, your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards will not be voted unless you or your proxyholder attends the Special Meeting and votes in person.

Q: What is a proxy?

A proxy is your legal designation of another person, referred to as a “proxyholder”, to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards. The document used to designate a proxyholder to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards is called a “form of proxy.”

Q: Can I appoint someone other than the person(s) designated by management of Zymeworks to vote my Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards?

The following applies to Zymeworks Shareholders, Zymeworks Warrantholders or Zymeworks Incentive Awardholders who wish to appoint someone as their proxyholder other than the persons designated in the enclosed form of proxy or voting instruction form. This includes non-registered Zymeworks Shareholders who wish to appoint themselves as proxyholder to attend, participate or vote at the Special Meeting.

You may appoint a person or company to represent you at the Special Meeting other than the persons assigned in the form of proxy. Write the name of this person, who need not be a shareholder, in the blank space provided in the form of proxy. It is important to ensure that any other person you appoint is attending the Special Meeting and is aware that he or she has been appointed to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards. Proxyholders should, upon arrival at the Special Meeting, register with Computershare.

 

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Q: If I am not going to attend the Special Meeting, should I return my form of proxy or otherwise vote my Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards?

Yes. Completing, signing, dating and returning the form of proxy by mail, submitting a proxy by calling the number shown on the form of proxy or submitting a proxy by visiting the website shown on the form of proxy ensures that your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards will be represented and voted at the Special Meeting, even if you otherwise do not attend.

Q: What is the deadline to provide my proxy?

To be valid, proxies must be deposited with Computershare Investor Services Inc., Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, before 9 a.m. (Pacific time) on October 5, 2022, or if the Special Meeting is adjourned or postponed, no later than 9 a.m. (Pacific time) on the second business day preceding the day to which the Special Meeting is adjourned or postponed. Notwithstanding the foregoing, the Chair of the Special Meeting has the discretion to accept proxies received after such deadline and the time limit for deposit of proxies may be waived or extended by the Chair of the Special Meeting at his or her discretion, without notice.

Q: Can I change or revoke my vote?

Yes. If your Zymeworks Common Shares are registered in your name or you are a Zymeworks Incentive Awardholder or a Zymeworks Warrantholder, you can change or revoke a previously delivered proxy in the following ways:

 

   

Send a written notice that is received by the deadline specified below stating that you revoke your proxy to Zymeworks’ Corporate Secretary at the following address: 114 East 4th Avenue, Suite 800, Vancouver BC, Canada V5T 1G4. The statement must be signed by you or your attorney as authorized in writing or, if the shareholder is a corporation, signed under its corporate seal or by a duly authorized officer or attorney of the corporation;

 

   

If you sent a form of proxy by mail, complete a new form of proxy bearing a later date and properly submit it so that it is received before the deadline set forth below;

 

   

Log onto the Internet website specified on the form of proxy in the same manner you would to submit your proxy electronically or call the toll-free number specified on the form of proxy prior to the Special Meeting, in each case if you are eligible to do so, and follow the instructions on the form of proxy; or

 

   

Appear in person at the Special Meeting, declare your prior proxy to be revoked and then vote in person at the Special Meeting (although merely attending the Special Meeting will not revoke your proxy).

Any revocation of a proxy must be delivered either to the registered office of Zymeworks at any time up to and including the last business day preceding the day of the Special Meeting or any adjournment or postponement of the Special Meeting, or to the Chair of the Zymeworks Board on the day of the Special Meeting, October 7, 2022, or any adjournment or postponement of the Special Meeting, prior to the time of the Special Meeting.

Q: If my Zymeworks Common Shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote my shares for me?

No. If your Zymeworks Common Shares are held in the name of a broker, bank or other nominee, you will receive separate instructions from your broker, bank or other nominee describing how to vote your shares. Please check with your broker, bank or other nominee and follow the voting procedures provided by your broker, bank or other nominee on your voting instruction form.

You should instruct your broker, bank or other nominee how to vote your Zymeworks Common Shares. Under the rules applicable to broker-dealers, your broker, bank or other nominee does not have discretionary authority

 

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to vote your shares in respect of the Redomicile Resolution. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Zymeworks does not expect any broker non-votes at the Special Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas the Redomicile Resolution to be presented at the Special Meeting is considered non-routine. As a result, no broker will be permitted to vote your Zymeworks Common Shares at the Special Meeting without receiving instructions.

Q: Who is making and paying for this proxy solicitation?

Zymeworks is making this proxy solicitation and will pay for all of the costs of soliciting these proxies. Its directors and certain of its employees may solicit proxies in person or by telephone, fax or email. Zymeworks will pay these employees and directors no additional compensation for these services. Zymeworks has retained the services of the Proxy Solicitor to solicit proxies. Zymeworks will deliver proxy-related materials to nominees, custodians and fiduciaries, and they will be asked to promptly forward them to the beneficial (non-registered) Zymeworks Shareholders. Zymeworks will also reimburse such nominees, custodians and fiduciaries for their expenses in sending proxy-related materials to the beneficial (non-registered) Zymeworks Shareholders and obtaining their proxies.

Q: How will shares of Delaware Common Stock of Parent or the Exchangeable Shares differ from Zymeworks Common Shares?

As a result of differences between Delaware law and the BCBCA, there will be differences between your rights as a stockholder of Parent under Delaware law or as an Exchangeable Shareholder and your current rights as a shareholder of Zymeworks under the BCBCA. In addition, there are differences between the organizational documents of Zymeworks, Parent and ExchangeCo.

These differences are discussed in detail under “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”. Also refer to “Description of Parent Capital Stock” for a description of the shares of Delaware Common Stock. The Parent Certificate of Incorporation and Parent Bylaws, in the form substantially as they will be in effect upon completion of the Redomicile Transactions, are attached as Appendices F and G, respectively, of this Proxy Statement/Prospectus, as well as the section titled “Description of Exchangeable Shares and Related Agreements” and the Exchangeable Share Provisions, which are attached as Exhibit E to the Transaction Agreement, which is set forth as Exhibit B to this Proxy Statement/Prospectus.

Q: Are Zymeworks Shareholders entitled to Dissent Rights?

Yes. Under the Interim Order, Registered Shareholders are entitled to Dissent Rights if they strictly follow the procedures set out in Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement and any further order of the Court. Persons who are beneficial owners of Zymeworks Common Shares registered in the name of an Intermediary who wish to dissent should be aware that only Registered Shareholders are entitled to Dissent Rights. Accordingly, a beneficial owner of Zymeworks Common Shares desiring to exercise Dissent Rights must make arrangements for the Zymeworks Common Shares beneficially owned by such Zymeworks Shareholder to be registered in the Zymeworks Shareholder’s name prior to the time the Dissent Notice is required to be received by Zymeworks, or, alternatively, make arrangements for the registered holder of such Zymeworks Common Shares to dissent on the Zymeworks Shareholder’s behalf.

Failure to comply strictly with the requirements set forth in Division 2 of Part 8 of the BCBCA as may be modified by the Interim Order, the Plan of Arrangement, and any other order of the Court may result in the loss

 

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of any right to dissent. It is strongly suggested that any Zymeworks Shareholder wishing to dissent seek independent legal advice. Be sure to read the section entitled “The Redomicile Transactions and the Plan of Arrangement — Dissent Rights” and consult your own legal advisor if you wish to exercise Dissent Rights.

Q: Who can answer my questions?

If you have any questions about the information contained in this Proxy Statement/Prospectus or require assistance in completing your form of proxy or voting instruction form, please contact Zymeworks’ strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors:

 

 

LOGO

Kingsdale Advisors

130 King Street West, Suite 2950

Toronto, Ontario M5X 1E2

Call Toll-Free (within North America): 1-855-476-7981

Call Collect (outside North America): 1-416-867-2272

Email at contactus@kingsdaleadvisors.com

Q: Where can I find more information about Zymeworks and the transactions contemplated by the Plan of Arrangement?

You can find out more information about Zymeworks and the transactions contemplated by the Plan of Arrangement by reading this Proxy Statement/Prospectus and from various sources described in the section entitled “Where You Can Find More Information”.

 

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SUMMARY

The following is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus. This summary is qualified in its entirety by the more detailed information appearing elsewhere in this Proxy Statement/Prospectus, including the appendices hereto and the documents incorporated by reference herein. It is recommended that Zymeworks Securityholders carefully read this Proxy Statement/Prospectus and consult with their own legal, tax, financial and other professional advisors with respect to the matters to be acted on at the Special Meeting. Capitalized terms used but not otherwise defined in this summary have the meanings set forth under the heading “Glossary”.

The Special Meeting

Date, Time and Place

The Special Meeting will be held on October 7, 2022, at the Pearl Room, Fairmont Pacific Rim, 1038 Canada Place, Vancouver, BC V6C 0B9, at 9 a.m. Pacific time.

Special Meeting Record Date and Zymeworks Securityholders Entitled to Vote

All Zymeworks Securityholders of record at the close of business on August 24, 2022, which is the Record Date for the Special Meeting, are entitled to notice of the Special Meeting and to vote thereat or at any adjournment or postponement thereof. As of the close of business on the Record Date, 61,694,387 Zymeworks Common Shares, 4,794,224 Zymeworks Warrants and 8,131,042 Zymeworks Incentive Awards were issued and outstanding. Each issued and outstanding Zymeworks Common Share is entitled to one vote on each of the resolutions to be considered and voted on at the Special Meeting. Each Zymeworks Warrant and Zymeworks Incentive Award is entitled to one vote on the resolutions to be considered and voted on at the Special Meeting for each Zymeworks Common Share underlying the respective Zymeworks Warrant and Zymeworks Incentive Award, respectively, which will be voted together with the holders of the Zymeworks Common Shares.

Vote of Directors, Executive Officers and Affiliates

The Redomicile Transactions must be approved by an affirmative vote of the holders of at least two-thirds of the votes cast at the Special Meeting on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately. As of the Record Date, directors, executive officers and their affiliates own 0.06% of Zymeworks Common Shares, 27.38% Zymeworks Incentive Awards and no warrants.

Quorum

To conduct business at the Special Meeting, a quorum consisting of at least 30% of the Zymeworks Common Shares entitled to vote must be present or represented by proxy and at least two persons entitled to vote at the Special Meeting must be present or represented by proxy. If you submit a properly executed form of proxy or vote by telephone or the Internet, you will be considered part of the quorum. While Zymeworks Warrantholders and Zymeworks Incentive Awardholders will be entitled to vote at the Special Meeting as described elsewhere in this Proxy Statement/Prospectus, there is no separate quorum requirement for them under the BCBCA.

Purpose of the Special Meeting

The purpose of the Special Meeting is for Zymeworks Securityholders to consider and, if thought advisable, to approve, with or without variation, the Redomicile Resolution with respect to the Redomicile Transactions

 

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pursuant to which, among other things, (a) Zymeworks Shareholders will receive, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, either (i) shares of Delaware Common Stock on a one-for-one basis, or (ii) Exchangeable Shares on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them), subject to the Exchangeable Share Cap; (b) Parent, Callco and ExchangeCo will enter into the Support Agreement; and (c) Parent, ExchangeCo, Callco and Share Trustee will enter into the Trust Agreement for the benefit of the Exchangeable Shareholders.

The Redomicile Transactions

The Redomicile Transactions are being implemented in accordance with the terms of and subject to the conditions contained in the Transaction Agreement (including, with respect to the Arrangement, the Plan of Arrangement). If approved by the Zymeworks Securityholders in the manner described herein, Zymeworks expects that the Redomicile Transactions will be completed as soon as practicable following the approval of the Court in respect of the Arrangement.

The result of the Redomicile Transactions will be that, among other things (a) Parent will become the direct or indirect owner of all of the assets and liabilities of Zymeworks, (b) Zymeworks Incentive Awardholders will hold Parent Incentive Awards identical to the Zymeworks Incentive Awards in all material respects but in respect of Delaware Common Stock in the place and stead of Zymeworks Common Shares, (c) Zymeworks Warrantholders will be entitled to receive Delaware Common Stock instead of Zymeworks Common Shares under their Zymeworks Warrants, and (d) Zymeworks Shareholders (other than Dissenting Shareholders) will hold one share of Delaware Common Stock or one Exchangeable Share, as applicable, for each Zymeworks Common Share owned immediately prior to the Redomicile Transactions (with the aggregate number of Exchangeable Shares being equal to or less than the Exchangeable Share Cap). If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election. All Exchangeable Shares issued under the Arrangement will be issued by ExchangeCo in reliance on the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10) thereunder.

Information Concerning Parent, ExchangeCo and Callco

Parent was incorporated on June 30, 2022 as a Delaware corporation. Parent does not currently conduct any business. Following completion of the Redomicile Transactions, Parent and its subsidiaries (including Zymeworks) will carry on the business currently conducted by Zymeworks and its subsidiaries. In connection with the Redomicile Transactions, Parent will rename itself as Zymeworks Inc. and Zymeworks will rename itself Zymeworks BC Inc.

Parent’s principal executive offices are located at 108 Patriot Drive, Suite A, Middletown, Delaware 19709, and its telephone number is (302) 274-8744. Following the Redomicile Transactions, Parent will continue to consider this address and telephone number as its principal executive offices. Parent will have physical operations and personnel in Canada and the United States, and will maintain offices in both countries. In addition, as a result of the ongoing COVID-19 pandemic Zymeworks has implemented and expects to continue implementing hybrid and virtual-only working arrangements. Its executive officers and directors will be located in several jurisdictions, including the United States, Canada and the United Kingdom. Accordingly Parent does not believe that designating either its Vancouver or Seattle offices as the principal executive offices is appropriate. Parent intends to hold an annual meeting of stockholders, including for the election of directors, following completion of the Redomicile Transactions.

 

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ExchangeCo is a corporation incorporated under the Business Corporations Act (British Columbia) on July 13, 2022 for the purpose of implementing the Arrangement. To date, ExchangeCo has not carried on any business except in connection with its role as a party to the Transaction Agreement. ExchangeCo is a direct wholly-owned subsidiary of Callco.

Callco is an unlimited liability company incorporated under the Business Corporations Act (British Columbia) on July 13, 2022. To date, Callco has not carried on any business except in connection with its role as a party to the Transaction Agreement. Callco is a wholly-owned subsidiary of Parent.

See section titled “Information Concerning Parent, ExchangeCo and Callco”.

Information Concerning Zymeworks

Zymeworks is a clinical-stage biopharmaceutical company dedicated to the development of next-generation multifunctional biotherapeutics. Zymeworks’ suite of complementary therapeutic platforms and its fully integrated drug development engine provide the flexibility and compatibility to precisely engineer and develop highly differentiated product candidates. These capabilities have resulted in multiple product candidates with the potential to drive positive outcomes in large underserved and unaddressed patient populations.

Zymeworks is a public company trading on the NYSE under the symbol “ZYME”. Zymeworks was incorporated on September 8, 2003 under the Canada Business Corporations Act under the name “Zymeworks Inc.” On October 22, 2003, Zymeworks was registered as an extra-provincial company under the Company Act (British Columbia), the predecessor to the BCBCA. On May 2, 2017, Zymeworks continued the Company to British Columbia under the BCBCA. Zymeworks’ principal office is located at 114 East 4th Avenue, Suite 800, Vancouver, British Columbia, Canada, V5T 1G4, and its telephone number is (604) 678-1388.

In addition to Parent, Zymeworks has five wholly owned subsidiaries:

 

   

Zymeworks Biopharmaceuticals Inc., located in Seattle, Washington;

 

   

Zymeworks Management Inc., located in Vancouver, British Columbia;

 

   

Callco, located in Vancouver, British Columbia;

 

   

ExchangeCo, located in Vancouver, British Columbia; and

 

   

Zymeworks Biopharmaceuticals Limited, located in Dublin, Ireland.

Additional information about Zymeworks can be found under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com. The information contained in, or that can be accessed through, Zymeworks’ website is not incorporated into this Proxy Statement/Prospectus.

See section titled “Information Concerning Zymeworks”.

Recommendation of the Zymeworks Board

At its meeting held on July 14, 2022, after careful consideration of, among other things, the advice of management and after considering information provided to management by its tax, accounting and legal advisors, and such other matters as it considered relevant, the Zymeworks Board determined that the Redomicile Transactions are in the best interests of Zymeworks. Accordingly, the Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

 

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See section titled “The Redomicile Transactions and the Plan of Arrangement — Recommendation of the Zymeworks Board”.

Reasons for the Redomicile Transactions

The Zymeworks Board determined that the Redomicile Transactions (including the Plan of Arrangement and the transactions to be completed as soon as practicable following the Arrangement as set forth in the Transaction Agreement) are in the best interests of Zymeworks and believes that the opportunity to enhance long-term value for shareholders will be greater as a Delaware corporation than as a British Columbia corporation. In recommending that Zymeworks Securityholders vote in favor of the Redomicile Resolution, the Zymeworks Board considered and relied upon a number of factors, including, among other things, the following:

 

   

Expand U.S. Institutional Investor Base — Due to the fact that Zymeworks is a British Columbia corporation, certain U.S. institutional investors and state-level investment vehicles are prohibited from investing in Zymeworks Common Shares or are limited in the size of such investment. Although the converse can also apply with respect to certain Canadian institutional investors (i.e., Canadian institutional investors may face prohibitions or limitations on investing in U.S. corporations or may have adopted internal policies limiting such holdings), the Zymeworks Board believes that becoming a Delaware corporation would provide greater opportunities to expand the institutional investor base, which would provide opportunities for increased value of Zymeworks Common Shares.

 

   

Index Listing — As a Delaware corporation, Parent may be eligible for inclusion in certain leading indices, such as the Russell and S&P indices, which could also increase demand for Parent shares through passive investment by certain index funds.

 

   

Acquisition Proposals — Delaware law provides boards of directors with additional tools for negotiating with potential acquirors, which may assist the board in increasing the value to stockholders in any proposed strategic transactions.

 

   

U.S. Stockholder Base — U.S. investors have greater familiarity with Delaware corporate law and the Zymeworks Board believes this familiarity would make Zymeworks Common Shares a more attractive investment for such investors, which could provide opportunities for increased value to current shareholders.

 

   

Comparability to U.S. Public Companies — Parent is a Delaware corporation. While there are differences between the BCBCA and the DGCL and shareholders’ rights may be different under the DGCL than the BCBCA depending on the specific set of circumstances, the Zymeworks Board believes being incorporated in Delaware may provide greater comparability to other U.S. public companies, many of which are incorporated in Delaware, including many of Zymeworks’ peer group companies. See section titled “Comparison of Rights of Zymeworks Shareholders and Parent Stockholders”.

 

   

Commercialization of Zanidatamab — The Zymeworks Board believes that, if zanidatamab is approved, the United States will be a key geography for the commercialization of zanidatamab. Commercialization in the United States may require, among other things, hiring additional U.S. employees and entering into additional agreements with U.S. counterparties. The Zymeworks Board believes that being a Delaware corporation would simplify such efforts by reducing some of the cross-border legal, regulatory and tax complexities related to these efforts. Beyond these anticipated benefits relating to commercialization, the Zymeworks Board expects to be able to reduce certain administrative costs and complexities as a Delaware corporation.

 

   

Expand Opportunities for Future Monetization of Early-Stage Product Candidates — The Zymeworks Board may in the future consider monetization opportunities for the Company’s early-stage product candidates. A significant portion of potential counterparties for such transactions are located in the United States. The Zymeworks Board believes that being a Delaware corporation would

 

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make Zymeworks more attractive to potential counterparties because it may reduce the tax, legal and regulatory complexity inherent to cross-border transactions and the potential counterparties are familiar with Delaware corporate law.

 

   

Continuing Operations in Canada — The Redomicile Transactions would not prevent Parent from indirectly continuing a portion of its operations in Canada through its Canadian subsidiaries.

The Zymeworks Board considered a number of other factors pertaining to the Redomicile Transactions as generally supporting its decision to recommend the Redomicile Transactions, including, but not limited to, the following material factors:

 

   

Required Securityholder Approvals and Court Approval — The Redomicile Transactions will be submitted to a vote at the Special Meeting and must be approved by the affirmative vote of at least two-thirds of the votes cast at the Special Meeting on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately. In addition, the Redomicile Transactions are subject to review by the Court, which will consider, among other things, the fairness and reasonableness of the Redomicile Transactions, both from a substantive and a procedural point of view.

 

   

Tax Deferred Rollover — Zymeworks Shareholders who are Eligible Holders will have the opportunity to elect to receive consideration that includes Exchangeable Shares (subject to the Exchangeable Share Cap) with respect to their Zymeworks Common Shares and may generally make a valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

 

   

Market Familiarity with Redomicile Transactions — The Zymeworks Board believes the proposed structure of the Redomicile Transactions is similar to that adopted by other former Canadian companies and is familiar to investors.

 

   

U.S. GAAP Reporting — Immediately prior to the Redomicile Transactions, shares of Delaware Common Stock of Parent will be listed for trading on the NYSE. Parent will also continue to report consolidated financial results in U.S. dollars and in accordance with U.S. GAAP and will file reports with the SEC and relevant Canadian securities regulatory authorities.

 

   

Dissent Rights — Registered Shareholders will have the ability to exercise Dissent Rights in respect of the Redomicile Transactions and to be paid the fair value of their Zymeworks Common Shares.

 

   

Estimated Corporate Tax Liability — The Zymeworks Board weighed the estimated corporate tax liability arising from the Redomicile Transactions and, with the assistance of professional advisors and based on and subject to current assumptions, does not anticipate Zymeworks will incur material corporate-level Canadian or U.S. federal income tax resulting from the Redomicile Transactions. Parent’s effective tax rate may be affected by the Redomicile Transactions or by changes in tax laws. See section titled “Risk FactorsParent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions.”

In the course of their deliberations, the Zymeworks Board, in consultation with management and after considering information provided to management by Zymeworks’ legal, accounting and tax advisors, also considered a variety of risks (as described in greater detail under the heading “Risk Factors”) and other potentially negative factors relating to the Redomicile Transactions, including the following:

 

   

Conditions to the Redomicile Transactions — The Redomicile Transactions are conditional. The Redomicile Transactions are subject to, among other things, receipt of the Required Securityholder Approval and approval by the Court. Such conditions may not be satisfied.

 

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Failure to Realize Benefits to the Redomicile Transactions — Zymeworks may fail to realize the perceived benefits of the Redomicile Transactions. For additional discussion of this risk, see the discussion under “Risk Factors”, including “— Zymeworks may fail to realize certain benefits of the Redomicile Transactions, including as a result of the shares of Delaware Common Stock not being included in a U.S. stock market index” and “The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds that are not permitted to hold shares of Delaware Common Stock under their internal guidelines..

 

   

Uncertainty — Zymeworks’ business may be impacted by the uncertainty associated with the Redomicile Transactions.

 

   

Costs — Zymeworks will allocate time and resources to effecting the Redomicile Transactions and incur non-recurring costs related to the Redomicile Transactions.

 

   

Redomicile Transactions May Be Deferred or Abandoned — Zymeworks may choose to defer or abandon the Redomicile Transactions.

 

   

Negative Publicity — Negative publicity resulting from the Redomicile Transactions could adversely affect Zymeworks’ business and the market price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

 

   

Impact on Agreements — Completion of the Redomicile Transactions may trigger certain provisions in agreements to which Zymeworks is a party.

 

   

Exercise of Dissent Rights — Payments in connection with the exercise of Dissent Rights by Zymeworks Shareholders may impact Parent’s financial resources.

 

   

Limitation on Enforcement Against Parent in Canada — Enforcement of rights against Parent in Canada may be limited.

 

   

Tax Impact on Non-Eligible Holders and Eligible Holders if the Exchangeable Share Cap is Reached — The disposition of Zymeworks Common Shares in exchange for shares of Delaware Common Stock in connection with the Redomicile Transactions would be taxable to Zymeworks Shareholders who are residents of Canada other than Eligible Holders that elect to receive Exchangeable Shares (subject to the Exchangeable Share Cap) and make a valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement. If the Exchangeable Share Cap is reached, then the Exchangeable Shares will be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

See section titled “The Redomicile Transactions and the Plan of Arrangement — Reasons for the Redomicile Transactions”.

Risk Factors

The Redomicile Transactions and the transactions contemplated by the Transaction Agreement involve risks, some of which are related to the Redomicile Transactions and others of which are related to Zymeworks’ business and Parent’s business. In considering the Redomicile Transactions and the transactions contemplated by the Transaction Agreement, including whether to vote for the Redomicile Resolution, Zymeworks Securityholders should carefully consider the information about these risks set forth under the section entitled “Risk Factors”, as well as the other information contained in and incorporated by reference into this Proxy

 

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Statement/Prospectus, and specifically, the factors described in the section entitled “Item 1A. Risk Factors” in the Annual Report on Form 10-K of Zymeworks for the year ended December 31, 2021 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

 

   

The rights of stockholders under Delaware law may differ from the rights of shareholders under the BCBCA.

 

   

Delaware law and provisions in the Parent Certificate of Incorporation and Parent Bylaws might delay, discourage or prevent a change in control of Parent or changes in its management, thereby depressing the market price of the Delaware Common Stock.

 

   

The Parent Bylaws will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between Parent and its stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit Parent’s stockholders’ ability to choose the judicial forum for disputes with Parent or its directors, officers, stockholders or employees.

 

   

There has been no prior public trading for the shares of Delaware Common Stock on a national securities exchange and the market price of the shares of Delaware Common Stock may be subject to volatility.

 

   

Parent may need to enter into certain new arrangements which may not be on terms as favorable as arrangements entered into by Zymeworks.

 

   

Parent’s ability to pay dividends in the future is not guaranteed.

 

   

The issuance of additional shares of Delaware Common Stock in connection with future equity financings, acquisitions or growth opportunities, any Parent Incentive Plan or otherwise may dilute all other shareholdings.

 

   

Zymeworks may fail to realize certain benefits of the Redomicile Transactions, including as a result of the shares of Delaware Common Stock not being included in a U.S. stock market index.

 

   

The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds that are not permitted to hold shares of Delaware Common Stock under their internal guidelines.

 

   

Zymeworks’ business may be impacted by the uncertainty associated with the Redomicile Transactions.

 

   

The Redomicile Transactions are conditional, and the conditions may not be satisfied.

 

   

Distributions to Non-U.S. holders of Delaware Common Stock may be subject to U.S. withholding.

 

   

Parent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions.

 

   

Zymeworks will allocate time and resources to effecting the Redomicile Transactions and incur non-recurring costs related to the Redomicile Transactions.

 

   

Zymeworks may choose to defer or abandon the Redomicile Transactions.

 

   

Negative publicity resulting from the Redomicile Transactions could adversely affect Zymeworks’ business and the market price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

 

   

Completion of the Redomicile Transactions may trigger certain provisions in agreements to which Zymeworks is a party.

 

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Payments in connection with the exercise of Dissent Rights by Zymeworks Shareholders may impact Parent’s financial resources.

 

   

Enforcement of rights against Parent in Canada may be limited.

 

   

The Exchangeable Shares will not be listed on any stock exchange.

 

   

Zymeworks Shareholders who elect to receive Exchangeable Shares will experience a delay in receiving Delaware Common Stock from the date they request an exchange, which may affect the value of the shares the holder receives in such exchange.

 

   

There may be a taxable event for an Eligible Holder as a result of a transaction beyond such Eligible Holder’s control.

 

   

Receipt of Delaware Common Stock by Eligible Holders who do not elect to receive all Exchangeable Shares will be a taxable event for Canadian income tax purposes, and could also be a taxable event for Zymeworks Shareholders who are not U.S. holders (as defined below) in their home jurisdiction.

Selected Comparative Per Share Information

Comparative Per Share Data of Zymeworks

The following table sets forth the closing market price per Zymeworks Common Share as reported by the NYSE on July 14, 2022, the last trading day before the Redomicile Transactions were publicly announced, and on August 29, 2022, the last practicable trading day before the date of this Proxy Statement/Prospectus.

 

Trading Date

   Common Shares
(ZYME)
 

July 14, 2022

   $ 5.91  

August 29, 2022

   $ 6.46  

Comparative Per Share Data of Parent

Historical market price information regarding Parent is not provided because there is no public market for Parent capital stock.

Particulars of the Redomicile Transactions

The Redomicile Transactions are being implemented in accordance with the terms of and subject to the conditions contained in the Transaction Agreement (including, with respect to the Arrangement, the Plan of Arrangement). Subject to the satisfaction or waiver of the conditions to the Transaction Agreement, Zymeworks expects the Redomicile Transactions to be completed as soon as practicable following obtaining approval of the Court in respect of the Arrangement. See section titled “Summary of the Transaction Agreement”.

The purpose of the Redomicile Transactions is to facilitate a series of transactions which will occur in a specific sequence and as a consequence of which, among other things (a) Zymeworks Shareholders will receive, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, either (i) shares of Delaware Common Stock on a one-for-one basis, or (ii) Exchangeable Shares on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them), subject to the Exchangeable Share Cap; (b) Parent, Callco and ExchangeCo will enter into the Support Agreement; and (c) Parent, ExchangeCo, Callco and Share Trustee will enter into the Trust Agreement for the benefit of the Exchangeable Shareholders. Immediately prior to the Redomicile Transactions, shares of Parent Common Stock will be listed for trading on the NYSE under the symbol “ZYME”. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings” and “The Redomicile Transactions and the Plan of Arrangement — Particulars of the Redomicile Transactions”.

 

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Assuming the Redomicile Resolution is approved at the Special Meeting, following the Effective Time and completion of the Redomicile Transactions, the stockholders of Parent will be the same persons who were Zymeworks Shareholders immediately prior to the Redomicile Transactions (other than those who have validly exercised Dissent Rights and holders of Exchangeable Shares prior to exchanging them for Delaware Common Stock) and Parent will become the direct or indirect owner of all of the assets and liabilities of Zymeworks. As a result, there will be no effective change of control of Zymeworks as a result of the Redomicile Transactions, as ultimate control will remain with the public stockholders. Upon completion of the Redomicile Transactions, Parent will have the general structure shown below.

Corporate Structure Prior to the Redomicile Transactions

 

 

LOGO

 

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Corporate Structure Following the Redomicile Transactions

 

 

LOGO

Effect of the Redomicile Transactions on the Zymeworks Incentive Awards

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans, which will become Parent Incentive Plans, and each outstanding Zymeworks Incentive Award will be assumed and be deemed to be exchanged for a Parent Incentive Award. The assumed and exchanged Zymeworks Incentive Awards will remain subject to the terms and conditions of the Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile

 

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Transactions and the Plan of Arrangement — Effect of the Redomicile Transactions on the Zymeworks Incentive Awards”.

Effect of the Redomicile Transactions on the Zymeworks Warrants

Parent will assume the Zymeworks Warrants, except that the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile Transactions and the Plan of Arrangement — Effect of the Redomicile Transactions on the Zymeworks Warrants”.

Required Securityholder Approvals

To be effective, the Redomicile Resolution must be approved, with or without variation, by the affirmative vote of at least two-thirds of the votes cast on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately.

The Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

Certain Legal and Regulatory Matters

Court Approval

An Arrangement under the BCBCA requires Court approval. Prior to the mailing of this Proxy Statement/Prospectus, Zymeworks obtained the Interim Order providing for the calling and holding of the Special Meeting, the Dissent Rights and other procedural matters.

Subject to the terms of the Plan of Arrangement and the Interim Order, including obtaining the Required Securityholder Approval as described above, the Company intends to make an application to the Court for a final order (the “Final Order”).

The Final Order is expected to take place via Microsoft Teams at the courthouse at 800 Smithe Street, Vancouver, British Columbia on October 12, 2022 at 9:45 a.m., Pacific Time, or as soon thereafter as counsel may be heard. Please see section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Court Approval” as well as the Notice of Hearing of Petition, attached as Appendix E to this Proxy Statement/Prospectus, and the Interim Order, attached as Appendix D to this Proxy Statement/Prospectus, for further information on participating or presenting evidence at the hearing for the Final Order. At the hearing, the Court will consider, among other things, the fairness and reasonableness of the Redomicile Transactions.

See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Court Approval” in this Proxy Statement/Prospectus.

Stock Exchange Listings and Securities Law Filings

The shares of Delaware Common Stock will be listed on the NYSE under the symbol “ZYME.” When the Redomicile Transactions are completed, the Zymeworks Common Shares currently listed on the NYSE will cease to be traded on the NYSE and will be deregistered under the U.S. Exchange Act. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”.

 

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In addition, as a result of the Redomicile Transactions, Parent will become a reporting issuer in all jurisdictions in Canada, and Zymeworks will apply to cease to be a reporting issuer in all jurisdictions in Canada in which it is currently a reporting issuer. Parent will be subject to, and Zymeworks will terminate its, reporting obligations in Canada following completion of the Redomicile Transactions.

Dissent Rights

Under the Interim Order, Registered Shareholders are entitled to Dissent Rights if they strictly follow the procedures set out in Division 2 of Part 8 of the BCBCA as may be modified by the Interim Order, the Plan of Arrangement, the Transaction Agreement, and any further order of the Court. Persons who are beneficial owners of Zymeworks Common Shares registered in the name of an Intermediary who wish to dissent should be aware that only Registered Shareholders as of the Record Date are entitled to Dissent Rights. Accordingly, a beneficial owner of Zymeworks Common Shares desiring to exercise Dissent Rights must make arrangements for the Zymeworks Common Shares beneficially owned by such Zymeworks Shareholder to be registered in the Zymeworks Shareholder’s name prior to the time the Dissent Notice is required to be received by Zymeworks, or, alternatively, make arrangements for the registered holder of such Zymeworks Common Shares to dissent on the Zymeworks Shareholder’s behalf.

Failure to comply strictly with the requirements set forth in Division 2 of Part 8 of the BCBCA as may be modified by the Interim Order, the Plan of Arrangement, and any other order of the Court may result in the loss of any right to dissent. It is strongly suggested that any Zymeworks Shareholder wishing to dissent seek independent legal advice.

See section titled “The Redomicile Transactions and the Plan of Arrangement — Dissent Rights” and Appendix C of this Proxy Statement/Prospectus.

Accounting Treatment of the Redomicile Transactions

The Redomicile Transactions will be accounted for consistent with a reorganization of entities under common control. Accordingly, the transfer of certain assets and liabilities and the exchange of shares will be recorded in the new entity (Parent) at their carrying amounts from the transferring entity (Zymeworks) at the date of transfer.

Material Canadian Federal Income Tax Considerations

Zymeworks Shareholders should carefully read the information in this Proxy Statement/Prospectus under “Material Canadian Federal Income Tax Considerations” which qualifies the information set out below and should consult their own tax advisors.

Subject to the following paragraph, Zymeworks Shareholders who are residents of Canada for purposes of the Tax Act (including Eligible Holders that do not make a valid tax election as discussed below or that are issued Delaware Common Stock) will generally realize a taxable disposition of their Zymeworks Common Shares.

Subject to the Exchangeable Share Cap, Zymeworks Shareholders who are Eligible Holders may elect to receive consideration that includes Exchangeable Shares. Such an Eligible Holder who elects to receive consideration that includes Exchangeable Shares with respect to their Zymeworks Common Shares and makes a valid tax election with ExchangeCo may generally defer all or a part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement, subject to the limitations in the Tax Act. See section titled “Material Canadian Federal Income Tax Considerations — Holders Resident in Canada — Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election” or the section titled “Material Canadian Federal Income Tax

 

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Considerations — Holders Resident in Canada — Exchange of Zymeworks Common Shares for Exchangeable Shares and Delaware Common Stock — Section 85 Election”.

Zymeworks Shareholders who are not residents of Canada for purposes of the Tax Act and who do not hold their Zymeworks Common Shares as “taxable Canadian property” will generally not be subject to tax under the Tax Act on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

Zymeworks Shareholders should consult with and rely on their own tax advisors for advice with respect to the Redomicile Transactions, including: (a) the income tax consequences to them of disposing of their Zymeworks Common Shares pursuant to the Redomicile Transactions and (b) holding and disposing of shares of Delaware Common Stock or Exchangeable Shares, all having regard to their own particular circumstances.

Zymeworks Incentive Award holders and Zymeworks Warrant holders should consult their own tax advisors for advice with respect to the Redomicile Transactions.

Material U.S. Federal Income Tax Considerations

The Redomicile Transactions are intended to qualify as an exchange described in Section 351 of the Code, and subject to the discussion under the caption heading “Material U.S. Federal Income Tax Considerations — PFIC Considerations” below, (a) no gain or loss will be recognized by a U.S. holder of Zymeworks Common Shares for U.S. federal income tax purposes on the exchange of its Zymeworks Common Shares for Delaware Common Stock in the Redomicile Transactions; (b) the aggregate tax basis of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will be equal to the aggregate tax basis of the Zymeworks Common Shares it exchanged in the Redomicile Transactions; and (c) the tax holding period of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will include the holding period of the Zymeworks Common Shares that it surrendered in exchange therefor in the Redomicile Transactions. The Redomicile Transactions may also qualify as a tax-free reorganization under Section 368(a) of the Code, in which case the tax consequences to U.S. holders will generally be similar to the tax treatment of the Redomicile Transactions under Section 351 of the Code. If the Redomicile Transactions fail to qualify as an exchange described in Section 351 of the Code or a tax-free reorganization under Section 368(a) of the Code, U.S. holders of Zymeworks Common Shares would be treated as if they sold their Zymeworks Common Shares in a fully taxable transaction.

U.S. holders are strongly urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the Redomicile Transactions to them in their particular circumstances.

The brief U.S. tax summary provided above is qualified in its entirety by the section “Material U.S. Federal Income Tax Considerations” below, which provides a summary of the material U.S. federal income tax considerations generally applicable to U.S. holders of participating in the Redomicile Transactions, and to the Non-U.S. holders of the ownership and disposition of shares of Delaware Common Stock received by Non-U.S. holders pursuant to the Redomicile Transactions. Zymeworks Shareholders are urged to consult with and rely on their own tax advisors to determine the particular tax consequences to them of the Redomicile Transactions as well as the tax consequences of the ownership and disposition of shares of Delaware Common Stock received pursuant to the Redomicile Transactions.

There may be different income tax treatment that applies to non-U.S. holders (including Canadian Holders) and U.S. holders of shares of Delaware Common Stock in respect of dividend and withholding taxes, as compared to the tax consequences that apply in respect of holding Zymeworks Common Shares. See sections titled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations”.

 

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Comparison of Shareholder Rights

Many of the principal attributes of Zymeworks Common Shares and shares of Delaware Common Stock, will be similar. In addition, holders who receive Exchangeable Shares in connection with the Redomicile Transactions are expected to have voting rights as beneficiaries under the Voting Trust Agreement equivalent to a holder of Delaware Common Stock. However, there are differences between what a stockholder’s rights will be under Delaware law and what they currently are under the BCBCA, and there are differences between what an Exchangeable Shareholder’s rights will be and what they currently are under the BCBCA and what they would be under Delaware law if Delaware Common Stock was received in lieu of Exchangeable Shares. In addition, there are differences between Zymeworks’ existing articles of incorporation and the Parent Certificate of Incorporation and Parent Bylaws as they will be in effect upon the completion of the Redomicile Transactions. There will also be differences between the Exchangeable Share Provisions and other agreements providing for rights to the Exchangeable Shareholders and both Zymeworks’ existing articles of incorporation and the Parent Certificate of Incorporation and Parent Bylaws as they will be in effect upon the completion of the Redomicile Transactions. These differences are discussed under “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”. In addition, see the section titled “Description of Parent Capital Stock” for a summary of Parent’s authorized capital stock and the rights and preferences thereof. Zymeworks Securityholders should also review the forms of the Parent Certificate of Incorporation and Parent Bylaws, as they will be in effect upon completion of the Redomicile Transactions, which are attached as Appendices F and G, respectively, of this Proxy Statement/Prospectus, as well as the section titled “Description of Exchangeable Shares and Related Agreements” and the Exchangeable Share Provisions, which are attached as Exhibit E to the Transaction Agreement, which is set forth as Exhibit B to this Proxy Statement/Prospectus. See also the section titled “Risk Factors — Risks Relating to Parent” and “Risk Factors — Risks Relating to the Exchangeable Shares”.

 

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RISK FACTORS

An investment in shares of Delaware Common Stock is subject to a number of risks. Prior to making any decision as to whether or not to vote in favor of the Redomicile Resolution, Zymeworks Securityholders should carefully consider risk factors associated with holding shares of Delaware Common Stock, Parent Warrants and/or Parent Incentive Awards, Zymeworks’ business and the industry in which it operates, together with all other information contained in this Proxy Statement/Prospectus, including, in particular the risk factors described below.

You should carefully consider the following factors as well as the other information contained in and incorporated by reference into this Proxy Statement/Prospectus, and specifically, the factors described in the section entitled “Item 1A. Risk Factors” in the Annual Report on Form 10-K of Zymeworks for the year ended December 31, 2021 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. For information about Zymeworks’ filings incorporated by reference in this Proxy Statement/Prospectus, see section titled “Where You Can Find More Information”. The Risk Factors contained or incorporated by reference in this Proxy Statement/Prospectus are not guarantees that no such conditions exist as of the date of this Proxy Statement/Prospectus and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

Risks Relating to Zymeworks’ Business

You should read and consider the risk factors specific to Zymeworks’ business that will continue to affect Parent after completion of the Redomicile Transactions. These risks are described in the section entitled “Item 1A. Risk Factors” in the Annual Report on Form 10-K of Zymeworks for the year ended December 31, 2021, and the section entitled “Item 1A. Risk Factors” in the Quarterly report on Form 10-Q of Zymeworks for the quarter ended June 30, 2022, each of which is incorporated by reference into this Proxy Statement/Prospectus, and in other documents that are incorporated by reference into this Proxy Statement/Prospectus.

Risks Relating to Parent

The rights of stockholders under Delaware law may differ from the rights of shareholders under the BCBCA.

If the Redomicile Transactions are completed, Zymeworks Shareholders (other than Dissenting Shareholders (as defined herein) and holders of Exchangeable Shares prior to exchanging them for Delaware Common Stock) will become stockholders of a Delaware corporation. There are differences between the BCBCA and the DGCL. For example, under the BCBCA, many significant corporate actions such as certain amendments to a corporation’s notice of articles and articles or consummating an amalgamation (other than a vertical short form or horizontal short form amalgamation among affiliated entities) require the approval of at least two-thirds of the votes cast by shareholders, whereas under the DGCL, in most cases, such actions require the approval of a majority of the voting power of outstanding stock entitled to vote on the matter. Furthermore, shareholders under the BCBCA are entitled to appraisal rights under a number of extraordinary corporate actions, including an amalgamation with another unrelated corporation, certain amendments to a corporation’s articles of incorporation or the sale of all or substantially all of a corporation’s assets, whereas under the DGCL, stockholders are only entitled to appraisal rights in connection with certain mergers, consolidations and similar transactions. As shown by the examples above, if the Redomicile Transactions are completed, in certain circumstances, holders of shares of Delaware Common Stock will be afforded different protections under the DGCL than Zymeworks Shareholders had under the BCBCA. See section titled “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders” for further details.

 

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Delaware law and provisions in the Parent Certificate of Incorporation and Parent Bylaws might delay, discourage or prevent a change in control of Parent or changes in its management, thereby depressing the market price of the Delaware Common Stock.

Parent Certificate of Incorporation and Parent Bylaws will contain provisions that may make the acquisition of Parent more difficult or delay or prevent changes in control of its management. Among other things, these provisions will:

 

   

authorize Parent’s board of directors to issue shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;

 

   

permit only the board of directors to establish the number of directors and fill vacancies and newly created directorships on the board, provided that the board of directors’ ability to increase the size of the board and fill vacancies and newly created directorships will be subject to the restrictions in the Parent Certificate of Incorporation and Parent Bylaws and further discussed under the section titled “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”;

 

   

establish that members of Parent’s board of directors serve in one of three staggered terms of three years each;

 

   

provide that Parent’s directors may only be removed by the affirmative vote of at least 66 2/3% of the voting power of the shares cast on such proposal;

 

   

permit stockholders to only take actions at a duly called annual or special meeting and not by written consent;

 

   

require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings;

 

   

not provide for cumulative voting rights in the election of directors;

 

   

provide that special meetings of Parent’s stockholders may be called only by the board of directors, the chairperson of the board of directors, Parent’s chief executive officer or president or the secretary of Parent upon request from holders of no less than 20% of Parent’s outstanding voting stock, subject to the limitations and requirements set forth in the Parent Bylaws; and

 

   

require a super-majority vote of stockholders to amend some of the provisions described above.

In addition, because Parent will be incorporated in Delaware, Parent will be governed by the provisions of Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested stockholder” for a period of three years following the date on which the stockholder became an “interested stockholder” unless certain conditions are met.

These provisions, alone or together, could delay, discourage or prevent a transaction involving a change in control of Parent. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause Parent to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for Parent’s stockholders to receive a premium for their shares of Delaware Common Stock, and could also affect the price that some investors are willing to pay for Delaware Common Stock. For more information, see section titled “Description of Parent Capital Stock – Parent Certificate of Incorporation and Parent Bylaws Provisions”.

 

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The Parent Bylaws will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between Parent and its stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit Parent’s stockholders’ ability to choose the judicial forum for disputes with Parent or its directors, officers, stockholders or employees.

The Parent Bylaws will provide that, unless Parent consents in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on Parent’s behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of Parent’s directors, stockholders, officers or other employees to Parent or its stockholders, (3) any action arising pursuant to any provision of the DGCL, the Parent Certificate of Incorporation or Parent Bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware), except for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction. This provision would not apply to any action brought to enforce a duty or liability created by the U.S. Exchange Act and the rules and regulations thereunder.

Section 22 of the Securities Act establishes concurrent jurisdiction for federal and state courts over Securities Act claims. Accordingly, both state and federal courts have jurisdiction to hear such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Parent Bylaws will also provide that, unless Parent consents in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of Parent’s securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. Although Parent believes these exclusive forum provisions benefit Parent by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with Parent or its current or former directors, officers, stockholders or other employees, which may discourage such lawsuits against Parent and its current and former directors, officers, stockholders and other employees. Parent’s stockholders will not be deemed to have waived its compliance with the federal securities laws and the rules and regulations thereunder as a result of Parent’s exclusive forum provisions.

The enforceability of similar exclusive forum provisions in other companies’ organizational documents have been challenged in legal proceedings, and, while certain courts have determined these provisions are enforceable, it is possible that a court of law could rule that these types of provisions are inapplicable or unenforceable if they are challenged in a proceeding or otherwise. If a court were to find either exclusive forum provision contained in the Parent Bylaws to be inapplicable or unenforceable in an action, Parent may incur significant additional costs associated with resolving such action in other jurisdictions, all of which could harm its results of operations.

There has been no prior public trading for the shares of Delaware Common Stock on a national securities exchange and the market price of the shares of Delaware Common Stock may be subject to volatility.

Although the Zymeworks Common Shares have historically been listed on the NYSE, there has been no public trading market for the shares of Delaware Common Stock. Following the listing of the shares of Delaware Common Stock on the NYSE, there can be no assurance that the trading market for such shares will continue to be as active or liquid as was the trading market for the Zymeworks Common Shares prior to the Redomicile Transactions or that the trading price of the shares of Delaware Common Stock following the Redomicile Transactions may not be effectively lower than the trading price of the Zymeworks Common Shares.

 

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As is the case with the Zymeworks Common Shares, the market price of the shares of Delaware Common Stock may be volatile. The value of an investment in the shares of Delaware Common Stock may decrease or increase abruptly, and such volatility may bear little or no relation to Zymeworks’ performance. The price of the shares of Delaware Common Stock may fall in response to market appraisal of Zymeworks’ strategy or if Zymeworks’ results of operations, clinical progress and/or prospects are below the expectations of market analysts or shareholders. In addition, stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market price of securities, and may, in the future, experience similar fluctuations which may be unrelated to Parent’s operating performance and prospects but nevertheless affect the price of the shares of Delaware Common Stock. This volatility may affect the ability of holders of shares of Delaware Common Stock to sell these at an advantageous price. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of the shares of Delaware Common Stock.

Parent may need to enter into certain new arrangements which may not be on terms as favorable as arrangements entered into by Zymeworks.

Concurrently with or immediately following completion of the Redomicile Transactions, Parent may need to enter into new arrangements as the ultimate parent company to Zymeworks and its subsidiaries. While Parent anticipates such terms will be materially consistent with the arrangements currently in place for Zymeworks, there is no assurance that such arrangement will not impose additional operating or financial restrictions on Parent, or that such arrangements will be on commercially reasonable terms or terms that are acceptable to Parent.

Parent’s ability to pay dividends in the future is not guaranteed.

Any future determination to pay dividends will be at the discretion of the Parent board of directors and will depend upon many factors, including Parent’s results of operations, financial position, capital requirements, distributable reserves, credit terms, general economic conditions and other factors as the Parent board of directors may deem relevant from time to time. Consequently, future dividends payable to investors are not guaranteed.

The issuance of additional shares of Delaware Common Stock in connection with future equity financings, acquisitions or growth opportunities, any Parent Incentive Plan or otherwise may dilute all other shareholdings.

Parent may seek to raise financing for acquisitions or to fund future growth opportunities. In certain circumstances, Parent may, for these and other purposes, including pursuant to any Parent Incentive Plan, issue additional equity or convertible equity securities. As a result, existing holders of shares of Delaware Common Stock may suffer dilution in their percentage ownership or the market price of such shares may be adversely affected.

Risks Relating to the Redomicile Transactions

Zymeworks may fail to realize certain benefits of the Redomicile Transactions, including as a result of the shares of Delaware Common Stock not being included in a U.S. stock market index.

Zymeworks has pursued the Redomicile Transactions because it believes that the Redomicile Transactions will enhance shareholder value over the long-term. Zymeworks believes that the Redomicile Transactions will raise the profile and marketability of Zymeworks’ capital stock in the United States through, among other things, the ability to attract deeper and growing pools of passive investment capital in the United States, particularly if shares of Delaware Common Stock are included in certain U.S. stock market indices and other investment vehicles that only include securities of U.S.-incorporated companies. However, following the Redomicile Transactions, if shares of Delaware Common Stock are not included in such U.S. stock market indices, this could result in increased selling pressure and/or decreased demand for Parent’s shares that would increase stock price volatility or cause the market price of the shares of Delaware Common Stock to fall. Initial inclusion and

 

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continued inclusion in a stock market index or fund is not guaranteed and is subject to numerous factors which can be applied subjectively by the entity managing the index or fund. There are no assurances that Parent will be included in any U.S. stock market indices or funds in a timely manner, or at all. Even if Parent is included in a U.S. stock market index or fund, the entities managing such indices or funds may change their inclusion criteria, resulting in the future exclusion from such index or fund.

The success of the Redomicile Transactions will depend, in part, on the ability of Zymeworks to realize the anticipated benefits associated with the Redomicile Transactions and associated reorganization of Zymeworks’ corporate structure, and Zymeworks may not be able to realize such benefits on a timely basis or at all.

The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds that are not permitted to hold shares of Delaware Common Stock under their internal guidelines.

The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds (including Canadian-focused funds) that are not permitted to hold shares of Delaware Common Stock under their internal guidelines, or are limited in the size of any such investments. Such sales could result in increased selling pressure and/or decreased demand for Parent’s shares of Delaware Common Stock, which could increase stock price volatility or cause the market price of the shares of Delaware Common Stock to fall. As a result of the foregoing, certain of these investors may be required under their internal guidelines to sell their shares at times when, or at prices for which, they would otherwise not have sold. If an investor sells its shares at a time when the market price is lower than their cost basis in the shares, the investor will suffer a loss that could be significant to such investor.

The success of the Redomicile Transactions will depend, in part, on the ability of Zymeworks to realize the anticipated benefits associated with the Redomicile Transactions and associated reorganization of Zymeworks’ corporate structure, and Zymeworks may not be able to realize such benefits on a timely basis or at all.

Zymeworks’ business may be impacted by the uncertainty associated with the Redomicile Transactions.

Although Parent expects to maintain Zymeworks’ existing physical operations in Canada and Washington state, the Company’s principal executive offices will be located in Middletown, Delaware, which reflects the ongoing evolution of our workforce toward hybrid and remote, with maintenance of our historical physical operations. As a result of this shift, certain relationships, including with employees, suppliers, contract research organizations, partners, collaborators, governments and other stakeholders, may be subject to disruption due to uncertainty associated with the Redomicile Transactions. Specifically, certain stakeholders may be reluctant to engage in business with Zymeworks prior to, or with Parent following completion of, the Redomicile Transactions, or may impose additional conditions on or apply less favorable terms to transactions involving Zymeworks and/or Parent. This could have an adverse effect on the business and operations of Zymeworks prior to, or Parent following, completion of the Redomicile Transactions.

The Redomicile Transactions are conditional, and the conditions may not be satisfied.

Completion of the Redomicile Transactions is conditional, among other things, upon the receipt of approvals and the satisfaction of other conditions, including (a) the authorization, upon official notice of issuance, of the listing of the shares of Delaware Common Stock on the NYSE, (b) the approval of the Court in respect of the Arrangement, and (c) the receipt of the Required Securityholder Approvals. Although Zymeworks is diligently applying its efforts to take, or cause to be taken, all actions to do, or cause to be done, all things necessary, proper or advisable to obtain the requisite approvals, there can be no assurance that these conditions will be fulfilled or that the Redomicile Transactions will be completed. Further, even if the Required Securityholder Approvals have been obtained, the Zymeworks Board may decide to delay or not proceed with the Redomicile Transactions if it determines that the Redomicile Transactions are no longer advisable.

 

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Distributions to Non-U.S. holders of Delaware Common Stock may be subject to U.S. withholding

Distributions by Parent on Delaware Common Stock held by Non-U.S. holders (as defined below) (including constructive distributions) may be subject to a U.S. federal withholding tax (generally, at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. holder’s country of residence). For more information, see section titled “Material U.S. Federal Income Tax Considerations – Material U.S. Federal Income Tax Considerations to Non-U.S. Holders of Ownership and Disposition of Delaware Common Stock – Distributions”.

Parent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions.

Following the Redomicile Transactions, Parent will be subject to U.S. federal income taxes on its earnings and the earnings of its non-U.S. subsidiaries in a manner that may adversely impact the company’s effective tax rate. For example, Parent may have to include additional amounts in income as a result of the application of “controlled foreign corporation” rules, including under the so-called “global intangible low-taxed income” regime, or the recently enacted 15% minimum tax on book income and 1% excise tax on stock redemptions. In addition, Parent may have to comply with U.S. withholding tax requirements on U.S. federal distributions paid to non-U.S. holders. Currently, the U.S. federal corporate income tax rate is 21%, and the Canadian corporate income tax rate (federal and provincial) is 27%. In addition, Zymeworks’s tax attributes (including net operating loss and tax credit carryforwards and deductible Scientific Research and Experimental Development Expenditure carryforwards) will generally not be available to offset U.S. income and may be subject to limitation following the Redomicile Transactions.

Further, Parent’s future operations and business structure may result in increased tax burden. For example, changes in Parent’s clinical development plans and business or commercialization strategies may result in an increased effective tax rate. Taxation of international business operations and intercompany transactions, including transactions between Parent and non-U.S. subsidiaries, is complicated. Any changes in the U.S. or non-U.S. taxation of such activities may increase Parent’s worldwide effective tax rate and harm Parent’s business, financial condition, and results of operations.

Zymeworks will allocate time and resources to effecting the Redomicile Transactions and incur non-recurring costs related to the Redomicile Transactions.

Zymeworks and its management have allocated and will continue to be required to allocate time and resources to effecting the completion of the Redomicile Transactions and related and incidental activities. There is a risk that the challenges associated with managing these various initiatives as described in this Proxy Statement/Prospectus may have a business impact and that consequently the underlying businesses will not perform in line with expectations. This could have an adverse effect on the business, financial condition and reputation of Parent.

In addition, Zymeworks expects to incur a number of non-recurring costs associated with the Redomicile Transactions, including legal fees, accountants’ fees, proxy solicitor fees, filing fees, mailing expenses and financial printing expenses. There can be no assurance that the actual costs will not exceed those estimated and the actual completion of the Redomicile Transactions may result in additional and unforeseen expenses. Most of these costs will be payable whether or not the Redomicile Transactions are completed. While it is expected that benefits of the Redomicile Transactions achieved by Parent will offset these transaction costs over time, this net benefit may not be achieved in the short-term or at all, particularly if the Redomicile Transactions are delayed or does not happen at all. These combined factors could adversely affect the business and overall financial condition of Parent.

Zymeworks may choose to defer or abandon the Redomicile Transactions.

Even if the Required Securityholder Approvals have been obtained and other conditions required to complete the Redomicile Transactions have been satisfied, Zymeworks may decide to defer or abandon the Redomicile

 

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Transactions at any time prior to the Effective Time of the Redomicile Transactions and in such case Zymeworks will have incurred costs and will have directed attention and resources relating to the Redomicile Transactions, but will not realize any of the anticipated benefits of the Redomicile Transactions.

Negative publicity resulting from the Redomicile Transactions could adversely affect Zymeworks’ business and the market price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

Transactions similar to the Redomicile Transactions that have been undertaken by other companies have in some cases generated significant news coverage, some of which has been negative. Negative publicity generated by the Redomicile Transactions could cause certain persons with whom Zymeworks has a business relationship to be more reluctant to do business with Zymeworks prior to the Redomicile Transactions, or Parent following the Redomicile Transactions. In addition, negative publicity could cause certain of Zymeworks’ employees, particularly those in Canada, to perceive uncertainty regarding future opportunities available to them. Either of these events could have a significant adverse impact on Zymeworks’ business. Negative publicity could also cause some Zymeworks Shareholders to sell Zymeworks Common Shares or decrease the demand for new investors to purchase such shares, which could have an adverse impact on the price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

Completion of the Redomicile Transactions may trigger certain provisions in agreements to which Zymeworks is a party.

While the Redomicile Transactions will not result in an effective change of control of Zymeworks, the completion of the Redomicile Transactions may trigger certain technical change in control, right of first offer, notice, consent, assignment or other provisions in agreements to which Zymeworks or its subsidiaries are a party. If Zymeworks and/or Parent are unable to assert that such provisions should not apply, or is unable to comply with or negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, including potentially terminating such agreements or seeking monetary damages. Even if Zymeworks is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Parent.

Payments in connection with the exercise of Dissent Rights by Zymeworks Shareholders may impact Parent’s financial resources.

Under the BCBCA, Registered Shareholders who (a) do not vote in favor of the Redomicile Resolution, (b) deliver to Zymeworks a Dissent Notice, (c) continuously hold their Zymeworks Common Shares through the Effective Time, and (d) otherwise comply with the requirements and procedures of Division 2 of Part 8 of the BCBCA (as may be modified by the Interim Order, the Plan of Arrangement, and any further order of the Court), are entitled to receive payment in cash of the “fair value” of their Zymeworks Common Shares. Should a material number of Zymeworks Shareholders exercise Dissent Rights, a substantial cash payment may be required to be made to such Dissenting Shareholders that could have an adverse effect on Parent’s financial condition and cash resources if the Redomicile Transactions are completed. It is a condition precedent to completion of the Redomicile Transactions that the time period for the exercise of any Dissent Rights conferred upon Zymeworks Shareholders in respect of the Redomicile Transactions shall have expired and Zymeworks Shareholders shall not have exercised (or otherwise be deemed to have exercised) Dissent Rights for greater than 10% of the outstanding Zymeworks Common Shares, or such other amount that would make it inadvisable to proceed with the implementation of the Redomicile Transactions, as determined by Zymeworks in its sole discretion.

Enforcement of rights against Parent in Canada may be limited.

Parent’s principal executive offices will be located in Middletown, Delaware and the majority of its directors, officers and experts are likely to reside outside of Canada. Accordingly, it may not be possible for Parent

 

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stockholders or Exchangeable Shareholders to effect service of process within Canada upon Parent or the majority of its directors, officers or experts, or to enforce judgments obtained in Canadian courts against Parent or the majority of its directors, officers or experts.

Risks Relating to the Exchangeable Shares

The Exchangeable Shares will not be listed on any stock exchange.

The Exchangeable Shares are not expected to be listed on any stock exchange. Although each Exchangeable Share will be exchangeable at the option of the holder for shares of Delaware Common Stock, there is no market through which the Exchangeable Shares may be sold, and holders may not be able to sell their Exchangeable Shares.

Zymeworks Shareholders who elect to receive Exchangeable Shares will experience a delay in receiving Delaware Common Stock from the date they request an exchange, which may affect the value of the shares the holder receives in such exchange.

Zymeworks Shareholders who elect to receive Exchangeable Shares as part of the Consideration with respect to their Zymeworks Common Shares and later request to receive shares of Delaware Common Stock in exchange for their Exchangeable Shares may not receive shares of Delaware Common Stock until a period of time after the applicable request is received. During this period, the market price of the shares of Delaware Common Stock may increase or decrease. Any such increase or decrease would affect the value of the Consideration to be received by such a holder of Exchangeable Shares upon a subsequent sale of shares of Delaware Common Stock received in the exchange.

In addition, pursuant to the terms of the Support Agreement and following completion of the Redomicile Transactions, Parent will file a registration statement or a prospectus supplement to an existing registration statement to register the issuance of Delaware Common Stock issued upon exchange of the Exchangeable Shares. If Parent is delayed in filing such registration statement or prospectus supplement to an existing registration statement, or if the effectiveness of such registration statement or prospectus supplement to an existing registration statement is delayed or suspended, shares of Delaware Common Stock issued upon exchange of the Exchangeable Shares would not be registered, which could impact a holder’s ability to sell such shares in a timely manner.

Exchangeable Shares will not be shares of capital stock of Parent and Exchangeable Shareholders will have limited rights against Parent and its officers and directors.

Zymeworks Shareholders who elect to receive Exchangeable Shares as part of or all of their Consideration should be aware that Exchangeable Shares will not be shares of capital stock of Parent. As a result, Exchangeable Shares will not provide the holders thereof the rights against Parent and its officers and directors that stockholders of Parent have under Delaware law. For example, although officers and directors of Parent owe fiduciary duties to stockholders of Parent, Delaware courts are likely to conclude that such duties are not owed to holders of Exchangeable Shares in such capacity. Prior to the exchange of Exchangeable Shares for shares of Delaware Common Stock, holders of Exchangeable Shares may only rely on contractual rights as beneficiaries under the Trust Agreement and the Support Agreement, such as rights to receive equivalent economic benefits as the holders of Delaware Common Stock and voting rights to be exercised through the share of Special Voting Stock. For additional information about these rights, see “Description of the Exchangeable Shares and Related Agreements” and “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

In addition, holders of Exchangeable Shares may not have standing to bring claims against Parent or its officers and directors, including derivative claims, claims based on a breach of fiduciary duty or other claims seeking to

 

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enforce the terms of Parent Certificate of Incorporation and Parent Bylaws against the officers and directors of Parent or Parent itself. Moreover, in seeking to enforce rights under the Trust Agreement and Support Agreement, such Exchangeable Shareholders will need to rely on the Share Trustee and may have limited ability to bring direct claims against Parent or its officers or directors. For additional information, see “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

Holders of Exchangeable Shares should also be aware that certain of Parent’s directors and officers, and all or a substantial portion of their assets as well as all or a substantial portion of Parent’s assets are or may be located outside of Canada. As a result, it may be difficult for investors to effect service of process within Canada upon Parent and such directors and officers or to enforce judgments obtained against Parent or such persons, in Canadian courts. Furthermore, as discussed under “The Parent Bylaws will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between Parent and its stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit Parent’s stockholders’ ability to choose the judicial forum for disputes with Parent or its directors, officers, stockholders or employees”, holders of Exchangeable Shares may be limited in their ability to bring suit against Parent in courts outside of the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware).

Exchangeable Shares will not be entitled to voting rights with respect to ExchangeCo except in limited circumstances.

Except as required by the BCBCA and in respect of any changes to the rights, privileges, restrictions and conditions attached to the Exchangeable Shares, the holders of the Exchangeable Shares will not be entitled as such to receive notice of or to attend any meeting of the shareholders of ExchangeCo or to vote at any such meeting, and the holders of the Exchangeable Shares will not be entitled to class votes except as required by the BCBCA. For additional information, see “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

The CEO and Chair of the Board of Parent is also the sole director of ExchangeCo and Callco and conflicts of interest may arise in the exercise of such roles.

As CEO and Chair of the Board of Parent, Kenneth Galbraith owes fiduciary duties to Parent and its stockholders. As sole director of ExchangeCo, he also owes fiduciary duties to ExchangeCo and a duty of care to the holders of ExchangeCo shares, including the Exchangeable Shareholders. Lastly, as sole director of Callco, he owes fiduciary duties to Callco and a duty of care to shareholders of Callco. Zymeworks Shareholders who elect to receive Exchangeable Shares should be aware that there may be situations in which the interests of Parent stockholders and ExchangeCo shareholders are in conflict. For example, if Parent declares a dividend or distribution to its stockholders, it must provide for a similar economic benefit to the Exchangeable Shareholders, which benefit may be provided through adjustment of the Exchangeable Share Exchange Ratio rather than provision of an in-kind dividend or distribution if the ExchangeCo board determines that ExchangeCo would be liable for any unrecoverable tax in connection with the payment of an equivalent dividend or distribution. If the value ascribed to such dividend or distribution undervalues such dividend or distribution, the Exchangeable Share Exchange Ratio may be inadequately adjusted, resulting in a loss of economic benefit to the Exchangeable Shareholders. Under the Exchangeable Share Provisions, any adjustment to the Exchangeable Share Exchange Ratio will be conclusive and binding. In addition, where the Exchangeable Share Exchange Ratio is adjusted in lieu of an economically equivalent dividend, the Exchangeable Shareholders will be delayed in receiving the benefit of that adjustment until they exchange their Exchangeable Shares for Delaware Common Stock. As an additional example, in the event of a Parent Control Transaction, the board of directors of ExchangeCo may accelerate the Redemption Date if it determines in good faith that it is not practicable to substantially replicate the Exchangeable Shares in such Parent Control Transaction, or that the redemption of all the outstanding Exchangeable Shares (other than Exchangeable Shares held by Parent and its subsidiaries) is necessary to enable the completion of the Parent Control Transaction in accordance with its terms. In such event, Exchangeable

 

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Shares held by Exchangeable Shareholders would be exchanged for Delaware Common Stock and such Exchangeable Shareholders may recognize Canadian income tax on any capital gain.

Moreover, for the reasons discussed under “Exchangeable Shares will not be shares of capital stock of Parent and Exchangeable Shareholders will have limited rights against Parent and its officers and directors”, Exchangeable Shareholders may be limited in their ability to seek redress against Parent and its directors and officers. Furthermore, ExchangeCo will have limited assets and any successful claim asserted by Exchangeable Shareholders against ExchangeCo may not result in adequate compensation as a result of such limited assets.

Holders of Exchangeable Shares will not be entitled to receive Delaware Rights under the Delaware Rights Agreement unless and until they exchange their Exchangeable Shares for shares of Delaware Common Stock.

Delaware Rights will only be issued in respect of shares of Delaware Common Stock. Accordingly, Zymeworks Shareholders who elect to receive Exchangeable Shares will not be entitled to receive Delaware Rights under the Delaware Rights Agreement unless and until their Exchangeable Shares are exchanged for shares of Delaware Common Stock.

There may be a taxable event for an Eligible Holder as a result of a transaction beyond such Eligible Holder’s control.

An Eligible Holder who (a) disposes of Zymeworks Common Shares pursuant to the Plan of Arrangement and who receives consideration that includes Exchangeable Shares, and (b) validly makes a joint election under subsection 85(1) or subsection 85(2) of the Tax Act (as applicable and as described in the sections titled “Material Canadian Federal Income Tax Considerations — Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election” and “Material Canadian Federal Income Tax Considerations — Exchange of Zymeworks Common Shares for Exchangeable Shares and Delaware Common Stock — Section 85 Election”) in respect of such shares, may obtain a full or partial tax deferral of any capital gain that may otherwise arise on the exchange of such Zymeworks Common Shares. However, a holder of Exchangeable Shares will be considered to have disposed of Exchangeable Shares (a) on a redemption (including pursuant to a retraction request) of such Exchangeable Shares by ExchangeCo, and (b) on an acquisition of such Exchangeable Shares by Callco or Parent. Although each is a taxable event, the Canadian federal income tax consequences of the disposition will be different depending on whether the event giving rise to the disposition is a redemption or an acquisition. Further, if the Exchangeable Share Cap is reached, then the Exchangeable Shares will be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

Prior to the Sunset Date, ExchangeCo may redeem Exchangeable Shares in limited circumstances, and ExchangeCo shall redeem the Exchangeable Shares on the Sunset Date. Accordingly, an Eligible Holder may have a taxable event in a transaction beyond their control. See section titled “Material Canadian Federal Income Tax Considerations” for further information.

Receipt of Delaware Common Stock by Eligible Holders who do not elect to receive Exchangeable Shares with respect to their Zymeworks Common Shares will be a taxable event for Canadian income tax purposes, and could also be taxable to Zymeworks Shareholders who are not U.S. holders (as defined below).

An Eligible Holder who does not elect to receive Exchangeable Shares with respect to their Zymeworks Common Shares and instead disposes of Zymeworks Common Shares for Delaware Common Stock will realize proceeds of disposition equal to the aggregate fair market value, at the time of the disposition, of the Delaware Common Stock acquired on the exchange. Such Eligible Holder will realize a capital gain (or capital loss) equal

 

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to the amount by which the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to such Eligible Holder of the Zymeworks Common Shares. See section titled “Material Canadian Federal Income Tax Considerations” for further information.

Further, receipt of Delaware Common Stock by Zymeworks Shareholders who are not U.S. holders (as defined below) could be taxable to such Zymeworks Shareholders under the laws of their respective jurisdictions. Such Zymeworks Shareholders should consult with their own tax advisors regarding the tax consequences of the Redomicile Transactions in their particular circumstances.

The tax treatment of Exchangeable Shares for non-Canadian tax purposes is uncertain.

The tax treatment of Exchangeable Shares for non-Canadian tax purposes, including U.S. federal income tax purposes, is uncertain and may differ from the general tax consequences described in section titled “Material Canadian Federal Income Tax Considerations”. Exchangeable Shareholders who are subject to taxation in jurisdictions other than Canada should consult with their tax advisors regarding the tax treatment of Exchangeable Shares under non-Canadian tax laws and regulations.

 

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VOTING INFORMATION

Voting Shares and Principal Holders

As of the Record Date for the Special Meeting, 61,694,387 Zymeworks Common Shares, 4,794,224 Zymeworks Warrants and 8,131,042 Zymeworks Incentive Awards were outstanding. The Zymeworks Common Shares trade under the stock symbol “ZYME” on the NYSE.

As of the Record Date for the Special Meeting, the directors and executive officers of Zymeworks had the right to vote approximately 34,710 Zymeworks Common Shares, representing approximately 0.06% of the Zymeworks Common Shares then issued and outstanding and entitled to vote at the Special Meeting, no Zymeworks Warrants then issued and outstanding and 2,225,972 Zymeworks Incentive Awards, representing approximately 27.38% of the Zymeworks Incentive Awards then issued and outstanding and entitled to vote at the Special Meeting.

For information regarding each person known by Zymeworks to beneficially own 5% or more of the outstanding Zymeworks Common Shares and information regarding beneficial ownership of Zymeworks Common Shares by directors and executive officers of Zymeworks, see section titled “Share Ownership of Certain Beneficial Owners and Management and Directors of Zymeworks”.

It is expected that each of the directors and executive officers of Zymeworks will vote FOR the Redomicile Resolution.

Record Date and Entitlement to Vote

Each Zymeworks Securityholder of record at the close of business on August 24, 2022, which is the Record Date of the Special Meeting, will be entitled to vote at the Special Meeting the Zymeworks Common Shares, Zymeworks Warrants and Zymeworks Incentive Awards registered in his, her or its name on that date. Each Zymeworks Common Share, Zymeworks Warrant and Zymeworks Incentive Award carries the right to one vote for the Redomicile Resolution.

Quorum

In order for business to be conducted at the Special Meeting, a quorum must be present. A quorum for the Special Meeting requires at least 30% of the Zymeworks Common Shares entitled to vote be present or represented by proxy and at least two persons entitled to vote at the Special Meeting be present or represented by proxy. While Zymeworks Warrantholders and Zymeworks Incentive Awardholders will be entitled to vote at the Special Meeting as described elsewhere in this Proxy Statement/Prospectus, there is no separate quorum requirement under the BCBCA.

Proxy Voting

The persons named in the form of proxy must vote your Zymeworks Common Shares, Zymeworks Warrant or Zymeworks Incentive Awards in accordance with your instructions on the form of proxy. Signing the form of proxy gives authority to the persons named therein, each of whom is either a director or officer of Zymeworks, to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards at the Special Meeting in accordance with your voting instructions.

In the absence of such instructions, however, your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards will be voted FOR the Redomicile Resolution.

If you are a registered Zymeworks Shareholder, Zymeworks Warrantholder or Zymeworks Incentive Awardholder, you may vote by completing and returning a proxy according to the instructions below, or by attending the Special Meeting in person.

 

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A proxy must be in writing and must be executed by you or by an attorney duly authorized in writing or, if the shareholder is a corporation or other legal entity, by a duly authorized officer or attorney.

The persons named in the form of proxy will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Special Meeting and with respect to other matters that properly come before the Special Meeting. As of the date of this Proxy Statement/Prospectus, Zymeworks’ management knows of no such amendment, variation or other matter expected to come before the Special Meeting. If any other matters properly come before the Special Meeting, the persons named in the form of proxy will vote on them in accordance with their best judgment.

If you are a beneficial Zymeworks Shareholder, the Intermediary (usually a bank, trust company, broker, securities dealer or other financial institution) through which you hold your Zymeworks Common Shares will send you instructions on how to vote your Zymeworks Common Shares. Please follow the instructions on your voting instruction form.

Transfer Agent

You can contact Computershare, Zymeworks’ transfer agent as follows:

 

By mail:

 

Computershare Investor Services Inc.

Proxy Department

100 University Avenue, 8th Floor

Toronto, Ontario, M5J 2Y1

  

By telephone:

 

within North America at 1-800-564-6253

all other countries at 1-514-982-7555

for broker inquiries at 1-888-838-1405

Registered Shareholder, Zymeworks Warrantholder and Zymeworks Incentive Awardholder Voting

You are a Registered Shareholder if your name appears on your share certificate or your Direct Registration (DRS) confirmation.

How to Vote

If you are eligible to vote and you are a Registered Shareholder, Zymeworks Warrantholder or Zymeworks Incentive Awardholder, you can vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards in person at the Special Meeting or by proxy, as explained below. Voting by proxy is the easiest way to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards.

Voting by Proxy

Below are the different ways in which you can give your instructions, details of which are found in the proxy form accompanying this Proxy Statement/Prospectus.

 

   

By Telephone: Zymeworks Securityholders located in Canada or in the United States may vote by telephone by calling 1-866-732-8683. You will need to enter the 15-digit control number provided on the form of proxy to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards over the phone.

 

   

By Internet: You may vote over the Internet by going to www.investorvote.com. You will need to enter the 15-digit control number provided on the form of proxy to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards over the internet.

 

   

Voting by telephone or on the Internet is fast, convenient and your vote is immediately confirmed and tabulated. If you choose to vote by telephone or on the Internet, instructions to do so are set forth on the form of proxy. The telephone and Internet voting procedures are designed to authenticate votes cast by

 

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use of a control number, which appears on the form of proxy. These procedures allow Zymeworks Securityholders to appoint a proxy to vote their Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards and to confirm that their instructions have been properly recorded. If you vote by telephone, you will not be able to appoint a proxyholder.

 

   

By Mail: You may sign the enclosed form of proxy appointing the named persons or some other person you choose, who need not be a Zymeworks Shareholder, Zymeworks Warrantholder or Zymeworks Incentive Awardholder, to represent you as proxyholder and vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards at the Special Meeting. Return the form of proxy by mail to:

Computershare Investor Services Inc.

Proxy Department

100 University Avenue, 8th Floor

Toronto, Ontario

M5J 2Y1

In addition, Zymeworks or its strategic shareholder advisor, proxy solicitation agent and information agent, Kingsdale Advisors, may utilize the Broadridge QuickVote service to assist non-registered Zymeworks Shareholders with voting their Common Shares over the telephone.

The persons named in the enclosed form of proxy are either directors or officers of Zymeworks. Please see section titled “Voting Information — Proxy Voting” above. You have the right to appoint some other person of your choice, who need not be a Zymeworks Shareholder, director or officer, to attend and act on your behalf at the Special Meeting. If you wish to do so, please write the name of this person or entity, who need not be a shareholder, in the blank space provided in the form of proxy. If you decide to vote by telephone, you cannot appoint a person to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards other than Zymeworks’ directors or officers whose printed names appear on the form of proxy. It is important to ensure that any other person you appoint as proxy is attending the Special Meeting and is aware that his or her appointment has been made to vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards.

Voting in Person

If you wish to vote in person, you do not need to complete or return your form of proxy. On the day of Special Meeting you will have to present yourself to a representative of Computershare at the registration table. Your vote will be taken and counted at the Special Meeting.

Any COVID protocols mandated by applicable local authorities that are in effect on the date of the Special Meeting will apply, to the extent applicable to the Special Meeting. All attendees will be asked to present a valid government-issued photo identification, such as a driver’s license or passport. The name on your photo identification will be verified against the list of Zymeworks Securityholders of record as of the Record Date prior to your being admitted to the Special Meeting. If you do not have valid photo identification and we are unable to verify your ownership of Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards as of the Record Date, you will not be admitted into the Special Meeting.

Deadline for Voting

Your duly completed form of proxy must be deposited with Computershare Investor Services Inc., Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, before 9 a.m. (Pacific time) on October 5, 2022, or if the Special Meeting is adjourned or postponed, no later than 9 a.m. (Pacific time) on the second business day preceding the day to which the Special Meeting is adjourned or postponed. Notwithstanding the foregoing, the Chair of the Special Meeting has the discretion to accept proxies received after such deadline and the time limit for deposit of proxies may be waived or extended by the Chair of the Special Meeting at his or her discretion, without notice.

 

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Revoking your Proxy

As a Registered Shareholder, Zymeworks Warrantholder or Zymeworks Incentive Awardholder, you can change or revoke a previously delivered proxy in the following ways:

 

   

Send a written notice that is received by the deadline specified below stating that you revoke your proxy to Zymeworks’ Corporate Secretary at the following address: 114 East 4th Avenue, Suite 800, Vancouver BC, Canada V5T 1G4. The statement must be signed by you or your attorney as authorized in writing or, if the shareholder is a corporation, signed under its corporate seal or by a duly authorized officer or attorney of the corporation;

 

   

If you sent a form of proxy by mail, complete a new form of proxy bearing a later date and properly submit it so that it is received before the deadline set forth below;

 

   

Log onto the Internet website specified on the form of proxy in the same manner you would to submit your proxy electronically or call the toll-free number specified on the form of proxy prior to the Special Meeting, in each case if you are eligible to do so, and follow the instructions on the form of proxy; or

 

   

Appear in person at the Special Meeting, declare your prior proxy to be revoked and then vote in person at the Special Meeting (although merely attending the Special Meeting will not revoke your proxy).

Any revocation of a proxy must be delivered either to the registered office of Zymeworks at any time up to and including the last business day preceding the day of the Special Meeting or any adjournment or postponement of the Special Meeting, or to the Chair of the Zymeworks Board on the day of the Special Meeting, October 7, 2022, or any adjournment or postponement of the Special Meeting, prior to the time of the Special Meeting.

Beneficial Shareholder Voting

You are a beneficial Zymeworks Shareholder if your Zymeworks Common Shares are held in a nominee’s name such as a bank, trust company, securities broker or other nominee. Typically, the form of proxy or voting instruction form sent or to be sent by your nominee indicates whether you are a beneficial Zymeworks Shareholder. Generally, without specific instructions, brokers and their agents or nominees are prohibited from voting shares for their client.

How to Vote

If you are eligible to vote and you are a beneficial Zymeworks Shareholder or a Zymeworks Warrantholder or a Zymeworks Incentive Awardholder, you can vote your Zymeworks Common Shares, Zymeworks Warrants or Zymeworks Incentive Awards in person at the Special Meeting or by voting instructions, as explained below. Voting by providing voting instructions is the easiest way to vote your Zymeworks Common Shares.

Voting Instructions

You will have received this Proxy Statement/Prospectus from your nominee, together with a request for voting instructions for the number of Zymeworks Common Shares you hold. If you do not plan on attending the Special Meeting, or do not otherwise wish to vote in person at the Special Meeting, please follow the voting instructions provided by your nominee.

Each nominee has its own procedures, which you should carefully follow to ensure that your Zymeworks Common Shares are voted at the Special Meeting. These procedures generally allow voting in person or by proxy (telephone, fax, mail or Internet). Beneficial Shareholders should contact their nominee for instructions in this regard.

 

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Whether or not you attend the Special Meeting, you can appoint someone else to attend and vote as your proxyholder. To do this, please follow the procedures of your nominee carefully. The persons already named in the form of proxy are either directors or officers of Zymeworks. Please see section titled “Voting InformationProxy Voting” above. It is important to ensure that any other person you appoint as proxy is either attending the Special Meeting in person or returning a proxy reflecting your instructions and is aware that his or her appointment has been made to vote your Zymeworks Common Shares.

Voting in Person

If you wish to vote in person at the Special Meeting, insert your own name in the space provided on the request for voting instructions or form of proxy to appoint yourself as proxyholder and follow the instructions of your nominee.

If you wish to attend and vote your Zymeworks Common Shares at the Special Meeting, Zymeworks will have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder. Therefore, if you wish to vote in person at the Special Meeting, insert your own name in the space provided on the voting instruction form sent to you by your nominee. Then sign and return the voting instruction form by following the signing and returning instructions provided by your nominee. By doing so, you are instructing your nominee to appoint you as proxyholder. Do not otherwise complete the voting instruction form as your vote will be taken at the Special Meeting. Please register with the transfer agent, Computershare, upon arrival at the Special Meeting.

Deadline for Voting

If voting by voting instructions, your nominee must receive your voting instructions in sufficient time for your nominee to act on them. Every nominee has its own procedures which you should carefully follow to ensure that your Zymeworks Common Shares are voted at the Special Meeting. For your vote to count it must be deposited with our Transfer Agent before 9 a.m. (Pacific time) on October 5, 2022, or if the Special Meeting is adjourned or postponed, no later than 9 a.m. (Pacific time) on the second business day preceding the day to which the Special Meeting is adjourned or postponed.

Revoking Voting Instructions

To revoke your voting instructions, follow the procedures provided by your nominee.

If you have any questions or require assistance with voting, please contact Zymeworks’ strategic shareholder advisor, proxy solicitation agent, and information agent, Kingsdale Advisors, at 1-855-476-7981 (toll-free) or via email at contactus@kingsdaleadvisors.com.

 

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THE REDOMICILE TRANSACTIONS AND THE PLAN OF ARRANGEMENT

Background to the Redomicile Transactions

As part of our continuous evaluation of our business, the Zymeworks Board, along with management, monitors investor sentiment and capital market trends for opportunities to enhance shareholder value. From time to time, over the past several years, we have analyzed a potential redomiciling of our business to the state of Delaware as a way to help build shareholder value.

In connection with executive management and other organizational changes in January 2022, management began revisiting the potential of redomiciling to the state of Delaware, and in February 2022 management commenced a detailed review of the proposed Redomicile Transactions, with the assistance of financial, legal, accounting and tax advisors.

On March 8, 2022, management presented to the Zymeworks Board its initial analysis regarding a potential redomiciling transaction, including available transaction structures, tax implications, anticipated benefits and potential risks. As part of its review, the Zymeworks Board discussed with management and its advisors the potential Redomicile Transactions and how the proposed transaction could enhance shareholder value. Among other reasons, management discussed with the Zymeworks Board that the Redomicile Transactions (a) would eliminate restrictions on investments imposed on certain U.S. institutional shareholders by virtue of Zymeworks being incorporated outside of the United States, (b) may make Zymeworks eligible for inclusion in certain leading stock indices, such as the Russell and S&P indices, which are not available to foreign corporations and which, if included in such indices, could potentially increase passive investment interest and provide opportunities for increased value for our shareholders, (c) could provide enhanced flexibility for the monetization of non-core assets, (d) could simplify future transactions with potential U.S. counterparties by eliminating or reducing the complexities inherent in cross-border transactions, and (e) would provide Zymeworks with the benefits of Delaware corporate law, which is widely recognized as the preeminent jurisdiction for incorporation in the United States and is better understood by U.S. investors due to the significant number of U.S.-listed companies that are incorporated by Delaware, including the vast majority of Zymeworks’ peer companies. As part of the presentation, management also discussed with the Zymeworks Board other opportunities that could benefit shareholders if Zymeworks were to have a Delaware-incorporated company as the public company. Among other reasons, the Redomicile Transactions could help streamline U.S. commercialization of our lead product candidate, zanidatamab, by reducing or eliminating cross-border legal, regulatory and tax complexities.

In addition to the potential benefits of the Redomicile Transactions, management discussed with the Zymeworks Board potential risks associated with the Redomicile Transactions, including tax considerations and complexities related to available transaction structures. In light of the potential benefits and with due consideration given to the potential risks, the Zymeworks Board directed management to review the costs of the potential Redomicile Transactions and to continue additional work to analyze the merits and risks of having a Delaware incorporated company as the public company, as well as associated corporate governance and capital structure changes.

On May 23, 2022, management presented to the Zymeworks Board an updated analysis regarding the potential Redomicile Transactions, including key transaction steps, estimated timeline to complete the Redomicile Transactions, and factors that could impact that timeline.

On July 14, 2022, management and management’s advisors presented to the Zymeworks Board their final analysis and recommendations regarding the potential reincorporation, including updated key transaction steps, estimated timelines to complete the potential reincorporation and related considerations.

In addition to a review of management’s recommendations, the Zymeworks Board discussed with management and management’s advisors the potential benefits and risks of the redomicile to Delaware, including those set forth in the section of this proxy statement/prospectus titled “Risk Factors — Risks Relating to the Redomicile

 

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Transactions”. The Zymeworks Board also received advice regarding the anticipated tax treatment applicable to Canadian and U.S. shareholders, as discussed in the section of this proxy statement/prospectus titled “Risk Factors — Risks Relating to the Exchangeable Shares”.

The Zymeworks Board reviewed the plan for the Redomicile Transactions and the Transaction Agreement and associated Plan of Arrangement. Following extensive discussion of the key considerations of the Redomicile Transactions, including those noted under “The Redomicile Transactions and the Plan of Arrangement — Reasons for the Redomicile Transactions”, and after consulting with management and receiving information provided to management by its advisors, the Zymeworks Board determined that the Redomicile Transactions are in the best interests of Zymeworks. Then, the Zymeworks Board approved proceeding with the Redomicile Transactions and recommended that Zymeworks Securityholders vote in favor of the Redomicile Resolution.

On July 15, 2022, prior to the opening of trading on the NYSE, Zymeworks issued a news release announcing the Redomicile Transactions.

On August 18, 2022, Zymeworks, Parent, ExchangeCo and Callco entered into a Restated and Amended Transaction Agreement to make certain amendments to clarify in the Transaction Agreement, the Plan of Arrangement and the Voting Trust (as applicable) (i) the Consideration under the Plan of Arrangement where a Mixed Election is selected, (ii) the application of the Exchangeable Share Cap, (iii) certain Post-Arrangement Transactions, and (iv) the establishment of the trust under the Voting Trust.

Recommendation of the Zymeworks Board

At its meeting held on July 14, 2022, after careful consideration of, among other things, the advice of management and after considering information provided to management by Zymeworks’ tax, accounting and legal advisors and such other matters considered relevant, the Zymeworks Board determined that the Redomicile Transactions (including the Plan of Arrangement and the transactions to be completed as soon as practicable following the Arrangement as set forth in the Transaction Agreement) are in the best interests of Zymeworks. Accordingly, the Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

Reasons for the Redomicile Transactions

The Zymeworks Board determined that the Redomicile Transactions (including the Plan of Arrangement and the transactions to be completed as soon as practicable following the Arrangement as set forth in the Transaction Agreement) are in the best interests of Zymeworks and believes that the opportunity to enhance long-term value for shareholders will be greater as a Delaware corporation than as a British Columbia corporation. In recommending that Zymeworks Securityholders vote in favor of the Redomicile Resolution, the Zymeworks Board considered and relied upon a number of factors, including, among other things, the following:

 

   

Expand U.S. Institutional Investor Base — Due to the fact that Zymeworks is a British Columbia corporation, certain U.S. institutional investors and state-level investment vehicles are prohibited from investing in Zymeworks Common Shares or are limited in the size of such investment. Although the converse can also apply with respect to certain Canadian institutional investors (i.e., Canadian institutional investors may face prohibitions or limitations on investing in U.S. corporations or may have adopted internal policies limiting such holdings), the Zymeworks Board believes that becoming a Delaware corporation would provide greater opportunities to expand the institutional investor base, which would provide opportunities for increased value of Zymeworks Common Shares.

 

   

Index Listing — As a Delaware corporation, Parent may be eligible for inclusion in certain leading indices, such as the Russell and S&P indices, which could also increase demand for Parent shares through passive investment by certain index funds.

 

   

Acquisition Proposals — Delaware law provides boards of directors with additional tools for negotiating with potential acquirors, which may assist the board in increasing the value to stockholders in any proposed strategic transactions.

 

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U.S. Stockholder Base — U.S. investors have greater familiarity with Delaware corporate law and the Zymeworks Board believes this familiarity would make Zymeworks Common Shares a more attractive investment for such investors, which could provide opportunities for increased value to current shareholders.

 

   

Comparability to U.S. Public Companies — Parent is a Delaware corporation. While there are differences between the BCBCA and the DGCL and shareholders’ rights may be different under the DGCL than the BCBCA depending on the specific set of circumstances, the Zymeworks Board believes being incorporated in Delaware may provide greater comparability to other U.S. public companies, many of which are incorporated in Delaware, including many of Zymeworks’ peer group companies. See section titled “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

 

   

Commercialization of Zanidatamab — The Zymeworks Board believes that, if zanidatamab is approved, the United States will be a key geography for the commercialization of zanidatamab. Commercialization in the United States may require, among other things, hiring additional U.S. employees and entering into additional agreements with U.S. counterparties. The Zymeworks Board believes that being a Delaware corporation would simplify such efforts by reducing some of the cross-border legal, regulatory and tax complexities related to these efforts. Beyond these anticipated benefits relating to commercialization, the Zymeworks Board expects to be able to reduce certain administrative costs and complexities as a Delaware corporation.

 

   

Expand Opportunities for Future Monetization of Early-Stage Product Candidates — The Zymeworks Board may in the future consider monetization opportunities for the Company’s early-stage product candidates. A significant portion of potential counterparties for such transactions are located in the United States. The Zymeworks Board believes that being a Delaware corporation would make Zymeworks more attractive to potential counterparties because it may reduce the tax, legal and regulatory complexity inherent to cross-border transactions and the potential counterparties are familiar with Delaware corporate law.

 

   

Continuing Operations in Canada — The Redomicile Transactions would not prevent Parent from indirectly continuing a portion of its operations in Canada through its Canadian subsidiaries.

The Zymeworks Board considered a number of other factors pertaining to the Redomicile Transactions as generally supporting its decision to recommend the Redomicile Transactions, including, but not limited to, the following material factors:

 

   

Required Securityholder Approvals and Court Approval — The Redomicile Transactions will be submitted to a vote at the Special Meeting and must be approved by the affirmative vote of at least two-thirds of the votes cast at the Special Meeting on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately. In addition, the Redomicile Transactions are subject to review by the Court, which will consider, among other things, the fairness and reasonableness of the Redomicile Transactions, both from a substantive and a procedural point of view.

 

   

Tax Deferred Rollover — Zymeworks Shareholders who are Eligible Holders will have the opportunity to elect to receive consideration that includes Exchangeable Shares (subject to the Exchangeable Share Cap) with respect to their Zymeworks Common Shares and may generally make a valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement.

 

   

Market Familiarity with Redomicile Transactions — The Zymeworks Board believes the proposed structure of the Redomicile Transactions is similar to that adopted by other former Canadian companies and is familiar to investors.

 

   

U.S. GAAP Reporting — Immediately prior to the Redomicile Transactions, shares of Delaware Common Stock of Parent will be listed for trading on the NYSE. Parent will also continue to report consolidated financial results in U.S. dollars and in accordance with U.S. GAAP and will file reports with the SEC and relevant Canadian securities regulatory authorities.

 

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Dissent Rights - Registered Shareholders will have the ability to exercise Dissent Rights in respect of the Redomicile Transactions and to be paid the fair value of their Zymeworks Common Shares.

 

   

Estimated Corporate Tax Liability — The Zymeworks Board weighed the estimated corporate tax liability arising from the Redomicile Transactions and, with the assistance of professional advisors and based on and subject to current assumptions, does not anticipate Zymeworks will incur material corporate-level Canadian or U.S. federal income tax resulting from the Redomicile Transactions. Parent’s effective tax rate may be affected by the Redomicile Transactions or by changes in tax laws. See section titled “Risk FactorsParent’s effective tax rate may change in the future, including as a result of the Redomicile Transactions.”

In the course of their deliberations, the Zymeworks Board, in consultation with management and after considering information provided to management by Zymeworks’ legal, accounting and tax advisors, also considered a variety of risks (as described in greater detail under the heading “Risk Factors”) and other potentially negative factors relating to the Redomicile Transactions, including the following:

 

   

Conditions to the Redomicile Transactions — The Redomicile Transactions are conditional. The Redomicile Transactions are subject to, among other things, receipt of the Required Securityholder Approval and approval by the Court. Such conditions may not be satisfied.

 

   

Failure to Realize Benefits to the Redomicile Transactions — Zymeworks may fail to realize the perceived benefits of the Redomicile Transactions. For additional discussion of this risk, see the discussion under “Risk Factors”, including “— Zymeworks may fail to realize certain benefits of the Redomicile Transactions, including as a result of the shares of Delaware Common Stock not being included in a U.S. stock market index” and “The Redomicile Transactions may result in sales of shares of Delaware Common Stock by certain retail and institutional shareholders or investment funds that are not permitted to hold shares of Delaware Common Stock under their internal guidelines..

 

   

Uncertainty — Zymeworks’ business may be impacted by the uncertainty associated with the Redomicile Transactions.

 

   

Costs — Zymeworks will allocate time and resources to effecting the Redomicile Transactions and incur non-recurring costs related to the Redomicile Transactions.

 

   

Redomicile Transactions May Be Deferred or Abandoned — Zymeworks may choose to defer or abandon the Redomicile Transactions.

 

   

Negative Publicity — Negative publicity resulting from the Redomicile Transactions could adversely affect Zymeworks’ business and the market price of the Zymeworks Common Shares and the shares of Delaware Common Stock.

 

   

Impact on Agreements — Completion of the Redomicile Transactions may trigger certain provisions in agreements to which Zymeworks is a party.

 

   

Exercise of Dissent Rights — Payments in connection with the exercise of Dissent Rights by Zymeworks Shareholders may impact Parent’s financial resources.

 

   

Limitation on Enforcement Against Parent in Canada — Enforcement of rights against Parent in Canada may be limited.

 

   

Tax Impact on Non-Eligible Holder and Eligible Holders if the Exchangeable Share Cap is Reached — The disposition of Zymeworks Common Shares in exchange for shares of Delaware Common Stock in connection with the Redomicile Transactions would be taxable to Zymeworks Shareholders who are residents of Canada other than Eligible Holders that elect to receive Exchangeable Shares (subject to the Exchangeable Share Cap) and make a valid tax election with ExchangeCo to defer all or part of the Canadian income tax on any capital gain that would otherwise arise on the disposition of their Zymeworks Common Shares under the Plan of Arrangement. If the Exchangeable Share Cap is reached, then the Exchangeable Shares will be allocated proportionally

 

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among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

The foregoing description of the information and factors considered by the Zymeworks Board includes the principal positive and negative factors considered by them, but is not intended to be exhaustive and may not include all of the factors considered, and, in view of the number and complexity of factors considered by the Zymeworks Board, the Zymeworks Board did not find it practicable to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors considered by them in making their recommendations (and individual members of the Zymeworks Board may have given different weights to different factors). The Zymeworks Board reached their recommendation based on the totality of the information presented to, and considered by, them through their deliberations.

The foregoing discussion of the information and factors considered by the Zymeworks Board is forward-looking in nature. This information should be read in light of the factors set forth in the sections entitled “Information Contained in Proxy Statement/Prospectus”, “Cautionary Statement Regarding Forward-Looking Statements”, “The Redomicile Transactions and the Plan of Arrangement — Background to the Redomicile Transactions” and “Risk Factors”.

Particulars of the Redomicile Transactions

The following summary of certain transaction steps of the Redomicile Transactions is qualified in its entirety by reference to the full text of Transaction Agreement, which is set forth in Appendix B to this Proxy Statement/Prospectus, and the Plan of Arrangement, a copy of which is attached as Exhibit A to the Transaction Agreement.

The Redomicile Transactions are being implemented in accordance with the terms of and subject to the conditions contained in the Transaction Agreement (including, with respect to the Arrangement and the Plan of Arrangement). Pursuant to the terms of the Plan of Arrangement, the Arrangement will be completed at the Effective Time. The Redomicile Transactions are subject to the satisfaction or waiver of the conditions thereto as set out in the Transaction Agreement. See section titled “Summary of the Transaction Agreement”.

The purpose of the Redomicile Transactions is to facilitate a series of transactions which will occur in a specific sequence and as a consequence of which, among other things: (a) Zymeworks Shareholders will receive, at their election and subject to applicable eligibility criteria, for their Zymeworks Common Shares, either (i) shares of Delaware Common Stock on a one-for-one basis, or (ii) Exchangeable Shares on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them), subject to the Exchangeable Share Cap; (b) Parent, Callco and ExchangeCo will enter into the Support Agreement; and (c) Parent, ExchangeCo, Callco and Share Trustee will enter into the Trust Agreement for the benefit of the Exchangeable Shareholders. If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election.

Shares of Delaware Common Stock will be listed on the NYSE under the symbol “ZYME”. See section titled “The Redomicile Transactions and the Plan of Arrangement — Certain Legal and Regulatory Matters — Stock Exchange Listings”.

 

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Plan of Arrangement Steps

Pursuant to the Plan of Arrangement, commencing at the time determined by Zymeworks on the Effective Date (expected to be prior to open of trading on the NYSE), each of the following events or transactions shall occur and be deemed to occur in the following sequence and five minutes following the event(s) in the immediately preceding section, without any further act or formality, unless specifically noted:

 

  (a)

subject to Section 5.1 of the Plan of Arrangement, each of the Zymeworks Common Shares held by Dissenting Shareholders shall be, and shall be deemed to be, transferred to Zymeworks (free and clear of any Liens) and cancelled in consideration for a debt claim against Zymeworks for the amount determined in accordance with Section 3.1(a) of the Plan of Arrangement, and:

 

  a.

such Dissenting Shareholders shall cease to be the holders of such Zymeworks Common Shares and to have any rights as holders of such Zymeworks Common Shares (including for the purposes of any matter concerning the Zymeworks Common Shares or the Zymeworks Shareholders in the remainder of Section 3.1 of the Plan of Arrangement), other than the right to be paid fair value for such Zymeworks Common Shares as set out in Section 3.1(a) of the Plan of Arrangement; and

 

  b.

such Dissenting Shareholders’ names shall be removed as the holders of such Zymeworks Common Shares from the registers of Zymeworks Common Shares maintained by or on behalf of Zymeworks;

 

  (b)

Non-Eligible Holders and Eligible Holders who have not made an election for the purposes of (c) below (and in each case excluding Dissenting Shareholders) will receive shares of Delaware Common Stock on a one-for-one basis;

 

  (c)

Eligible Holders will receive, at their election, Exchangeable Shares on a one-for-one basis, or a mix of Exchangeable Shares and Delaware Common Stock (in such aggregate number that is equal to the number of Zymeworks Common Shares exchanged for them), subject to the Exchangeable Share Cap. If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election;

 

  (d)

the Zymeworks Shareholders who have surrendered their Zymeworks Common Shares in the exchange described in (b) and (c) shall cease to be, and shall be deemed to cease to be, holders of such Zymeworks Common Shares and to have any rights as holders of such Zymeworks Common Shares other than the right to receive the consideration to which they are entitled pursuant to the Plan of Arrangement, and such Zymeworks Shareholders’ names shall be removed as the holders from the register of Zymeworks Common Shares maintained by or on behalf of Zymeworks;

 

  (e)

Parent, Callco and ExchangeCo will enter into the Support Agreement;

 

  (f)

Parent, ExchangeCo, Callco and Share Trustee will enter into the Trust Agreement for the benefit of the Exchangeable Shareholders, and one share of Special Voting Stock will be issued to the Share Trustee;

 

  (g)

the term “Change of Control” as defined in the “Inducement Stock Option and Equity Compensation Plan” and the “Amended and Restated Stock Option and Equity Compensation Plan” forming part of the Zymeworks Incentive Plans will be deemed to be amended to include any transaction, plan, scheme, reorganization or arrangement whereby Parent acquires, directly or indirectly, greater than 50% of the Zymeworks Common Shares, such that Parent will be a successor to Zymeworks under such plans;

 

  (h)

Zymeworks will assign to Parent, and Parent will assume, all of Zymeworks’ rights and obligations under the Zymeworks Incentive Plans, and such plans will become Parent Incentive Plans, and each Zymeworks Incentive Award outstanding immediately prior to the Effective Time will be assumed by

 

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  Parent and be exchanged for a Parent Incentive Award identical to such Zymeworks Incentive Award in all material respects (except such award will cover shares of Delaware Common Stock instead of Zymeworks Common Shares); and

 

  (i)

Zymeworks will assign to Parent, and Parent shall assume, all of Zymeworks’ rights and obligations under the Zymeworks Warrants, and in accordance with the provisions regarding “Fundamental Transactions” (as that term is defined in the Zymeworks Warrants), and the Zymeworks Warrantholders will be entitled to receive Delaware Common Stock (instead of Zymeworks Common Shares) upon exercise of the Zymeworks Warrants in accordance with the terms of the Zymeworks Warrants.

Zymeworks and Parent may amend, modify and/or supplement the Plan of Arrangement at any time and from time to time prior to the Effective Date, provided that any such amendment, modification or supplement must be contained in a written document which is: (a) filed with the Court and, if made following the Special Meeting and adversely affecting the economic interest of any Zymeworks Securityholder, approved by the Court; and (b) if required by the Court, communicated to the Zymeworks Securityholders in the manner required by the Court.

Post-Arrangement Transactions

After the Effective Time and Zymeworks’ election to be treated as a private corporation for Canadian tax purposes, and as part of the Redomicile Transactions, the following additional steps will take place:

 

  (a)

the share capital of Zymeworks will be reorganized to create a second class of common shares having substantially similar rights and restrictions as the existing common shares (the “New Common Shares”);

 

  (b)

ExchangeCo will exchange all of its existing Zymeworks Common Shares for an equal number of New Common Shares of Zymeworks;

 

  (c)

Zymeworks will effect a distribution of all of the shares of Zymeworks Biopharmaceuticals Inc. (“ZBI”) and Zymeworks Pharmaceuticals Limited (the “Irish Sub”) to Parent, in kind, as a reduction of capital on the Zymeworks Common Shares held by Parent, and ZBI and the Irish Sub will each become a wholly-owned subsidiary of Parent. The shares of the Irish Sub are expected to have nominal value; and

 

  (d)

Zymeworks shall surrender to Parent, free and clear of all Liens and for cancellation by Parent without a return of capital, the Delaware Common Stock issued by Parent to Zymeworks on the incorporation of Parent.

Effect of the Redomicile Transactions on the Original Rights

On June 9, 2022, the Zymeworks Board authorized and declared a dividend distribution of one Original Right for each outstanding Zymeworks Common Share to Zymeworks Shareholders of record as of the close of business on June 21, 2022. Each Original Right entitles the registered holder to purchase from Zymeworks one one-thousandth of a Series A Preferred Share of Zymeworks at an exercise price of $74.00, subject to adjustment. The complete terms of the Original Rights are set forth in the Zymeworks Rights Agreement, dated as of June 9, 2022, between the Company and Computershare Trust Company, N.A., as rights agent.

The Zymeworks Board adopted the Zymeworks Rights Agreement to protect Zymeworks Shareholders from coercive or otherwise unfair takeover tactics. In general terms, the Zymeworks Rights Agreement imposes a significant penalty on any person or group that acquires 10% or more (or 20% or more in the case of certain institutional investors who report their holdings on Schedule 13G) of the Zymeworks Common Shares without the approval of the Zymeworks Board. The overall effect of the Zymeworks Rights Agreement and the issuance of the Original Rights may be to render more difficult or discourage a merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination involving Zymeworks that is not approved by the Zymeworks Board. However, neither the Zymeworks Rights Agreement nor the Original Rights should interfere with any merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination approved by the Zymeworks Board.

 

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In connection with the Redomicile Transactions, the Zymeworks Rights Agreement with respect to the Original Rights will be terminated and Parent will adopt the Delaware Rights Agreement with respect to the Delaware Common Stock, which will be substantively similar in all material respects to the Zymeworks Rights Agreement. Under the Delaware Rights Agreement, in connection with the consummation of the Redomicile Transactions, the Parent board of directors will authorize and declare a dividend distribution of one Delaware Right for each outstanding share of Delaware Common Stock that is issued in connection with the Redomicile Transactions. Each Delaware Right will entitle the registered holder to purchase from Parent one one-thousandth of a share of Series B Participating Preferred Stock of Parent at an exercise price of $74.00, subject to adjustment.

For more information with respect to the Zymeworks Rights Agreement, including a summary of its terms, please refer to Zymeworks’ Current Report on Form 8- K filed with the SEC on June 10, 2022. The Zymeworks Rights Agreement is also incorporated as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part. For more information on the Delaware Rights Agreement, please see a substantially final form thereof attached as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part.

Effect of the Redomicile Transactions on the Zymeworks Incentive Awards

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans, which will become Parent Incentive Plans, and each outstanding Zymeworks Incentive Award will be assumed and be deemed to be exchanged for a Parent Incentive Award. The assumed and exchanged Zymeworks Incentive Awards will remain subject to the terms and conditions of the Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of Delaware Common Stock rather than Zymeworks Common Shares.

Effect of the Redomicile Transactions on the Zymeworks Warrants

Parent will assume the Zymeworks Warrants in accordance with their terms, except that the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares.

Tax Effect of the Redomicile Transactions on Parent

Canadian Federal Income Tax Considerations

For Canadian federal income tax purposes, Zymeworks does not expect the Redomicile Transactions to give rise to corporate-level Canadian federal income tax for Zymeworks or Parent.

U.S. Federal Income Tax Considerations

For U.S. federal income tax purposes, Zymeworks does not expect the Redomicile Transactions to give rise to corporate-level U.S. federal income tax for Zymeworks or Parent.

Directors and Officers of Parent following the Redomicile Transactions

The same persons currently serving as directors and officers of Zymeworks will serve as directors and officers of Parent following the Redomicile Transactions. See section titled “Information Concerning Parent, ExchangeCo and Callco – Directors and Officers of Parent”.

Letter of Transmittal and Election Form

A Letter of Transmittal and Election Form will be mailed to each person who was a registered holder of Zymeworks Common Shares on the Record Date. Each Registered Shareholder must forward a duly completed and executed Letter of Transmittal and Election Form, with accompanying Zymeworks Common Share certificate(s) and/or such other documents and instruments as the Depositary may reasonably require, in order to receive the shares of Delaware Common Stock or Exchangeable Shares, as applicable, to which such Zymeworks Shareholder is entitled under the Redomicile Transactions. It is recommended that Zymeworks Shareholders complete, sign and return the Letter of

 

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Transmittal and Election Form and accompanying documents to the Depositary as soon as possible. All deposits of Zymeworks Common Shares made under a Letter of Transmittal and Election Form are irrevocable.

Each Registered Shareholder who is an Eligible Holder will have the right to elect to receive Exchangeable Shares or a mix of Exchangeable Shares and Delaware Common Stock (subject to the Exchangeable Share Cap), by delivering a duly completed Letter of Transmittal and Election Form to the Depositary prior to the Election Deadline, being 5:00 p.m. (Vancouver time) on the date before the Special Meeting. Eligible Holders who do not make an election before the Election Deadline, or for whom their election is not properly made with respect to their Zymeworks Common Shares, will receive Delaware Common Stock.

Beneficial Shareholders whose Zymeworks Common Shares are registered in the name of an Intermediary should contact that Intermediary for instructions on making an election with respect to the Consideration that they wish to receive. See “—Procedure for the Exchange of Shares”.

Zymeworks Shareholders who are not Eligible Holders will not have the right to make an election and will receive Delaware Common Stock.

The Letter of Transmittal and Election Form is available as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part, and on Zymeworks’ website at www.zymeworks.com, on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.

Any use of the mail to transmit a certificate for Zymeworks Common Shares or surrender book-entry Zymeworks Common Shares and a related Letter of Transmittal and Election Form is at the risk of the Zymeworks Shareholder and delivery will be deemed to be effective only when such documents are actually received by the Depositary. If these documents are mailed, it is recommended that registered mail, properly insured, be used.

Whether or not Zymeworks Shareholders forward the certificate(s) representing their Zymeworks Common Shares or surrender their book-entry Zymeworks Common Shares, from and after completion of the Redomicile Transactions, and at the times contemplated in the Plan of Arrangement and the Transaction Agreement, each certificate, agreement, note, document, electronic record, book entry or other instrument (as applicable) that immediately prior to the completion of the Redomicile Transactions represented Zymeworks Securities shall be deemed to represent only the right to receive the consideration in respect of such Zymeworks Securities required under the Plan of Arrangement and the Transaction Agreement, as applicable, less any withholding amounts pursuant to the Plan of Arrangement.

The instructions for exchanging certificates representing Zymeworks Common Shares and depositing such share certificates with the Depositary and surrendering book-entry Zymeworks Common Shares are set out in the Letter of Transmittal and Election Form. The Letter of Transmittal and Election Form provides instructions with regard to lost certificates.

IF YOU ARE A REGISTERED ZYMEWORKS SHAREHOLDER, YOU MUST SURRENDER YOUR ZYMEWORKS COMMON SHARES THROUGH A LETTER OF TRANSMITTAL AND ELECTION FORM BY THE DAY THAT IS THREE YEARS LESS ONE DAY FROM THE EFFECTIVE DATE IN ORDER TO RECEIVE THE SHARES OF DELAWARE COMMON STOCK OR EXCHANGEABLE SHARES TO WHICH YOU ARE ENTITLED UNDER THE PLAN OF ARRANGEMENT. ON SUCH DATE, ANY AND ALL CONSIDERATION TO WHICH SUCH FORMER HOLDER WAS ENTITLED WILL BE DEEMED TO HAVE BEEN CANCELLED AND NONE OF ZYMEWORKS, PARENT, EXCHANGECO OR ANY OTHER PERSON WILL HAVE ANY OBLIGATION TO ISSUE SUCH SHARES OF DELAWARE COMMON STOCK OR EXCHANGEABLE SHARES.

Procedure for the Exchange of Shares

In connection with the Redomicile Transactions, such number of shares of Delaware Common Stock and Exchangeable Shares as is required pursuant to the Redomicile Transactions will be deposited with the Depositary for the benefit of the Zymeworks Shareholders.

 

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Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented outstanding Zymeworks Common Shares or book-entry Zymeworks Common Shares that were exchanged and transferred pursuant to the Plan of Arrangement and otherwise affected after giving effect to the Redomicile Transactions, together with the duly completed and executed Letter of Transmittal and Election Form and such additional documents and instruments as the Depositary may reasonably require, the Zymeworks Shareholder surrendering such certificate or book-entry Zymeworks Common Shares will be entitled to receive in exchange therefor, and the Depositary will deliver to such Zymeworks Shareholder, the consideration which such Zymeworks Shareholder has the right to receive under the Redomicile Transactions for such Zymeworks Common Shares (including certificates representing the number of shares of Delaware Common Stock or Exchangeable Shares issued to such holder in accordance with the Redomicile Transactions), less any amounts withheld pursuant to the Plan of Arrangement, and any Zymeworks Common Share certificate or book-entry Zymeworks Common Shares so surrendered will forthwith be cancelled.

Any exchange or transfer of Zymeworks Common Shares pursuant to the Redomicile Transactions will be free and clear of any Liens.

Return of Zymeworks Common Shares

If the Redomicile Transactions are not completed, any deposited Zymeworks Common Shares will be returned to the depositing Zymeworks Shareholder at Zymeworks’ expense upon written notice to the Depositary from Zymeworks, by returning the deposited Zymeworks Common Shares (and any other relevant documents) by first class insured mail in the name of and to the address specified by the Zymeworks Shareholder in the Letter of Transmittal and Election Form or, if such name and address is not so specified, in such name and to such address as shown on the register maintained by Zymeworks’ transfer agent.

Lost Certificates

If a registered Zymeworks Shareholder holds Zymeworks Common Shares in certificated form, the Letter of Transmittal and Election Form submitted by such registered Zymeworks Shareholder to the Depositary must be accompanied by the original certificate(s) evidencing their Zymeworks Common Shares and any required accompanying evidences of authority. If a registered Zymeworks Shareholder’s certificate(s) representing Zymeworks Common Shares have been lost, stolen or destroyed, the registered Zymeworks Shareholder should contact the Depositary at (800) 564-6253 or by calling (514) 982-7555 between the hours of 8:30 a.m. and 8:00 p.m. Eastern Time prior to submitting the Letter of Transmittal and Election Form to make arrangements concerning such certificate(s) (which may include the posting of a bond or other satisfactory indemnification and an affidavit of loss). A registered Zymeworks Shareholder that holds Zymeworks Common Shares in electronic book-entry form does not need to include any share certificates when submitting their Letter of Transmittal and Election Form.

Cancellation of Rights

Until surrendered, each certificate that immediately prior to the Effective Time represented Zymeworks Common Shares or book-entry Zymeworks Common Shares will be deemed after the Effective Time to represent only the right to receive upon such surrender the consideration to which the holder is entitled to receive. Any such certificate, agreement, note, document, electronic record, book entry or other instrument (as applicable) formerly representing Zymeworks Common Shares not duly surrendered on or before the day that is three years less one day from the Effective Date will cease to represent a claim by or interest of any kind or nature against Zymeworks, ExchangeCo or Parent, including without limitation shares of Delaware Common Stock or Exchangeable Shares. On such date, any and all consideration to which such former holder was entitled will be deemed to have been cancelled and none of Zymeworks, Parent, ExchangeCo or any other Person will have any obligation to issue such shares of Delaware Common Stock or Exchangeable Shares.

 

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Withholding Rights

Zymeworks, Parent, Callco, ExchangeCo and the Depositary shall be entitled to deduct and withhold from any consideration payable to any Zymeworks Securityholder under the Redomicile Transactions, such amounts as Zymeworks, Parent, Callco, ExchangeCo or the Depositary determines, acting reasonably, are required or reasonably believed to be required to be deducted and withheld from such consideration under any provision of any Laws in respect of taxes. Any such amounts shall be treated for all purposes as having been paid to the Person in respect of which such deduction and withholding was made and such deducted and withheld amounts shall be remitted to the appropriate Governmental Entity.

Zymeworks does not expect any withholding to be required for Canadian federal income tax purposes or U.S. federal income tax purposes as a result of the Redomicile Transactions. Refer to “Material Canadian Federal Income Tax Considerations and “Material U.S. Federal Income Tax Considerations”.

Fractional Shares

No certificates representing fractional Zymeworks Common Shares, shares of Delaware Common Stock or Exchangeable Shares shall be issued.

Depositary

Zymeworks has retained the services of the Depositary for the receipt of the Letter of Transmittal and Election Form and the certificates representing Zymeworks Common Shares, the surrender of book-entry Zymeworks Common Shares and for the delivery of the shares of Delaware Common Stock and Exchangeable Shares in exchange for the Zymeworks Common Shares under the Redomicile Transactions. The Depositary will receive reasonable and customary compensation for its services in connection with the Redomicile Transactions, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities, including liabilities under securities laws and expenses in connection therewith.

Expenses of the Redomicile Transactions

Zymeworks estimates that expenses in the aggregate amount of approximately $4.1 million will be incurred by Zymeworks in connection with the Redomicile Transactions, including legal, tax and accounting advisors, Depositary, transfer agents, proxy solicitor, filing and printing costs and the cost of preparing and mailing this Proxy Statement/Prospectus.

Required Securityholder Approvals

To be effective, the Redomicile Resolution must be approved, with or without variation, by the affirmative vote of at least two-thirds of the votes cast on the Redomicile Resolution, in person or by proxy, by both (a) Zymeworks Shareholders, Zymeworks Warrantholders and Zymeworks Incentive Awardholders, voting together as a single class, and (b) Zymeworks Shareholders, voting separately.

The Zymeworks Board recommends that Zymeworks Securityholders vote FOR the Redomicile Resolution.

Certain Legal and Regulatory Matters

Court Approval

An Arrangement under the BCBCA requires Court approval. Prior to the mailing of this Proxy Statement/Prospectus, Zymeworks obtained the Interim Order providing for the calling and holding of the Special Meeting, the Dissent Rights and other procedural matters, including, but not limited to: (a) the Required Securityholder Approval; (b) the Dissent Rights for Registered Shareholders; (c) the notice requirements with respect to the Court hearing of the application for the Final Order; (d) the ability of Zymeworks to adjourn or postpone the Special Meeting from time to time in accordance with the terms of the Transaction Agreement without the need

 

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for additional approval of the Court; and (e) the Record Date for the Zymeworks Securityholders entitled to notice of and to vote at the Special Meeting. A copy of the Interim Order is attached hereto as Appendix D. A copy of Zymeworks’ Notice of Hearing of Petition is attached hereto as Appendix E.

Subject to the terms of the Transaction Agreement, and if the Redomicile Resolution is approved by the Zymeworks Securityholders at the Special Meeting in the manner required by the Interim Order, Zymeworks intends to make an application to the Court for the Final Order. The Interim Order provides for a Final Order approving the Redomicile Transactions to be heard via Microsoft Teams at the courthouse at 800 Smithe Street, Vancouver, British Columbia at 9:45 a.m. on October 12, 2022, or as soon thereafter as counsel may be heard, or at any other date and time and by any other method as the Court may direct. Any Zymeworks Securityholder or other interested party who wishes to participate, appear, or to be represented, and to present evidence or arguments at the hearing must file and serve a Response to Petition in the form prescribed by the Supreme Court Civil Rules (British Columbia) together with any evidence or materials that such party intends to present to the Court, on or before 4:00 p.m. (Vancouver time) on October 7, 2022, all as set out in the Interim Order and Notice of Hearing of Petition. Service of such notice shall be effected by service upon the solicitors of Zymeworks: Blake, Cassels & Graydon LLP, Suite 2600 – 595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Attention: Sean Boyle and Alexandra Luchenko. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further direction of the Court, only those persons having previously served a Response to Petition in compliance with the Interim Order will be given notice of the adjournment or postponement, or the new date. Participation in the Court hearing of the application for the Final Order, including who may participate and present evidence or argument and the procedure for doing so, is subject to the terms of the Interim Order and any subsequent direction of the Court.

The Court has broad discretion under the BCBCA when making orders with respect to plans of arrangement and that the Court will consider at the hearing to obtain the Final Order, among other things, the fairness and reasonableness of the Redomicile Transactions, both from a substantive and a procedural point of view. The Court may approve the Redomicile Transactions either as proposed or as amended in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court thinks fit. Depending upon the nature of any amendments to the plan of arrangement required by the Court, Zymeworks may determine not to proceed with the Redomicile Transactions.

For further information regarding the Court hearing and your rights in connection with the Court hearing, see the form of the Notice of Hearing of Petition attached as Appendix E to this Proxy Statement/Prospectus. The Notice of Hearing of Petition constitutes notice of the Court hearing of the application for the Final Order and is your only notice of the Court hearing.

Stock Exchange Listings

Currently, the Zymeworks Common Shares trade on the NYSE under the symbol “ZYME”. Immediately prior to the Redomicile Transactions, the shares of Delaware Common Stock will be listed for trading on the NYSE under the symbol “ZYME”. When the Redomicile Transactions are completed, the Zymeworks Common Shares currently listed on the NYSE will cease to be traded on the NYSE and will be deregistered under the U.S. Exchange Act.

Material Canadian Securities Law Matters

The shares of Delaware Common Stock and Exchangeable Shares to be issued pursuant to the Redomicile Transactions will be issued pursuant to an exemption from the prospectus and registration requirements of applicable Canadian Securities Laws under Section 2.11 of NI 45-106 and will generally not be subject to any resale restrictions under applicable Canadian Securities Laws, provided that the following conditions are satisfied: (a) the issuer of such shares, pursuant to Section 2.9 of NI 45-102, is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade (upon completion of the Redomicile Transactions, Parent will be deemed to have been a reporting issuer from the time that Zymeworks became a reporting issuer, satisfying this requirement); (b) the trade is not a control distribution; (c) no unusual effort is made to prepare the market or to create a demand for the security that is the subject of the trade; (d) no

 

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extraordinary commission or consideration is paid to a person or company in respect of the trade; (e) if the selling securityholder is an insider or officer of the issuer, the selling securityholder has no reasonable grounds to believe that the issuer is in default of securities legislation (each as set out in Section 2.6(3) of NI 45-102); and (f) such holder is not a person or company engaged in or holding itself out as engaging in the business of trading securities or such trade is made in accordance with applicable dealer registration requirements or in reliance upon an exemption from such requirements. Zymeworks Shareholders should consult with their own financial and legal advisors with respect to any restrictions on the resale of shares of Delaware Common Stock and Exchangeable Shares received on completion of the Redomicile Transactions.

Ongoing Reporting Obligations

Following completion of the Redomicile Transactions, Parent will be subject to the reporting requirements of the SEC as the successor issuer to Zymeworks. Parent will also become a reporting issuer in each of the provinces and territories of Canada where Zymeworks is currently a reporting issuer and will become subject to the applicable Canadian continuous disclosure requirements in the same manner as Zymeworks is currently.

Consistent with how Zymeworks currently reports, Parent will report consolidated financial results in U.S. dollars and in accordance with U.S. GAAP and will file reports on Form 10-K, 10-Q and 8-K with the SEC and comply with the proxy rules under the U.S. Exchange Act. In accordance with applicable Canadian securities laws, and consistent with Zymeworks’ current practice, Parent will generally file with the relevant Canadian securities regulatory authorities copies of its documents filed with the SEC under the U.S. Exchange Act in order to meet its Canadian continuous disclosure obligations.

Dissent Rights

The following is a summary of the provisions of Division 2 of Part 8 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, relating to a Registered Shareholder’s Dissent Rights in respect of the Redomicile Resolution. It is not a comprehensive statement of such rights and procedures and is qualified in its entirety by the reference to the full text of Division 2 of Part 8 of the BCBCA (which is attached as Appendix C to this Proxy Statement/Prospectus), as may be modified by the Transaction Agreement and the Interim Order (which are attached as Appendix B and Appendix D to this Proxy Statement/Prospectus, respectively) and any further order of the Court.

The statutory provisions dealing with the right of dissent are technical and complex. Any Zymeworks Shareholder who intends to exercise Dissent Rights should carefully consider and comply with the provisions of Division 2 of Part 8 of the BCBCA, as modified by the Interim Order, the Plan of Arrangement, and any other order of the Court, and seek legal advice. Failure to comply strictly with the provisions of Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement, and any other order of the Court, and to adhere to the procedures established therein, may result in the loss of all rights thereunder.

Pursuant to the Interim Order, Registered Shareholders as of the Record Date have been granted Dissent Rights with respect to the Redomicile Resolution. Each Dissenting Shareholder is entitled to be paid the fair value (determined as of the close of business on the last Business Day before the Redomicile Resolution was adopted at the Special Meeting) of all, but not less than all, of the holder’s Zymeworks Common Shares in accordance with the provisions of Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement, and any other order of the Court, provided that the holder duly dissents with respect to the Redomicile Resolution and the Redomicile Transactions become effective.

Pursuant to Section 238 of the BCBCA, every Registered Shareholder who duly and validly dissents from the Redomicile Resolution in strict compliance with Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement, and any further order of the Court will be entitled to be paid the fair value of the Zymeworks Common Shares held by such Dissenting Shareholder determined as at the point in time immediately before the passing of the Redomicile Resolution.

 

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Persons who are beneficial owners of Zymeworks Common Shares registered in the name of a broker, bank, trust company or other Intermediary or nominee who wish to dissent should be aware that only Registered Shareholders are entitled to exercise Dissent Rights. Accordingly, a Beneficial Shareholder desiring to exercise this right must make arrangements for the Zymeworks Common Shares beneficially owned by such Zymeworks Shareholder to be registered in the Zymeworks Shareholder’s name prior to the time the Dissent Notice is required to be received by Zymeworks, or, alternatively, make arrangements for the registered holder of such Zymeworks Common Shares to dissent on the Zymeworks Shareholder’s behalf. A Zymeworks Shareholder that votes in favor of the Redomicile Resolution will not be entitled to Dissent Rights but a Zymeworks Shareholder’s failure to vote against the Redomicile Resolution will not constitute a waiver of such shareholder’s dissent rights and a vote against the Redomicile Resolution will not be deemed to satisfy notice requirements under the BCBCA with respect to Dissent Rights.

Registered Zymeworks Shareholders who wish to dissent must provide a written objection to the Redomicile Resolution (a “Dissent Notice”) to Zymeworks, c/o Blake, Cassels & Graydon LLP, 595 Burrard Street, Suite 2600, Vancouver BC V7X 1L3, Attention: Sean Boyle and Alexandra Luchenko, which Dissent Notice must be received by October 5, 2022, or such day that is two Business Days immediately preceding the date that any adjournment or postponement of the Special Meeting is reconvened, and must otherwise strictly comply with the dissent procedures prescribed by the BCBCA, as may be modified and supplemented by the Interim Order, the Plan of Arrangement, and any other order of the Court. A copy of the Plan of Arrangement is attached as Exhibit A to the Transaction Agreement, which is set forth in Appendix B to the Proxy Statement/Prospectus. Copies of the text of Division 2 of Part 8 of the BCBCA and the Interim Order are set forth in Appendices C and D, respectively, to the Proxy Statement/Prospectus.

To exercise Dissent Rights, a Registered Shareholder must dissent with respect to all Zymeworks Common Shares of which it is the registered and beneficial owner, except as expressly set forth below. Beneficial Shareholders who wish to exercise Dissent Rights must cause the registered Zymeworks Shareholder holding their Zymeworks Common Shares to deliver the Dissent Notice. A Registered Shareholder that votes in favour of the Redomicile Resolution will not be entitled to Dissent Rights but a Zymeworks Shareholder’s failure to vote against the Redomicile Resolution will not constitute a waiver of such shareholder’s Dissent Rights and a vote against the Redomicile Resolution will not be deemed to satisfy notice requirements under the BCBCA with respect to Dissent Rights.

A Registered Shareholder must prepare a separate Dissent Notice for him, her or itself, if dissenting on his, her or its own behalf, and for each other Beneficial Shareholder who beneficially owns Zymeworks Common Shares registered in the Zymeworks Shareholder’s name and on whose behalf the Registered Shareholder is dissenting; and, if dissenting on its own behalf, must dissent with respect to all of the Zymeworks Common Shares registered in his, her or its name or if dissenting on behalf of a beneficial Zymeworks Shareholder, with respect to all of the Zymeworks Common Shares registered in his, her or its name and beneficially owned by the beneficial Zymeworks Shareholder on whose behalf the Zymeworks Shareholder is dissenting. The Dissent Notice must set out the number of Zymeworks Common Shares in respect of which the Dissent Rights are being exercised (the “Notice Shares”) and: (a) if such Zymeworks Common Shares constitute all of the Zymeworks Common Shares of which the Zymeworks Shareholder is the registered and beneficial owner and the Zymeworks Shareholder owns no other Zymeworks Common Shares beneficially, a statement to that effect; (b) if such Zymeworks Common Shares constitute all of the Zymeworks Common Shares of which the Registered Shareholder is both the registered and beneficial owner, but the Registered Shareholder beneficially owns additional Zymeworks Common Shares, a statement to that effect and the names of the Registered Shareholders of those other Zymeworks Common Shares, the number of Zymeworks Common Shares held by each such Registered Shareholder and a statement that written notices of dissent are being or have been sent with respect to such other Zymeworks Common Shares; or (c) if the Dissent Rights are being exercised by a Registered Shareholder who is not the Beneficial Shareholder, a statement to that effect and the name and address of the Beneficial Shareholder and a statement that the Registered Shareholder is dissenting with respect to all Zymeworks Common Shares of the Beneficial Shareholder registered in such registered holder’s name.

 

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The delivery of a Dissent Notice does not deprive a Dissenting Shareholder of the right to vote at the Special Meeting on the Redomicile Resolution; however, a Dissenting Shareholder is not entitled to exercise the Dissent Rights with respect to any of his or her Zymeworks Common Shares if the Dissenting Shareholder votes in favour of the Redomicile Resolution. A vote against the Redomicile Resolution, whether in person or by proxy, does not constitute a Dissent Notice.

If the Redomicile Resolution is approved by the Zymeworks Securityholders and if Zymeworks notifies the Dissenting Shareholder of the Company’s intention to act upon the Redomicile Resolution, the Dissenting Shareholder is then required, within one month after Zymeworks gives such notice, to send to Zymeworks the certificates (if any) representing the Notice Shares and a written statement that requires Zymeworks to purchase all of the Notice Shares (including a written statement prepared in accordance with Section 244(1)(c) of the BCBCA if the dissent is being exercised by a Registered Shareholder on behalf of a Beneficial Shareholder), whereupon, subject to the provisions of the BCBCA relating to the termination of Dissent Rights, the Zymeworks Shareholder becomes a Dissenting Shareholder, and is bound to sell, and Zymeworks is bound to purchase, those Zymeworks Common Shares. Such Dissenting Shareholder may not vote or exercise or assert any rights of a Zymeworks Shareholder in respect of such Notice Shares, other than the rights set forth in Division 2 of Part 8 of the BCBCA, as modified by the Interim Order, the Plan of Arrangement, and any other order of the Court.

The Dissenting Shareholder and Zymeworks may agree on the payout value of the Notice Shares; otherwise, either party may apply to the Court to determine the fair value of the Notice Shares. There is no obligation on Zymeworks to make an application to the Court. If such Dissenting Shareholder does not reach an agreement with Zymeworks, such Dissenting Shareholder, or Zymeworks, may apply to the Court, and the Court may:

 

  (a)

determine the fair value of the Notice Shares;

 

  (b)

join in the application of each Dissenting Shareholder who has not agreed with Zymeworks on the amount of the fair value of the Notice Shares; and

 

  (c)

make consequential orders and give directions as the Court considers appropriate.

After a determination of the payout value of the Notice Shares, the Dissenting Shareholder must then promptly be paid that amount. There can be no assurance that the amount a Dissenting Shareholder may receive as fair value for its Zymeworks Common Shares will be more than or equal to the consideration under the Redomicile Transactions.

Dissenting Shareholders who:

 

  (a)

are ultimately entitled to be paid fair value for their Zymeworks Common Shares shall be deemed not to have participated in the transactions in Article 3 of the Plan of Arrangement (other than Section 3.1(a) of the Plan of Arrangement) or otherwise in the Redomicile Transactions and shall be paid an amount equal to such fair value by Zymeworks (less any amounts withheld pursuant to the Plan of Arrangement) and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement or otherwise in the Redomicile Transactions had such Zymeworks Shareholders not exercised their Dissent Rights in respect of such Zymeworks Common Shares, and they shall be deemed to have transferred their Zymeworks Common Shares for which Dissent Rights have been exercised to Zymeworks for cancellation at the Effective Time; or

 

  (b)

are ultimately not entitled, for any reason, to be paid fair value for their Zymeworks Common Shares, shall be deemed to have participated in the Arrangement, as of the Effective Time, and the remainder of the Redomicile Transactions on the same basis as a non-dissenting holder of Zymeworks Common Shares and shall be entitled to receive only the consideration contemplated in Section 3.1(b) of the Plan of Arrangement (less any amounts withheld pursuant to the Plan of Arrangement) or otherwise in the Redomicile Transactions that such Zymeworks Shareholder would have received pursuant to the Redomicile Transactions if such Zymeworks Shareholder had not exercised Dissent Rights,

 

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provided, however, that in no case shall Zymeworks, Parent or the Depositary or any other Person be required to recognize Zymeworks Shareholders who exercise Dissent Rights as Zymeworks Shareholders after the Effective Time.

A Dissenting Shareholder loses his or her Dissent Right if, before full payment is made for the Notice Shares, Zymeworks abandons the corporate action that has given rise to the Dissent Right (namely, the Redomicile Transactions), a court permanently enjoins the action, or the Dissenting Shareholder withdraws the Dissent Notice with Zymeworks’ written consent. When these events occur, Zymeworks must return the share certificates (if any) to the Dissenting Shareholder and the Dissenting Shareholder regains the ability to vote and exercise shareholder rights.

In no circumstances will Zymeworks, the Depositary or any other person be required to recognize a person as a Dissenting Shareholder unless such person is the holder of the Zymeworks Common Shares in respect of which Dissent Rights are purported to be exercised immediately prior to the Effective Time of the Redomicile Transactions; (i) if such person has voted or instructed a proxyholder to vote the Notice Shares in favour of the Redomicile Resolution; and (ii) unless such person has strictly complied with the procedures for exercising Dissent Rights set out in Division 2 of Part 8 of the BCBCA, as modified by the Interim Order, the Plan of Arrangement, and any other order of the Court, and does not withdraw such person’s Dissent Notice prior to the effective time of the Arrangement.

In no event will Zymeworks, Parent or any other Person be required to recognize a Dissenting Shareholder as the holder of any Zymeworks Common Shares in respect of which Dissent Rights have been validly exercised and not withdrawn at and after the Effective Time, and at the Effective Time the names of such Dissenting Shareholders will be deleted from the central securities register of Zymeworks as at the Effective Time.

Dissent Rights with respect to Notice Shares will terminate and cease to apply to the Dissenting Shareholder if, before full payment is made for the Notice Shares, the Arrangement in respect of which the Dissent Notice was sent is abandoned or by its terms will not proceed, a court permanently enjoins or sets aside the corporate action approved by the Redomicile Resolution, the Dissenting Shareholder votes in favour of the Redomicile Resolution, or the Dissenting Shareholder withdraws the Dissent Notice with Zymeworks’ written consent. If any of these events occur, Zymeworks must return the share certificates representing the Zymeworks Common Shares to the Dissenting Shareholder and the Dissenting Shareholder regains the ability to vote and exercise its rights as a Shareholder.

If a Dissenting Shareholder fails to strictly comply with the requirements of the Dissent Rights set out in the Interim Order, it will lose its Dissent Rights, Zymeworks will return to the Dissenting Shareholder the certificates representing the Notice Shares that were delivered to Zymeworks, if any, and if the Arrangement is completed, that Dissenting Shareholder will be deemed to have participated in the Arrangement on the same terms as a Zymeworks Shareholder.

The discussion above is only a summary of the Dissent Rights, which are technical and complex. A Zymeworks Shareholder who intends to exercise Dissent Rights should carefully consider and comply with the provisions of Division 2 of Part 8 of the BCBCA, as may be modified by the Interim Order, the Plan of Arrangement, and any other order of the Court. Zymeworks suggests that any Zymeworks Shareholder wishing to avail themselves of the Dissent Rights seek their own legal advice as failure to comply strictly with the applicable provisions of the BCBCA, as may be modified by the Plan of Arrangement, Interim Order and the Final Order may result in the loss of all Dissent Rights. Dissenting Shareholders should note that the exercise of Dissent Rights can be a complex, time-consuming and expensive process.

For a general summary of certain income tax implications to a Dissenting Shareholder, see section titled “Material Canadian Federal Income Tax Considerations”.

 

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SUMMARY OF THE TRANSACTION AGREEMENT

The following is a summary description of certain material provisions of the Transaction Agreement, is not comprehensive and is qualified in its entirety by reference to the complete text of the Transaction Agreement, copies of which are available under Zymeworks’ profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

On August 18, 2022, Zymeworks, Parent, ExchangeCo and Callco entered into the Restated and Amended Transaction Agreement, pursuant to which they agreed that, subject to the terms and conditions set forth in the Transaction Agreement, Parent will acquire, directly or indirectly through ExchangeCo (a direct wholly-owned subsidiary of Callco), all outstanding Zymeworks Common Shares pursuant to the Arrangement. Upon completion of the Arrangement, Zymeworks Shareholders will hold one share of Delaware Common Stock or one Exchangeable Share, as applicable, for each Zymeworks Common Share owned immediately prior to the Arrangement (with the aggregate number of Exchangeable Shares that is equal to or less than the Exchangeable Share Cap). If the Exchangeable Share Cap is reached, then the Exchangeable Shares shall be allocated proportionally among the applicable Eligible Holders based on the number of Exchangeable Shares requested and rounded down to the nearest whole share in respect of each Eligible Holder, in which case, the Eligible Holder will also be issued Delaware Common Stock under a Mixed Election. The Share Trustee will hold one share of the Special Voting Stock, which will be held by the Share Trustee under the terms of the Trust Agreement. The Exchangeable Shares will be exchangeable for Delaware Common Stock in accordance with the Exchangeable Share Provisions.

Representations and Warranties

Except for its status as the contractual document that establishes and governs the legal relations among Zymeworks, Parent, ExchangeCo and Callco with respect to the Arrangement, the Transaction Agreement is not a source of factual, business or operational information about Zymeworks, Parent, ExchangeCo or Callco.

The Transaction Agreement contains representations and warranties made by each of Zymeworks, Parent, ExchangeCo and Callco to each other. The representations and warranties relate to, among other things: (a) the due organization, existence and power and authority of each of Zymeworks, Parent, ExchangeCo and Callco to own, lease and operate their respective properties and to carry on their respective business; (b) the corporate power and authority of each of Zymeworks, Parent, ExchangeCo and Callco to enter into the Transaction Agreement and perform their respective obligations thereunder; and (c) the execution and delivery of the Transaction Agreement by each of Zymeworks, Parent, ExchangeCo and Callco, and the performance by each of them of their respective obligations thereunder and the completion of the Arrangement not resulting in a violation, conflict or default under their respective constating documents or any applicable Law, or resulting in the creation of a lien against their respective properties and assets.

Conditions Precedent to the Arrangement

The obligations of Zymeworks, Parent, ExchangeCo and Callco to consummate the Arrangement and the other transactions contemplated under the Transaction Agreement are subject to the satisfaction of the following conditions (which may be waived, to the extent permitted by Law, by Zymeworks):

 

(a)

the Redomicile Resolution having been approved and adopted by Zymeworks Securityholders at the Special Meeting in accordance with the Interim Order;

 

(b)

the Interim Order and the Final Order each having been obtained in form and on terms satisfactory to Zymeworks, and not having been set aside or modified in a manner unacceptable to Zymeworks, on appeal or otherwise;

 

(c)

no writ, order, judgment, injunction, decision, determination, award, ruling, subpoena, verdict or decree entered, issued or rendered by any Governmental Entity, or Law issued by any court of competent jurisdiction or other Governmental Entity, or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Plan of Arrangement, the Support Agreement, the

 

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  Trust Agreement, and each other agreement, document, instrument or certificate that is necessary, desirable or useful (as determined by Zymeworks or Parent) to give effect to the Arrangement (collectively, the “Transactions”) shall be in effect;

 

(d)

all other material consents as may be desirable or useful in connection with the consummation of the Redomicile Transactions, as determined by Zymeworks, will have been obtained;

 

(e)

the registration statement of Parent on Form S-4 relating to the Transactions and containing a prospectus for the Delaware Common Stock, among other things (the “Registration Statement”), shall have become effective in accordance with the provisions of the U.S. Securities Act, no stop order shall have been issued by the SEC and shall remain in effect with respect to the Registration Statement, and no proceeding seeking such a stop order shall have been threatened or initiated by the SEC and remain pending; and

 

(f)

Dissent Rights having not been exercised in respect of more than 10% of the Zymeworks Common Shares, or such other amount of Zymeworks Common Shares that, as determined by Zymeworks in its sole and unfettered discretion, it is no longer in the best interests of Zymeworks to proceed with the Transactions.

Other Covenants

The Transaction Agreement provides that:

 

(a)

Parent and Zymeworks shall prepare and mutually agree upon, and Parent shall file with the SEC the Registration Statement, and use commercially reasonable efforts to (i) cause the Registration Statement to comply in all material respects with the applicable rules and regulations promulgated by the SEC; (ii) have the Registration Statement declared effective under the U.S. Securities Act as soon as reasonably practicable after it is filed with the SEC; and (iii) keep the Registration Statement effective through the Effective Time in order to permit the consummation of the Transactions;

 

(b)

as soon as reasonably practicable after the Registration Statement is declared effective by the SEC, Zymeworks shall apply under Part 9, Division 5 of the BCBCA and shall prepare, file and pursue an application to the Court for the Interim Order in respect of the Arrangement;

 

(c)

the Parties will use reasonable efforts to ensure that all Exchangeable Shares issued under the Arrangement will be issued in reliance on the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereunder;

 

(d)

Zymeworks shall take all steps necessary or desirable to submit the Arrangement to the Court and diligently pursue an application for the Final Order pursuant to Part 9, Division 5 of the BCBCA, as soon as reasonably practicable after the required approval is obtained for the Redomicile Resolution as provided for in the Interim Order;

 

(e)

prior to or concurrently with the Effective Time, Parent and ExchangeCo, as applicable, shall deposit with the Depositary sufficient Delaware Common Stock and Exchangeable Shares to satisfy the aggregate Consideration payable to the Zymeworks Shareholders pursuant to the terms of the Plan of Arrangement; and

 

(f)

Parent shall use reasonable efforts to cause the shares of Delaware Common Stock issuable under the Arrangement (including the Delaware Common Stock issuable pursuant to the exchange or exercise of Exchangeable Shares) to be listed for trading on the NYSE under the symbol “ZYME” immediately prior to the Effective Time and will cause the Zymeworks Common Shares currently listed on the NYSE to cease to be traded on the NYSE and to be deregistered under the U.S. Exchange Act, and for Canadian tax purposes will elect to be treated as a private corporation immediately following the completion of the Arrangement.

Post-Arrangement Matters

As soon as practicable following the Effective Time and Zymeworks’ election to be treated as a private corporation for Canadian tax purposes, Zymeworks, Parent, ExchangeCo and Callco shall use reasonable efforts,

 

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and shall take such corporate steps and actions, as may be necessary or desirable to effect and implement the following transactions in the order set forth below:

 

(a)

the authorized share structure of Zymeworks shall be reorganized to create an unlimited number of New Common Shares without par value, having special rights and restrictions that are substantially similar to the Zymeworks Common Shares, and in such form and substance as may be as determined by Zymeworks;

 

(b)

ExchangeCo shall exchange all of the Zymeworks Common Shares then held by ExchangeCo for New Common Shares of Zymeworks, on a one-for-one basis, pursuant to Section 86 of the Tax Act, and in such form and substance as may be as determined by Zymeworks;

 

(c)

Zymeworks shall reduce the capital on the Zymeworks Common Shares (which will then be held solely by Parent), by an amount equal to the fair market value of the issued and outstanding shares of ZBI (the “ZBI Stock”) and Irish Sub (the “Irish Sub Stock”), and in such manner and substance as Zymeworks may determine, and shall effect the same by way of a transfer of the ZBI Stock and the Irish Sub Stock from Zymeworks to Parent free and clear of all Liens, in such form and substance as Zymeworks may determine; and

 

(d)

Zymeworks shall surrender to Parent, free and clear of all Liens and for cancellation by Parent without a return of capital, the Delaware Common Stock issued by Parent to Zymeworks on the incorporation of Parent.

Termination of the Transaction Agreement

The Transaction Agreement may be terminated prior to the Effective Time upon written notice by Zymeworks to Parent, ExchangeCo and Callco.

Governing Law

The Transaction Agreement is governed by and construed in accordance with the Laws of the Province of British Columbia and other federal Laws of Canada applicable in British Columbia without giving effect to any choice of law or conflict of law provision or rule (whether of the Province of British Columbia or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the Province of British Columbia.

Amendment

The Transaction Agreement may only be amended upon the written agreement of Zymeworks, Parent, ExchangeCo and Callco.

 

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DESCRIPTION OF EXCHANGEABLE SHARES AND RELATED AGREEMENTS

Description of Exchangeable Shares

The Exchangeable Shares will be issued by ExchangeCo and will carry, as nearly as reasonably practicable, equivalent economic entitlements to those of the Delaware Common Stock, for which they are exchangeable. Regardless of the mechanism by which the Exchangeable Shares are exchanged, described in more detail below, and except in connection with any unpaid dividends or distributions in cash or other property, Exchangeable Shareholders will only receive shares of Delaware Common Stock in exchange for their Exchangeable Shares. There are possible disadvantages or risks of holding Exchangeable Shares. See section titled “Risks Factors — Risks Relating to the Exchangeable Shares”.

Zymeworks Shareholders who are Eligible Holders may wish to elect to receive Exchangeable Shares rather than Delaware Common Stock with respect to their Zymeworks Common Shares in order to take advantage of a full or partial tax deferral available under the Tax Act. The Canadian tax consequences of receiving or holding Exchangeable Shares may differ significantly from the Canadian tax consequences of receiving or holding Delaware Common Stock depending upon the particular circumstances of an Eligible Holder. Careful consideration should be given by Eligible Holders to the tax consequences in determining whether or not an election should be made to receive any Exchangeable Shares. See section titled “Material Canadian Federal Income Tax Considerations”.

The following summary description of certain material provisions of the Exchangeable Share Provisions is not comprehensive and is qualified in its entirety by reference to the complete text thereof, as set forth in the Articles of ExchangeCo, and in the form attached as Exhibit E to the Transaction Agreement, which is set forth in Appendix B to the Proxy Statement/Prospectus.

Ranking

The Exchangeable Shares will be entitled to a preference over the common shares of ExchangeCo and any other shares ranking junior to the Exchangeable Shares with respect to (a) the payment of dividends or other distributions to the extent provided in the Exchangeable Share Provisions, and (b) the distribution of assets in the event of the liquidation, dissolution or winding-up of ExchangeCo, whether voluntary or involuntary, or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs to the extent provided in the Exchangeable Share Provisions.

Dividends and Other Distributions

Subject to applicable Law (in this section, as defined in the Exchangeable Share Provisions) and except as otherwise set forth in the Exchangeable Share Provisions, on each date (a “Parent Dividend Declaration Date”) on which the Parent board of directors declares any dividend or other distribution on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement) (a) a holder of an Exchangeable Share will be entitled to receive, and (b) the ExchangeCo board of directors will declare a dividend or other distribution on each Exchangeable Share:

 

(i)

in case of a cash dividend or other distribution (but excluding any distributions pursuant to a Preferred Stock Rights Agreement) declared on the Delaware Common Stock, in an amount in cash, payable in United States dollars, for each Exchangeable Share equal to the cash dividend or other distribution multiplied by the relevant Exchangeable Share Exchange Ratio declared on each share of Delaware Common Stock on the Parent Dividend Declaration Date;

 

(ii)

in the case of a stock or share dividend or other distribution declared on the Delaware Common Stock to be paid in Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement), by the issue or transfer by ExchangeCo of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of shares of Delaware Common Stock to be paid on each share of Delaware Common Stock; provided, however, that ExchangeCo may, in lieu of such stock or share dividend or other distribution, elect to effect a corresponding, contemporaneous and economically equivalent (as determined by the ExchangeCo board of directors) subdivision of the outstanding Exchangeable Shares; or

 

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(iii)

in the case of a dividend or other distribution declared on the Delaware Common Stock in property other than cash or Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement), in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent (as determined by the ExchangeCo board of directors in accordance with the Exchangeable Share Provisions) and adjusted for the relevant Exchangeable Share Exchange Ratio to the type and amount of property declared as a dividend or other distribution on each share of Delaware Common Stock, and

such dividends or other distributions will be paid out of money, assets or property of ExchangeCo properly applicable to the payment of dividends or other distributions, or out of authorized but unissued shares of ExchangeCo, as applicable; provided that the ExchangeCo board of directors may determine to adjust the Exchangeable Share Exchange Ratio as provided in the Exchangeable Share Provisions in lieu of paying any such dividend or other distribution on the Exchangeable Shares; and provided further that the Exchangeable Share Exchange Ratio will be so adjusted only to the extent the ExchangeCo board of directors determines in good faith and in its sole discretion that ExchangeCo would be liable for any unrecoverable tax as a result of paying any such dividend or distribution. The holders of Exchangeable Shares will not be entitled to any dividends or other distributions other than or in excess of the foregoing.

The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend or other distribution declared on the Exchangeable Shares will be the same dates as the record date and payment date, respectively, for the corresponding dividend or other distribution declared on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement).

If on any payment date for any dividends or other distributions declared on the Exchangeable Shares, the dividends or other distributions are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends or other distributions that remain unpaid will be paid on a subsequent date or dates determined by the ExchangeCo board of directors on which ExchangeCo has sufficient monies, assets or property properly applicable to the payment of such dividends or other distributions.

The ExchangeCo board of directors is required to determine, in good faith and in its sole discretion (with the assistance of such financial or other advisors as the ExchangeCo board of directors may determine), “economic equivalence” for the purposes of the Exchangeable Share Provisions and each such determination will be conclusive and binding on ExchangeCo and its shareholders. In making each such determination, a number of factors set out in the Exchangeable Share Provisions will, without excluding other factors determined by the ExchangeCo board of directors to be relevant, be considered by the ExchangeCo board of directors.

Certain Restrictions

So long as any of the Exchangeable Shares are outstanding, ExchangeCo will not at any time without, but may at any time with, the approval of the holders of the Exchangeable Shares given as specified in the Exchangeable Share Provisions:

 

(a)

pay any dividends or other distributions on any shares ranking junior to the Exchangeable Shares with respect to the payment of dividends or other distributions (other than the common shares of ExchangeCo), other than stock or share dividends payable in common shares of ExchangeCo or any such other shares ranking junior to the Exchangeable Shares, as the case may be;

 

(b)

redeem or purchase or make any capital distribution in respect of any shares ranking junior to the Exchangeable Shares with respect to the payment of dividends or other distributions (other than the common shares of ExchangeCo) in the event of the liquidation, dissolution or winding up of ExchangeCo, whether voluntary or involuntary, or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs;

 

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(c)

redeem or purchase or make any capital distribution in respect of any other shares of ExchangeCo ranking equally with the Exchangeable Shares with respect to the payment of dividends or other distributions in the event of the liquidation, dissolution or winding-up of ExchangeCo, whether voluntary or involuntary, or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs; or

 

(d)

issue any Exchangeable Share or any other shares ranking equally with, or superior to, the Exchangeable Shares, other than, in each case, by way of stock or share dividends to the holders of such Exchangeable Shares or pursuant to a shareholders rights plan adopted by ExchangeCo.

The restrictions listed in paragraphs (a), (b), (c) and (d) above will not apply if, in connection with all dividends or other distributions declared and paid on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement): (i) all dividends or other distributions on the outstanding Exchangeable Shares have been declared and paid in full on the Exchangeable Shares, or (ii) the Exchangeable Share Exchange Ratio has been adjusted in accordance with the Exchangeable Share Provisions, in each case, prior to or as at the date of any such event referred to in paragraphs (a), (b), (c) or (d) above.

Exchangeable Share Exchange Ratio Adjustments

The Exchangeable Share Exchange Ratio may be cumulatively adjusted from time to time after the Effective Date by increasing the Exchangeable Share Exchange Ratio on each date after the Effective Date on which the Parent board of directors pays any dividend or other distribution on the Delaware Common Stock by an amount, rounded to the nearest five decimal places, equal to (a)(i) the amount of such dividend or other distribution (which, in the case of a non-cash dividend, shall equal the fair value as determined by the ExchangeCo board of directors in good faith and in its sole discretion), expressed on a per Delaware Common Stock basis, multiplied (ii) by the Exchangeable Share Exchange Ratio in effect on the Business Day (for purposes of this section, as defined in the Exchangeable Share Provisions) immediately preceding the record date set for such dividend or other distribution, divided by (b) the Current Market Price on the record date set for such dividend or other distribution, and any such adjustment shall be determined by the ExchangeCo board of directors in good faith and in its sole discretion and any such determination by the ExchangeCo board of directors shall be conclusive and binding; provided, however, that the Exchangeable Share Exchange Ratio will be so adjusted only to the extent that the ExchangeCo board of directors determines in good faith and in its sole discretion that ExchangeCo would be liable for any unrecoverable tax as a result of paying any such dividend or distribution and determines to adjust the Exchangeable Share Exchange Ratio in lieu of paying an Equivalent Dividend on the Exchangeable Shares as contemplated by the Exchangeable Share Provisions.

Distribution on Liquidation and Associated Call Right

Subject to applicable Laws and the due exercise by Callco of the Liquidation Call Right, in the event of the liquidation, dissolution or winding-up of ExchangeCo, whether voluntary or involuntary, or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares will be entitled to receive from the assets of ExchangeCo in respect of each Exchangeable Share held by such holder on the effective date of such liquidation, dissolution, winding-up or other distribution (the “Liquidation Date”), before any distribution of any part of the assets of ExchangeCo among the holders of the common shares of ExchangeCo or any other shares ranking junior to the Exchangeable Shares, an amount per share (the “Liquidation Amount”) equal to the Exchangeable Share Price on the last Business Day prior to the Liquidation Date, which will be satisfied in full by ExchangeCo delivering or causing to be delivered to such holder of Exchangeable Shares the Exchangeable Share Consideration representing the Liquidation Amount for each Exchangeable Share held by such holder; provided that, for the avoidance of doubt, upon such a liquidation, dissolution or winding-up of ExchangeCo, a holder of Exchangeable Shares will still have the rights set forth under “Retraction of Exchangeable Shares and Associated Call Right”.

Pursuant to the Support Agreement, Callco has the overriding right (the “Liquidation Call Right”), in the event of and notwithstanding the proposed liquidation, dissolution or winding-up of ExchangeCo or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, to

 

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purchase from all but not less than all of the holders of Exchangeable Shares (other than Parent or its subsidiaries (in this section, as defined in the Exchangeable Share Provisions)) on the Liquidation Date, all but not less than all of the Exchangeable Shares held by each such holder on payment by Callco to each such holder of an amount per share equal to the Exchangeable Share Price (payable in the form of the Exchangeable Share Consideration) on the last Business Day prior to the Liquidation Date (the “Liquidation Call Purchase Price”). In the event of the exercise of the Liquidation Call Right by Callco, each holder of Exchangeable Shares (other than Parent and its subsidiaries) will be obligated to sell all of the Exchangeable Shares held by the holder to Callco on the Liquidation Date upon payment by Callco to such holder of the Liquidation Call Purchase Price for each such share, and ExchangeCo will have no obligation to pay any Liquidation Amount to the holders of such shares so purchased. The Liquidation Call Purchase Price will be satisfied in full by Callco depositing or causing to be deposited with the ExchangeCo Transfer Agent, on or before the Liquidation Date, the Exchangeable Share Consideration representing the aggregate Liquidation Call Purchase Price less any amounts withheld on account of taxes.

To exercise the Liquidation Call Right, Callco must notify the ExchangeCo Transfer Agent, as agent for the holders of Exchangeable Shares, and ExchangeCo of its intention to exercise such right (a) in the case of a voluntary liquidation, dissolution or winding-up of ExchangeCo or any other voluntary distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, at least fifteen (15) Business Days before the Liquidation Date, or (b) in the case of an involuntary liquidation, dissolution or winding-up of ExchangeCo or any other involuntary distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, at least five (5) Business Days before the Liquidation Date. The ExchangeCo Transfer Agent will notify the holders of Exchangeable Shares as to whether or not Callco has exercised the Liquidation Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If Callco exercises the Liquidation Call Right, then on the Liquidation Date, Callco will purchase and the holders of the Exchangeable Shares (other than Parent or its subsidiaries) will sell, all of the Exchangeable Shares held by such holders on such date for a price per share equal to the Liquidation Call Purchase Price (payable in the form of the Exchangeable Share Consideration). If Callco does not notify the Exchange Transfer Agent and ExchangeCo of its intention to exercise the Liquidation Call Right in the manner and timing described above, each holder of Exchangeable Shares will, at the holder’s discretion, be entitled to demand (by way of notice given to the Company) that Callco exercise the Liquidation Call Right in respect of the shares covered by the notice, in which case, Callco shall be deemed of have exercised the Liquidation Call Right and will be bound thereby.

Retraction of Exchangeable Shares and Associated Call Right

Subject to applicable Laws and the due exercise by Callco of the Retraction Call Right, a holder of Exchangeable Shares will be entitled at any time to require ExchangeCo to redeem any or all Exchangeable Shares registered in the name of such holder and for an amount per share equal to the Exchangeable Share Price on the last Business Day prior to the Retraction Date (the “Retraction Price”), which price will be satisfied in full by ExchangeCo delivering or causing to be delivered to such holder the Exchangeable Share Consideration representing the Retraction Price. A holder of Exchangeable Shares must give notice of a request to redeem or purchase, as applicable, by presenting and surrendering to ExchangeCo (or to the ExchangeCo Transfer Agent) the certificate(s) representing the Exchangeable Shares that the holder desires to have ExchangeCo redeem, together with (a) such documents, instruments and payments as the ExchangeCo Transfer Agent and ExchangeCo may reasonably require and (b) a duly executed request (the “Retraction Request”) in accordance with the Exchangeable Share Provisions: (i) specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate(s) (the “Retracted Shares”) redeemed by ExchangeCo; (ii) stating the Business Day on which the holder desires to have ExchangeCo redeem the Retracted Shares (the “Retraction Date”), provided that the Retraction Date will not be less than ten (10) Business Days nor more than fifteen (15) Business Days after the date on which the Retraction Request is received by ExchangeCo, and further provided that, in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date will be deemed to be the fifteenth (15th) Business Day after the date on which the Retraction Request is received by ExchangeCo, subject to the Exchangeable Share Provisions; and (iii) acknowledging the overriding Retraction Call Right of Callco to purchase all but not less than all the Retracted Shares directly from the holder and that the Retraction Request will be deemed to be a

 

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revocable offer by the holder to sell the Retracted Shares to Callco in accordance with the Retraction Call Right on the Retraction Date for the Retraction Call Right Purchase Price and on the other terms and conditions set out in the Exchangeable Share Provisions.

In accordance with the Exchangeable Share Provisions, in the event that a holder of Exchangeable Shares delivers a Retraction Request, Callco will have the overriding right (the “Retraction Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares, to purchase from such holder on the Retraction Date all but not less than all of the Retracted Shares held by such holder on payment by Callco of an amount per share equal to the Exchangeable Share Price applicable on the last Business Day prior to the Retraction Date (the “Retraction Call Right Purchase Price”), which price will be satisfied in full by Callco delivering or causing to be delivered to such holder the Exchangeable Share Consideration representing the Retraction Call Right Purchase Price less any amounts withheld on account of taxes.

Upon receipt by ExchangeCo of a Retraction Request, ExchangeCo will immediately notify Callco and will provide Callco with a copy of the Retraction Request. To exercise its Retraction Call Right, Callco must notify ExchangeCo in writing of its determination to do so within five (5) Business Days after ExchangeCo notifies Callco. If Callco does not so notify ExchangeCo within such five (5) Business Day period, ExchangeCo will notify the holder as soon as possible thereafter that Callco did not exercise the Retraction Call Right. If Callco delivers a Retraction Call Notice within such five (5) Business Day period and duly exercises its Retraction Call Right, the obligation of ExchangeCo to redeem the Retracted Shares will terminate and, provided that the Retraction Request is not revoked by the holder of such Retracted Shares in the manner described below), Callco will purchase from such holder and such holder will sell to Callco on the Retraction Date the Retracted Shares for an amount per share equal to the Retraction Call Right Purchase Price less any amounts withheld on account of taxes. Provided that the aggregate Retraction Call Right Purchase Price has been deposited with the ExchangeCo Transfer Agent, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right will be deemed to have occurred as at the close of business on the Retraction Date.

A holder of Exchangeable Shares who has made a Retraction Request may, by notice in writing given by the holder to ExchangeCo before the close of business on the Business Day immediately preceding the Retraction Date, withdraw such Retraction Request, in which event such Retraction Request will be null and void and the revocable offer constituted by the Retraction Request to sell such Exchangeable Shares to Callco pursuant to the exercise of the Retraction Call Right will be deemed to have been revoked.

If Callco does not notify the ExchangeCo Transfer Agent and ExchangeCo of its intention to exercise the Retraction Call Right in the manner and timing described above, each holder of Exchangeable Shares will, at the holder’s discretion, be entitled to demand (by way of notice given to the Company) that Callco exercise the Retraction Call Right in respect of the shares covered by the notice, in which case, Callco shall be deemed of have exercised the Retraction Call Right and will be bound thereby.

Redemption of Exchangeable Shares and Associated Call Right

Subject to applicable Laws and the due exercise by Callco of the Redemption Call Right, ExchangeCo will on the Redemption Date redeem all but not less than all of the then outstanding Exchangeable Shares (other than Exchangeable Shares held by Parent and its subsidiaries) for an amount per share (the “Redemption Price”) equal to the Exchangeable Share Price on the last Business Day prior to the Redemption Date, which price will be satisfied in full by ExchangeCo delivering or causing to be delivered to each holder of Exchangeable Shares the Exchangeable Share Consideration for each Exchangeable Share held by such holder.

The “Redemption Date” is the date, if any, established by the ExchangeCo board of directors for the redemption by ExchangeCo of all but not less than all of the outstanding Exchangeable Shares, which date will be on the Sunset Date unless:

 

(a)

the aggregate number of Exchangeable Shares issued and outstanding (other than Exchangeable Shares held by Parent and its subsidiaries) is less than 5% of the number of Exchangeable Shares issued and outstanding

 

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  on the Effective Date (as such number of shares may be adjusted as deemed appropriate by the ExchangeCo board of directors in certain circumstances set forth in the Exchangeable Share Provisions), in which case the ExchangeCo board of directors may accelerate such Redemption Date to such date as it may determine, upon at least thirty (30) days’ prior written notice to the holders of the Exchangeable Shares; or

 

(b)

a Parent Control Transaction is proposed, in which case, provided that the ExchangeCo board of directors determines in good faith that it is not practicable to substantially replicate the terms and conditions of the Exchangeable Shares in connection with such Parent Control Transaction or that the redemption of all but not less than all of the outstanding Exchangeable Shares (other than Exchangeable Shares held by Parent and its subsidiaries) is necessary to enable the completion of such Parent Control Transaction in accordance with its terms, the ExchangeCo board of directors may accelerate such Redemption Date to such date as it may determine, upon such number of days’ prior written notice to the holders of the Exchangeable Shares as the ExchangeCo board of directors may determine to be reasonably practicable in such circumstances.

Pursuant to the Support Agreement, Callco has the overriding right (the “Redemption Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares by ExchangeCo, to purchase from all but not less than all of the holders of Exchangeable Shares (other than Parent or any of its subsidiaries) on the Redemption Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Callco of an amount per share equal to the Exchangeable Share Price on the last Business Day prior to the Redemption Date (the “Redemption Call Purchase Price”). In the event of the exercise of the Redemption Call Right by Callco, each holder of Exchangeable Shares will be obligated to sell all of the Exchangeable Shares held by the holder to Callco on the Redemption Date on payment by Callco to the holder of the Redemption Call Purchase Price for each such share, and ExchangeCo will have no obligation to redeem, or pay the Redemption Price otherwise payable by ExchangeCo, in respect of the shares so purchased. The Redemption Call Purchase Price will be satisfied in full by Callco depositing or causing to be deposited with the ExchangeCo Transfer Agent, on or before the Redemption Date, the Exchangeable Share Consideration representing the aggregate Redemption Call Purchase Price less any amounts withheld on account of taxes.

To exercise the Redemption Call Right, Callco must notify the ExchangeCo Transfer Agent, as agent for the holders of Exchangeable Shares, and ExchangeCo of its intention to exercise such right (a) in the case of a redemption occurring in connection with a Parent Control Transaction, on or before the Redemption Date, and (b) in any other case, at least fifteen (15) Business Days before the Redemption Date. The ExchangeCo Transfer Agent will notify the holders of Exchangeable Shares as to whether or not Callco has exercised the Redemption Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If Callco exercises the Redemption Call Right, Callco will purchase and the holders of the Exchangeable Shares (other than Parent or its subsidiaries) will sell, on the Redemption Date, all of the Exchangeable Shares held by such holders on such date for a price per share equal to the Redemption Call Purchase Price (payable in the form of the Exchangeable Share Consideration).

If Callco does not notify the Transfer Agent and ExchangeCo of its intention to exercise the Redemption Call Right in the manner and timing described above, each holder of Exchangeable Shares will, at the holder’s discretion, be entitled to demand (by way of notice given to the Company) that Callco exercise the Redemption Call Right in respect of the shares covered by the notice, in which case Callco shall be deemed of have exercised the Redemption Call Right and will be bound thereby.

Change of Law Call Right

Pursuant to the Support Agreement, Callco has the overriding right (the “Change of Law Call Right”), in the event of a Change of Law, to purchase from all but not less than all of the holders of Exchangeable Shares (other than Parent or its subsidiaries) on the Change of Law Call Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Callco of an amount per share (the “Change of Law Call Purchase Price”) equal to the Exchangeable Share Price applicable on the last Business Day prior to the date on

 

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which ExchangeCo acquires the Exchangeable Shares pursuant to the exercise of the Change of Law Call Right (the “Change of Law Call Date”). In the event of the exercise of the Change of Law Call Right by Callco, each such holder of Exchangeable Shares will be obligated to sell all of the Exchangeable Shares held by the holder to Callco on the Change of Law Call Date upon payment by Callco to such holder of the Change of Law Call Purchase Price (payable in the form of Exchangeable Share Consideration). The Change of Law Call Purchase Price will be satisfied in full by Callco depositing or causing to be deposited with the ExchangeCo Transfer Agent, on or before the Change of Law Call Date, the Exchangeable Share Consideration representing the total Change of Law Call Purchase Price less any amounts withheld on account of taxes.

To exercise the Change of Law Call Right, Callco must notify the ExchangeCo Transfer Agent, as agent for the holders of Exchangeable Shares, and ExchangeCo of its intention to exercise such right at least fifteen (15) days before the Change of Law Call Date. The ExchangeCo Transfer Agent will notify the holders of Exchangeable Shares that Callco has exercised the Change of Law Call Right forthwith after receiving notice of such exercise. If Callco exercises the Change of Law Call Right, Callco will purchase, and the holders of the Exchangeable Shares will sell, on the Change of Law Call Date, all of the Exchangeable Shares then outstanding for a price per share equal to the Change of Law Call Purchase Price.

Voting Rights

Except as required by applicable Laws and in respect of certain matters as further described in the Exchangeable Share Provisions, the holders of the Exchangeable Shares will not be entitled as such to receive notice of or to attend any meeting of the shareholders of ExchangeCo or to vote at any such meeting. Without limiting the generality of the foregoing, the holders of the Exchangeable Shares will not be entitled to class votes except as required by applicable Law.

Amendment and Approval

Any approval required to be given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares in accordance with applicable Laws will be deemed to have been sufficiently given if it has been given in accordance with applicable Laws, subject to, in certain circumstances as provided for in the Exchangeable Share Provisions, a minimum requirement that such approval be evidenced by a resolution passed by not less than two-thirds of the votes cast on such resolution at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least 10% of the outstanding Exchangeable Shares at that time are present in person or represented by proxy.

Tax Treatment

The treatment of Exchangeable Shares for U.S. federal income tax purposes is uncertain. Holders of Exchangeable Shares should consult their own advisors regarding the tax consequences of owning and disposition of Exchangeable Shares.

Support Agreement

The following is a summary description of certain material provisions that will be contained in the Support Agreement, is not comprehensive and is qualified in its entirety by reference to the complete text of the Support Agreement the form of which is attached as Exhibit C to the Transaction Agreement, which is set forth in Appendix B to the Proxy Statement/Prospectus. The Support Agreement will be filed on SEDAR and EDGAR following closing of the Arrangement, available under Zymeworks’ profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

 

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Covenants regarding Exchangeable Shares

Pursuant to the Support Agreement, Parent will agree that, so long as any Exchangeable Shares not owned by Parent or its subsidiaries (as defined in such agreement) are outstanding, Parent will, among other things:

 

(a)

not take any action that will result in the declaration or payment of any dividend or make any other distribution on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement) unless (i) ExchangeCo will (A) simultaneously, declare or pay, as the case may be, an equivalent dividend or other distribution economically equivalent thereto (as determined in accordance with the Exchangeable Share Provisions) on the Exchangeable Shares (an “Equivalent Dividend”); (B) in the case of a cash dividend or other distribution, receive sufficient money or other assets from Parent (through any intermediary entities) to enable the due declaration and the due and punctual payment, in accordance with applicable Law and the Exchangeable Share Provisions, of any such Equivalent Dividend and (C) in the case of a dividend or other distribution that is a stock or share dividend or a distribution of stock or shares, have sufficient authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with applicable Law and the Exchangeable Share Provisions, of any such Equivalent Dividend; provided, however, for the avoidance of doubt, that in no event may ExchangeCo elect to effect a dividend or other distribution that is a stock or share dividend or a distribution of stock or shares in the form of cash or property other than stock or shares; or (ii) if the ExchangeCo board of directors so chooses, in its sole discretion, as an alternative to taking the actions described in clause (i) above, ExchangeCo adjusts the Exchangeable Share Exchange Ratio in accordance with the Exchangeable Share Provisions (but excluding any distributions pursuant to a Preferred Stock Rights Agreement); provided, however, that the Exchangeable Share Exchange Ratio will only be so adjusted to the extent that the ExchangeCo board of directors determines in good faith and in its sole discretion that ExchangeCo would be liable for any unrecoverable tax as a result of taking any of the actions described in clause (i) above and determines to adjust the Exchangeable Share Exchange Ratio in lieu of taking any such action;

 

(b)

advise ExchangeCo sufficiently in advance of the declaration by Parent of any dividend or other distribution on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement) and take all such other actions as are reasonably necessary or desirable, in co-operation with ExchangeCo, to ensure that the respective declaration date, record date and payment date for an Equivalent Dividend will be the same as those for any corresponding dividends or other distributions on the Delaware Common Stock;

 

(c)

take all actions and do all things as are reasonably necessary or desirable to enable and permit ExchangeCo, in accordance with applicable Law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount, the Retraction Price or the Redemption Price to the holders of the Exchangeable Shares in the event of a liquidation, dissolution or winding-up of ExchangeCo, whether voluntary or involuntary, the delivery of a Retraction Request by a holder of Exchangeable Shares or a redemption of Exchangeable Shares by ExchangeCo, as the case may be;

 

(d)

take all actions and do all things as are reasonably necessary or desirable to enable and permit the Share Trustee in accordance with applicable Law to perform its obligations under the Trust Agreement, including, without limitation, all such actions and all such things as are reasonably necessary or desirable to enable and permit the Share Trustee in its capacity as trustee under the Trust Agreement to exercise such number of votes in respect of a Parent Meeting or a Parent Consent (as such terms are defined in the Trust Agreement) as is equal to the aggregate number of Exchangeable Shares outstanding at the relevant time (other than those held by Parent and its affiliates), multiplied by the Exchangeable Share Exchange Ratio, and rounded down to the nearest whole vote in respect of any one Beneficiary (as that term is defined in the Trust Agreement);

 

(e)

take all actions and do all things as are reasonably necessary or desirable to enable and permit Callco, in accordance with applicable Law, to perform its obligations arising upon the exercise by it of the Liquidation Call Right, the Retraction Call Right, the Change of Law Call Right or the Redemption Call Right;

 

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(f)

take all such actions and do all such things as are reasonably necessary or desirable to enable and permit ExchangeCo, in accordance with applicable Law, to perform its obligations in connection with a Retraction Request pursuant to the Exchangeable Share Provisions; and

 

(g)

not, except as otherwise contemplated in the Exchangeable Share Provisions, (i) exercise its vote as a shareholder of ExchangeCo to initiate the voluntary liquidation, dissolution or winding up of ExchangeCo or any other distribution of the assets of ExchangeCo for the purpose of winding up its affairs, or (ii) take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding up of ExchangeCo or any other distribution of the assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, without the prior written consent of the holders of the Exchangeable Shares.

Economic Equivalence

In order to protect the economic equivalence of the Exchangeable Shares, the Support Agreement will provide that, so long as any Exchangeable Shares not owned by Parent or its subsidiaries are outstanding:

 

  (a)

Parent will not without the prior approval of ExchangeCo and the prior approval of the holders of the Exchangeable Shares given in accordance with the Exchangeable Share Provisions:

 

  (i)

issue or distribute Delaware Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire Delaware Common Stock) to the holders of all or substantially all of the then outstanding Delaware Common Stock by way of stock or share dividend or other distribution, other than an issue of Delaware Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire Delaware Common Stock) to holders of Delaware Common Stock (A) who exercise an option to receive dividends in Delaware Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire Delaware Common Stock) in lieu of receiving cash dividends, (B) pursuant to any dividend reinvestment plan or scrip dividend or similar arrangement, or (C) pursuant to a Preferred Stock Rights Agreement, as that term is defined in the Exchangeable Share Provisions;

 

  (ii)

issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Delaware Common Stock entitling them to subscribe for or to purchase Delaware Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire Delaware Common Stock) (other than pursuant to a Preferred Stock Rights Agreement, as that term is defined in the Exchangeable Share Provisions); or

 

  (iii)

issue or distribute to the holders of all or substantially all of the then outstanding Delaware Common Stock (A) shares or securities of Parent of any class other than Delaware Common Stock (or securities convertible into or exchangeable for or carrying rights to acquire Delaware Common Stock), (B) rights, options, warrants or other assets other than those referred to in paragraph (a)(ii) above, (C) evidence of indebtedness of Parent or (D) assets of Parent, except pursuant to a Preferred Stock Rights Agreement, as that term is defined in the Exchangeable Share Provisions,

unless, in each case, ExchangeCo issues or distributes the economic equivalent on a per share basis of such rights, options, warrants, securities, shares, evidences of indebtedness or other assets simultaneously to holders of the Exchangeable Shares, including, without limitation, an adjustment to the Exchangeable Share Exchange Ratio in accordance with the terms of the Exchangeable Share Provisions;

 

  (b)

Parent will not, without the prior approval of ExchangeCo and the prior approval of the holders of the Exchangeable Shares given in accordance with the Exchangeable Share Provisions:

 

  (i)

subdivide, redivide or change the then outstanding Delaware Common Stock into a greater number of Delaware Common Stock;

 

  (ii)

reduce, combine, consolidate or change the then outstanding Delaware Common Stock into a lesser number of Delaware Common Stock; or

 

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  (iii)

reclassify or otherwise change the Delaware Common Stock or effect an amalgamation, merger, combination, reorganization or other transaction affecting the Delaware Common Stock;

unless, in each case, the same or an economically equivalent change is made simultaneously to, or in the rights of the holders of, the Exchangeable Shares.

The ExchangeCo board of directors will determine, in good faith and in its sole discretion (with the assistance of such financial or other advisors as the ExchangeCo board of directors may determine), “economic equivalence” for the purposes of any event referred to in paragraphs (a) or (b) above and each such determination will be conclusive and binding on Parent. Pursuant to the Support Agreement, ExchangeCo will agree that, to the extent required, upon due notice from Parent, ExchangeCo will use commercially reasonable efforts to take or cause to be taken such steps as may be necessary for the purposes of ensuring that appropriate dividends are paid or other distributions are made by ExchangeCo, or the Exchangeable Share Exchange Ratio is adjusted, in order to implement the required economic equivalence with respect to the Delaware Common Stock and Exchangeable Shares.

Tender Offers

The Support Agreement will provide that, in the event that a tender offer, share exchange offer, issuer bid, takeover bid or similar transaction with respect to Delaware Common Stock (an “Offer”) is proposed by Parent or is proposed to Parent or its stockholders and is recommended by the Parent board of directors, or is otherwise effected or to be effected with the consent or approval of the Parent board of directors, and the Exchangeable Shares are not redeemed by ExchangeCo or purchased by Callco pursuant to the Redemption Call Right, Parent and ExchangeCo will use commercially reasonable efforts to take all such actions and do all such things as are necessary or desirable to enable and permit holders of Exchangeable Shares (other than Parent and its affiliates) to participate in such Offer to the same extent and on an economically equivalent basis as the holders of Delaware Common Stock, without discrimination. Without limiting the generality of the foregoing, Parent and ExchangeCo will use commercially reasonable efforts in good faith to ensure that all holders of Exchangeable Shares may participate in such Offer without being required to retract Exchangeable Shares as against ExchangeCo (or, if so required, to ensure that any such retraction is effective only upon, and is conditional upon, the closing of such Offer and only to the extent necessary to tender or deposit to the Offer).

Ownership of ExchangeCo Shares

The Support Agreement will also provide that, without the prior approval of ExchangeCo and the prior approval of the holders of the Exchangeable Shares given in accordance with the Exchangeable Share Provisions, as long as any outstanding Exchangeable Shares not owned by Parent or any of its affiliates are outstanding, Parent will be and remain the direct or indirect beneficial owner of all issued and outstanding common shares of ExchangeCo and Callco.

Amendments to the Support Agreement

The Support Agreement will provide that, with the exception of changes for the purpose of (a) adding to the covenants of any or all of the parties thereto; (b) evidencing the succession of successors to Parent and the covenants and obligations assumed by such successors; (c) making such amendments or modifications not inconsistent with the Support Agreement as may be necessary or desirable with respect to matters or questions arising thereunder or (d) curing or correcting any ambiguities or defect or inconsistent provision or clerical omission or mistake or manifest errors (provided, in the case of clauses (a), (c) and (d), that the board of directors of each of Parent, ExchangeCo and Callco are of the good faith opinion that such amendments are not prejudicial to the rights or interests of the holders of the Exchangeable Shares), the Support Agreement may not be amended except by agreement in writing executed by Parent, Callco and ExchangeCo and approved by the holders of the Exchangeable Shares given in accordance with the Exchangeable Share Provisions.

 

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Voting of Exchangeable Shares

Under the Support Agreement, each of Parent and Callco will agree not to, and to cause its affiliates not to, exercise any voting rights which may be exercisable by holders of Exchangeable Shares from time to time with respect to any Exchangeable Shares owned by it or its affiliates in respect of any matter considered at meetings of holders of Exchangeable Shares (including any approval sought from such holders in respect of matters arising under the Support Agreement).

Reimbursement by Parent

Parent shall reimburse ExchangeCo for, and indemnify and hold ExchangeCo harmless against, any expense or liability incurred by ExchangeCo with respect to the Exchangeable Shares.

Trust Agreement

The following is a summary description of certain material provisions that will be contained in the Trust Agreement, and is not comprehensive and is qualified in its entirety by reference to the complete text of the Trust Agreement, the form of which is attached as Exhibit D to the Transaction Agreement, which is set forth in Appendix B to the Proxy Statement/Prospectus. The Trust Agreement will be filed on SEDAR and EDGAR following closing of the Arrangement, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

The purpose of the Trust Agreement is to create a trust for the benefit of the registered holders from time to time of Exchangeable Shares (other than Parent or affiliates of Parent) (the “Beneficiaries”). The Share Trustee will hold the Special Voting Stock in order to enable the Share Trustee to exercise the voting rights attached thereto and will hold the Exchange Right and the Automatic Exchange Right (as such terms are defined in the Trust Agreement) in order to enable the Share Trustee to exercise or enforce such rights, in each case as trustee for and on behalf of the Beneficiaries.

Voting Rights

Pursuant to the Trust Agreement, Parent will issue to and deposit with the Share Trustee the Special Voting Stock to be held of record by the Share Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries and in accordance with the provisions of the Trust Agreement.

Under the Trust Agreement, the Share Trustee shall be entitled to exercise all of the voting rights, including the right to consent to or vote in person or by proxy, attaching to the Special Voting Stock on any matters, question, proposal or proposition that may properly come before all meetings of stockholders of Parent or in connection with a Parent Consent (as such term is defined in the Trust Agreement).

With respect to all meetings of stockholders of Parent at which stockholders of Parent are entitled to vote and with respect to all Parent Consents, each Beneficiary shall be entitled to instruct the Share Trustee to cast and exercise, in the manner instructed, the number of votes to which a holder of one share of Delaware Common Stock is entitled with respect to such matter, proposition or question for each Exchangeable Share owned of record by such Beneficiary at the close of business on the record date established by Parent or by applicable law, multiplied by the Exchangeable Share Exchange Ratio, and in respect of each Beneficiary, rounded down to the nearest whole vote.

The aggregate voting rights attached to the Special Voting Stock at a meeting of stockholders of Parent at which stockholders of Parent are entitled to vote shall consist of a number of votes equal to one vote per outstanding Exchangeable Share from time to time not owned by Parent and its affiliates on the record date established by Parent, multiplied by the Exchangeable Share Exchange Ratio, and in respect of each Beneficiary, rounded down to the nearest whole vote, and for which the Share Trustee shall have received voting instructions from the holder of the Exchangeable Share.

 

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The Share Trustee will exercise each vote attached to the Special Voting Stock only as directed by the relevant holder and, in the absence of instructions from a holder as to voting, the Share Trustee will not exercise voting rights with respect to such Exchangeable Share. A holder may, upon instructing the Share Trustee, obtain a proxy from the Share Trustee entitling the holder to vote directly at the relevant meeting the votes attached to the Special Voting Stock to which the holder is entitled.

The Share Trustee will send to the Beneficiaries by mail or electronic transmission the notice of each meeting or Parent Consent at which the stockholders of Parent are entitled to vote, together with the related meeting materials and a statement as to the manner in which the holder may instruct the Share Trustee to exercise the votes attaching to the Special Voting Stock, at the same time as Parent sends such notice and materials to the stockholders of Parent. The Share Trustee will also send to the holders of Exchangeable Shares copies of all information statements, interim and annual financial statements, reports and other materials sent by Parent to the stockholders of Parent at the same time as such materials are sent to the stockholders of Parent. To the extent such materials are provided to the Share Trustee by Parent, the Share Trustee will also send to the holders all materials sent by third parties to stockholders of Parent generally, including dissident proxy circulars and tender and exchange offer circulars, as soon as possible after such materials are first sent to the stockholders of Parent.

All rights of a holder of Exchangeable Shares to exercise votes attached to the Special Voting Stock will cease upon the exchange of such holder’s Exchangeable Shares for Delaware Common Stock.

ExchangeCo Insolvency Event — Exchange Right

Upon the occurrence and during the continuance of an Insolvency Event (as such term is defined in the Trust Agreement), the Share Trustee shall have the right (the “Exchange Right”) to require Parent or Callco to purchase from each Beneficiary all or any part of the Exchangeable Shares from each or any Beneficiary, provided that the Share Trustee may exercise such right only on the basis of instructions received from each such holder, and provided further that Parent may delegate its obligations thereunder to Callco. The purchase price payable by Parent or Callco, as the case may be, for each Exchangeable Share purchased pursuant to the exercise of the Exchange Right will be the Exchangeable Share Price on the last Business Day prior to the closing of the purchase and sale of such Exchangeable Share, which price will be satisfied in full by Parent or Callco delivering the Exchangeable Share Consideration representing such Exchangeable Share Price to the Share Trustee.

As soon as practicable following the occurrence of an Insolvency Event or any event that with the passage of time or the giving of notice or both would be an Insolvency Event, Parent and Holdco will give written notice thereof to the Share Trustee. As soon as practicable after receiving such notice, or upon the Share Trustee otherwise becoming aware of an Insolvency Event, the Share Trustee will give notice to each holder of Exchangeable Shares of such event and will advise the holder of its rights with respect to the Exchange Right.

Liquidation Event — Automatic Exchange Right

Immediately prior to the effective date of a Liquidation Event (as such term is defined in the Trust Agreement), each of the then outstanding Exchangeable Shares (other than Exchangeable Shares held by Parent and its affiliates) shall be automatically exchanged for one share of Delaware Common Stock, multiplied by the Exchangeable Share Exchange Ratio, rounded down to the nearest whole share in respect of each holder of Exchangeable Shares, together with a cash payment for any fractional interest equal to the fractional interest multiplied by the Current Market Price. Such automatic exchange shall be deemed to occur immediately prior to the Liquidation Event Effective Date.

 

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SELECTED COMPARATIVE PER SHARE INFORMATION

Comparative Per Share Data of Zymeworks

The following table sets forth the closing market price per Zymeworks Common Share as reported by the NYSE on July 14, 2022, the last trading day before the Redomicile Transactions were publicly announced, and on August 29, 2022, the last practicable trading day before the date of this Proxy Statement/Prospectus.

 

Trading Date

   Common Shares
(ZYME)
 

July 14, 2022

   $ 5.91  

August 29, 2022

   $ 6.46  

Comparative Per Share Data of Parent

Historical market price information regarding Parent is not provided because there is no public market for Parent capital stock.

 

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INFORMATION CONCERNING PARENT, EXCHANGECO AND CALLCO

General and Corporate Structure

Parent was formed on June 30, 2022 as a Delaware corporation. The principal office of Parent is located at 108 Patriot Drive, Suite A, Middletown, Delaware 19709. Parent intends to hold an annual meeting of stockholders following completion of the Redomicile Transactions.

Intercorporate Relationships

Assuming the Redomicile Resolution is approved at the Special Meeting, following the Effective Time and completion of the Redomicile Transactions, the stockholders of Parent will be the same persons who were Zymeworks Shareholders immediately prior to the Redomicile Transactions (other than those who have validly exercised Dissent Rights and holders of Exchangeable Shares prior to exchanging them for Delaware Common Stock) and Parent will become the direct or indirect owner of all of the assets and liabilities of Zymeworks. As a result, there will be no effective change of control of Zymeworks as a result of the Redomicile Transactions, as ultimate control will remain with the public stockholders. Upon completion of the Redomicile Transactions, Parent will have the general structure shown below.

Corporate Structure Prior to the Redomicile Transactions

 

 

LOGO

 

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Corporate Structure Following the Redomicile Transactions

 

 

LOGO

Business

Prior to completion of the Redomicile Transactions, Parent will not have carried on any active business since its incorporation. Following completion of the Redomicile Transactions, Parent and its subsidiaries will carry on the business currently carried on by Zymeworks and its subsidiaries.

 

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Common Stock

For a description of the shares of Delaware Common Stock see section titled “Description of Parent Capital Stock”.

Selected Unaudited Pro Forma Condensed Consolidated Financial Information

If the Redomicile Transactions had occurred on January 1, 2021, the pro forma balance sheet would have reflected a pro forma adjustment to reduce deferred income tax liability by $1.2 million with a corresponding increase in retained earnings by $1.2 million. The pro forma income statement for the three months ended June 30, 2022 would decrease tax expense by $0.1 million. The pro forma income statement for the six months ended June 30, 2022 would increase tax expense by $0.1 million. The pro forma income statement for the year ended December 31, 2021 would decrease tax expense by $0.4 million.

Directors and Officers of Parent

The persons who will serve as directors and officers of Parent after giving effect to the Redomicile Transactions are the same persons currently serving as directors and officers of Zymeworks. For information regarding the persons who will become the directors of Parent after giving effect to the Redomicile Transactions, please refer to the information contained in Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021, filed on SEDAR and EDGAR on May 2, 2022, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

Parent intends to adopt an amended and restated certificate of incorporation (the “Parent Certificate of Incorporation”) that will become effective prior to completion of the Redomicile Transactions. The Parent Certificate of Incorporation will provide that each member of Parent’s board of directors will be elected to one of three staggered three-year terms. Only one such term expires at each annual meeting of stockholders, with directors serving under the other terms continuing for the remainder of their respective three-year terms. Zymeworks’ current directors will be up for re-election as follows:

 

   

The terms of Troy M. Cox, Kenneth Hillan and Natalie Sacks will expire at the annual meeting of stockholders to be held in 2022;

 

   

The terms of Hollings C. Renton and Lota Zoth will expire at the annual meeting of stockholders to be held in 2023; and

 

   

The terms of Kenneth Galbraith, Susan Mahony and Kelvin Neu will expire at the annual meeting of stockholders to be held in 2024.

For information regarding the persons who will become the officers of Parent after giving effect to the Redomicile Transactions, please refer to the information contained in Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021, filed on SEDAR and EDGAR on May 2, 2022, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com. Since the filing of Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021, the following have taken place:

 

   

On June 27, 2022, Zymeworks announced via a press release and Current Report on Form 8-K the appointment of Dr. Paul Moore as Chief Scientific Officer of the Company.

 

   

On August 4, 2022, Zymeworks announced via press release and a Current Report on Form 8-K that the Zymeworks Board had appointed Neil Klompas as President, effective August 4, 2022. Following Mr. Klompas’ appointment, Mr. Galbraith will continue to serve in the role of Chair of the Zymeworks Board and Chief Executive Officer.

 

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Director and Executive Compensation

The director and executive compensation programs currently offered by Zymeworks are described in Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021, filed on SEDAR and EDGAR on May 2, 2022, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

Beneficial Ownership of Securities of Parent

Immediately prior to the Effective Time, Parent will be a wholly-owned subsidiary of Zymeworks.

Auditor, Registrar and Transfer Agent

The auditor of Parent following completion of the Redomicile Transactions will be KPMG LLP. The transfer agent and registrar for shares of Delaware Common Stock and Exchangeable Shares following completion of the Redomicile Transactions will be Computershare. The transfer agent and registrar’s address is 510 Burrard Street, 3rd Floor, Vancouver, B.C. V6C 3B9.

Material Contracts

Except as described in this Proxy Statement/Prospectus, Parent and its predecessors do not expect to enter into any material contracts prior to the Effective Time.

Corporate Governance of Parent

The corporate governance practices of Parent, after giving effect to the Redomicile Transactions, will generally be the same as the corporate governance practices of Zymeworks. For information regarding the corporate governance practices of Zymeworks, please refer to the information regarding the corporate governance practices of Zymeworks contained in Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021, filed on SEDAR and EDGAR on May 2, 2022, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com. There are differences between Zymeworks’ existing articles of incorporation and the Parent Certificate of Incorporation and Parent Bylaws as they will be in effect upon the completion of the Redomicile Transactions. These differences are discussed under “Comparison of Rights of Zymeworks Shareholders, Exchangeable Shareholders and Parent Stockholders”.

Audit Committee of Parent

Immediately after giving effect to the Redomicile Transactions, the Audit Committee of Parent will be comprised of the same persons currently serving on the Audit Committee of Zymeworks. For information regarding the Audit Committee of Parent after giving effect to the Redomicile Transactions, please refer to the information regarding the Audit Committee of Zymeworks contained in Zymeworks’ Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2021 filed on SEDAR and EDGAR on May 2, 2022, available under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com.

ExchangeCo Overview

ExchangeCo is a corporation incorporated under the Business Corporations Act (British Columbia) on July 13, 2022 for the purpose of implementing the Arrangement. To date, ExchangeCo has not carried on any business except in connection with its role as a party to the Transaction Agreement. ExchangeCo is a direct wholly-owned subsidiary of Callco. ExchangeCo’s registered and principal office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, P.O. Box 49314, Vancouver, BC V7X 1L3. The sole director of ExchangeCo is Kenneth Galbraith.

 

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ExchangeCo Share Capital

The authorized capital of ExchangeCo consists of an unlimited number of common shares and an unlimited number of Exchangeable Shares. See section titled “Description of Exchangeable Shares and Related Agreements — Description of Exchangeable Shares” for a summary of certain provisions of the Exchangeable Shares which will be created prior to the Effective Time.

As of the date hereof, there are 10 common shares of ExchangeCo issued and outstanding, which are held by Callco. The sole holder of ExchangeCo’s common shares is expected to be Callco. The holders of ExchangeCo’s common shares are entitled to receive notice of and to attend all meetings of ExchangeCo’s shareholders and to one vote in respect of each Common share held at all such meetings. The holders of ExchangeCo’s common shares will, subject to the rights of the holders of Exchangeable Shares, be entitled to receive dividends if, as and when declared by the board of directors of ExchangeCo out of the assets of ExchangeCo properly applicable to the payment of dividends in such amounts and payable in such manner as the board of directors of ExchangeCo may from time to time determine. In the event of the liquidation, dissolution or winding up of ExchangeCo or other distribution of assets of ExchangeCo among its shareholders for the purpose of winding up its affairs, the holders of ExchangeCo’s common shares will, subject to the rights of the holders of Exchangeable Shares and any other class of shares of ExchangeCo, be entitled to receive the assets of ExchangeCo. Such distribution will be made in equal amounts per share on all the common shares at the time outstanding without preference or distinction.

Callco Overview

Callco is an unlimited liability company incorporated under the Business Corporations Act (British Columbia) on July 13, 2022 for the purpose of implementing the Arrangement. To date, Callco has not carried on any business except in connection with its role as a party to the Transaction Agreement. Callco is a wholly-owned subsidiary of Parent. Callco’s registered and principal office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, P.O. Box 49314, Vancouver, BC V7X 1L3. The sole director of Callco is Kenneth Galbraith.

 

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INFORMATION CONCERNING ZYMEWORKS

General

Company Overview

Zymeworks is a clinical-stage biopharmaceutical company dedicated to the development of next-generation multifunctional biotherapeutics. Zymeworks’ suite of complementary therapeutic platforms and its fully integrated drug development engine provide the flexibility and compatibility to precisely engineer and develop highly differentiated product candidates. These capabilities have resulted in multiple product candidates with the potential to drive positive outcomes in large underserved and unaddressed patient populations.

Zymeworks’ lead product candidate, zanidatamab, is a novel bispecific antibody that targets two distinct domains of the human epidermal growth factor receptor 2 (“HER2”). Zanidatamab’s unique binding properties result in multiple mechanisms of action that may enable it to address unmet need in patient populations with HER2-expressing cancers. In clinical trials, zanidatamab monotherapy and zanidatamab in combination with chemotherapy have been well tolerated with promising antitumor activity in patients with treatment-naive and heavily pretreated HER2-expressing cancers, including individuals whose disease had progressed on multiple prior treatment regimens that included HER-targeted agents. Based on these data, a number of global multicenter clinical trials have been initiated to evaluate zanidatamab in specific indications and lines of therapy. These include pivotal clinical trials in (a) previously-treated HER2 gene amplified biliary tract cancer (“BTC”) and (b) first-line locally advanced or metastatic HER2-positive gastroesophageal adenocarcinomas (“GEA”) in combination with chemotherapy with or without BeiGene, Ltd.’s tislelizumab, as well as proof of concept trials in (c) first-line locally advanced or metastatic HER2-positive colorectal cancer, GEA, or BTC in combination with standard of care chemotherapy, (d) first-line locally advanced or metastatic HER2-positive GEA in combination with tislelizumab and chemotherapy, (e) first-line locally advanced or metastatic HER2-positive breast cancer in combination with docetaxel, (f) previously-treated locally advanced or metastatic HER2-positive, hormone receptor-positive breast cancer in combination with Pfizer’s Ibrance (palbociclib) and fulvestrant, and (g) previously-treated locally advanced or metastatic HER2-expressing cancers (including HER2-positive and HER2-low breast cancer) in combination with ALX Oncology Inc.’s evorpacept (ALX148).

Zymeworks’ second product candidate, zanidatamab zovodotin (ZW49), combines the unique design of zanidatamab with Zymeworks’ ZymeLink antibody-drug conjugate (“ADC”) platform, comprised of proprietary cytotoxin (cancer cell-killing compound) and cleavable linker. Zymeworks designed zanidatamab zovodotin to be a best-in-class HER2-targeting ADC to further address unmet need across a range of HER2-expressing cancers. A Phase 1 clinical trial to establish safety and antitumor activity of zanidatamab zovodotin is currently ongoing.

Zymeworks is also advancing a deep pipeline of preclinical product candidates and discovery-stage programs in oncology (including immuno-oncology agents) and other therapeutic areas.

Zymeworks’ proprietary capabilities and technologies include several modular, complementary therapeutic platforms that can be used in combination with each other and with existing approaches. This ability to layer technologies without compromising manufacturability enables Zymeworks to engineer next-generation biotherapeutics with synergistic activity, which it believes will result in improved patient outcomes. Zymeworks’ platforms include:

 

   

Azymetric, Zymeworks’ bispecific platform, which enables therapeutic antibodies to simultaneously bind multiple distinct locations on a target (known as an epitope) or to multiple targets. This is achieved by tailoring multiple configurations of the antibody’s Fab regions (locations on the antibody to which epitopes bind);

 

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ZymeLink, Zymeworks’ ADC platform, comprised of cytotoxins and the linker technology used to couple these cytotoxins to tumor-targeting antibodies or proteins. This platform can be used in conjunction with Zymeworks’ other therapeutic platforms to increase safety and efficacy as compared to existing ADC technologies;

 

   

EFECT, which enables finely tuned modulation (both up and down) of immune cell recruitment and function; and

 

   

ProTECT, which enables tumor-specific activity that may reduce systemic toxicity, and simultaneously enhances localized immune co-stimulation or checkpoint modulation that may increase efficacy.

Zymeworks’ goal is to leverage its next-generation therapeutic platforms and proprietary protein engineering capabilities to become a leader in the discovery, development and commercialization of best-in-class multifunctional biotherapeutics for the treatment of cancer and other diseases with high unmet medical need.

Zymeworks commenced operations in 2003 and has since devoted substantially all of its resources to research and development activities including developing its therapeutic platforms, identifying and developing potential product candidates and undertaking preclinical studies and clinical trials. Additionally, Zymeworks has supported its research and development activities with general and administrative support, as well as by raising capital, conducting business planning and protecting its intellectual property. Zymeworks has not generated any revenue from the sale of approved products to date and does not expect to do so until such time as Zymeworks obtains regulatory approval and commercialize one or more of its product candidates. Zymeworks cannot be certain of the timing or success of approval of its product candidates.

Additional information about Zymeworks can be found under its profile on SEDAR at www.sedar.com, its profile on the SEC’s website at www.sec.gov or its website at www.zymeworks.com. The information contained in, or that can be accessed through, Zymeworks’ website is not intended to be incorporated into this Proxy Statement/Prospectus. For information about Zymeworks’ filings incorporated by reference in this Proxy Statement/Prospectus, see section titled “Where You Can Find More Information”.

Auditor, Registrar and Transfer Agent

KPMG LLP (“KPMG”) is the auditor of Zymeworks. Computershare is the registrar and transfer agent for the Zymeworks Common Shares. Transfer of the Zymeworks Common Shares can be effected at Computershare’s principal offices in Vancouver, British Columbia.

Holders

As of August 24, 2022, Zymeworks had 62 shareholders of record holding its common shares, of which 34 were U.S. shareholders. A substantially greater number of holders of Zymeworks’ common stock are “street name” or beneficial holders whose shares of record are held by banks, brokers, and other financial institutions.

Dividends

Zymeworks has neither declared nor paid dividends on the Zymeworks Common Shares. Zymeworks has no present intention of paying dividends on its Zymeworks Common Shares as it anticipates that all available funds will be invested to finance the growth of its business.

Prior Sales

Except as disclosed below, within the last 12 months from the date of this Proxy Statement/Prospectus, no Zymeworks Common Shares have been issued, excluding Zymeworks Common Shares purchased or sold pursuant to the exercise of options or the settlement of RSUs and Zymeworks Common Shares purchased pursuant to Zymeworks’ Amended and Restated Employee Stock Purchase Plan.

 

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On January 31, 2022, Zymeworks completed an underwritten public offering of 11,035,000 Zymeworks Common Shares at a price of $8.00 per Common Share, including the exercise in full of the underwriters’ option to purchase 1,875,000 additional Zymeworks Common Shares, and, in lieu of Zymeworks Common Shares to certain investors, pre-funded warrants to purchase up to 3,340,000 Zymeworks Common Shares at a price of $7.9999 per pre-funded warrant.

Market Price and Trading Volume of Zymeworks Common Shares

The Zymeworks Common Shares are listed on the NYSE under the stock symbol “ZYME”.

The following table sets out the market price ranges and trading volumes on the NYSE on a monthly basis for a period from July 2021 to August 2022:

 

Month

   High Price
(US$)
     Low Price
(US$)
     Closing Price
(US$)
     Volume*  

July 2021

     39.35        31.85        32.09        9,908,800  

August 2021

     35.90        30.52        32.99        6,990,200  

September 2021

     37.10        27.20        29.04        12,479,800  

October 2021

     29.59        22.08        22.25        13,484,000  

November 2021

     25.59        17.71        20.11        14,474,700  

December 2021

     21.39        14.90        16.39        16,848,800  

January 2022

     17.20        7.86        8.90        30,529,400  

February 2022

     8.98        6.52        7.24        16,257,700  

March 2022

     7.63        5.93        6.55        15,923,000  

April 2022

     7.88        4.56        6.11        57,622,200  

May 2022

     7.28        4.98        6.75        45,319,500  

June 2022

     7.60        4.96        5.30        23,989,200  

July 2022

     6.55        5.23        5.84        15,882,200  

August 2022 (through August 29, 2022)

     7.53        5.71        6.46        14,383,800  

 

*

Represents the total number of Zymeworks Common Shares traded over the calendar month.

Interest of Informed Persons in Material Transactions

Other than as set forth in this Proxy Statement/Prospectus, Zymeworks is not aware of any material interests, direct or indirect, by way of beneficial ownership of securities or otherwise, of any director or executive officer, nominee for election as a director or any Zymeworks Shareholder holding more than 10% of the voting rights attached to the Zymeworks Common Shares or an associate or affiliate of any of the foregoing in any transaction since January 1, 2021, or in any proposed or ongoing transaction of Zymeworks which has or would materially affect Zymeworks or any of its subsidiaries.

Legal Proceedings

From time to time, Zymeworks may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. As of the date hereof, Zymeworks was not a party to any legal proceedings that, in the opinion of management, would reasonably be expected to have a material adverse effect on Zymeworks’ business, financial condition, operating results or cash flows if determined adversely to it. Regardless of the outcome, litigation can have an adverse impact on Zymeworks because of defense and settlement costs, diversion of management resources and other factors.

 

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LEGAL MATTERS

The legality of the shares of Delaware Common Stock issuable in the Arrangement will be passed upon by Wilson Sonsini Goodrich & Rosati, Professional Corporation. Certain other legal matters in connection with the Redomicile Transactions will be passed upon by Blake, Cassels & Graydon LLP, Canadian corporate and tax counsel to Zymeworks, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, U.S. corporate and tax counsel to Zymeworks.

 

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EXPERTS

The consolidated financial statements of Zymeworks as of December 31, 2021 and 2020, and for each of the years in the three-year period ended December 31, 2021, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2021 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

Representatives of KPMG LLP are not expected to be present at the Special Meeting.

 

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MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations under the Tax Act generally applicable to a beneficial owner of Zymeworks Common Shares who, for the purposes of the Tax Act and at all relevant times, (1) holds Zymeworks Common Shares, and will hold Exchangeable Shares and/or Delaware Common Stock, as applicable, as capital property; and (2) deals at arm’s length with, and is not affiliated with, Zymeworks, Parent, Callco or ExchangeCo (a “Holder”). Generally, Zymeworks Common Shares, Exchangeable Shares and/or Delaware Common Stock (collectively, the “Shares”), as applicable, will be capital property to a Holder, provided that the Holder does not acquire or hold the Shares in the course of carrying on a business or as part of an adventure or concern in the nature of trade.

This summary does not apply to a Holder who acquired Zymeworks Common Shares under a Zymeworks Warrant or Zymeworks Incentive Award. Those Holders should consult their own tax advisors. This summary also does not apply to Zymeworks Incentive Award holders or Zymeworks Warrant holders. Those holders should consult their own tax advisors.

This summary is based on the current provisions of the Tax Act in force as of the date hereof and an understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) published in writing by it prior to the date hereof. This summary takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in Law or administrative policy or assessing practice whether by legislative, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.

This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular Holder. This summary is not exhaustive of all Canadian federal income tax considerations applicable to the purchasing, holding and disposing of the Zymeworks Common Shares, Exchangeable Shares or Delaware Common Stock. Accordingly, Holders should consult their own tax advisors having regard to their own particular circumstances.

Generally, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of securities (including dividends, adjusted cost base and proceeds of disposition) must be converted into Canadian dollars based on exchange rates as determined in accordance with the Tax Act. In particular, the amount of dividends to be included in the income of, and the amount of capital gains or capital losses realized by, a Holder of Delaware Common Stock, and the amount of any capital gain realized on the disposition of Zymeworks Common Shares pursuant to the Plan of Arrangement, may be affected by fluctuation in the Canadian/U.S. dollar exchange rate.

Holders Resident in Canada

This portion of the summary is generally applicable to a Holder who for the purposes of the Tax Act and any applicable tax treaty, is resident or is deemed to be resident in Canada at all times while they hold Zymeworks Common Shares, Exchangeable Shares or Delaware Common Stock (a “Resident Holder”).

Certain Resident Holders whose Zymeworks Common Shares or Exchangeable Shares might not otherwise qualify as capital property may be entitled to make, or may have already made, an irrevocable election under subsection 39(4) of the Tax Act. This election may deem any Zymeworks Common Shares or Exchangeable Shares (and any other “Canadian security”, as defined in the Tax Act) owned by such Resident Holder to be capital property in the taxation year in which the election is made and in all subsequent taxation years. Resident Holders whose Zymeworks Common Shares or Exchangeable Shares might not otherwise be considered to be

 

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capital property should consult their own tax advisors concerning this election. Exchangeable Shares received by an Eligible Holder under a section 85 election in respect of Zymeworks Common Shares, as described below, will not be a “Canadian security” to such Resident Holder for this purpose. Resident Holders should consult with their own tax advisors for advice with respect to whether an election under subsection 39(4) is available in their particular circumstances.

This portion of the summary does not apply to a Zymeworks Shareholder (a) an interest in which is a “tax shelter investment” as defined in the Tax Act; (b) that is a “financial institution” for the purposes of the mark-to-market rules contained in the Tax Act; (c) that is a “specified financial institution” as defined in the Tax Act; (d) that has made a functional currency reporting election under the Tax Act; (e) that is a corporation resident in Canada, and is, or becomes, or does not deal at arm’s length with a corporation resident in Canada that is or becomes, as part of a transaction or event or series of transactions or events that includes the Plan of Arrangement, controlled by a non-resident person (or a group of persons that do not deal at arm’s length) for purposes of the “foreign affiliate dumping” rules in section 212.3 of the Tax Act; (f) that has, or will, enter into, with respect to any Shares, a “derivative forward agreement” or a “synthetic disposition agreement”, as those terms are defined in the Tax Act; or (g) in respect of whom Parent is or will be a “foreign affiliate” as defined in the Tax Act. Those Zymeworks Shareholders should consult their own tax advisors.

It is assumed, for the purposes of this portion of the summary, that ExchangeCo will be a “taxable Canadian corporation” within the meaning of the Tax Act at all relevant times.

Receipt of Ancillary Rights

A Resident Holder who receives Exchangeable Shares as part of the Consideration for Zymeworks Common Shares will also receive ancillary rights in respect of the Exchangeable Shares, described under “Description of Exchangeable Shares and Related Agreements — Description of Exchangeable Shares”. A Resident Holder will be required to account for the ancillary rights in determining the proceeds of disposition of such Resident Holder’s Zymeworks Common Shares and the cost to the Resident Holder of the Exchangeable Shares received in consideration therefor. Zymeworks considers that the ancillary rights have a nominal fair market value. This determination of value is not binding on the CRA and it is possible that the CRA could take a contrary view.

Call Rights

A Resident Holder who receives Exchangeable Shares as part of the Consideration for Zymeworks Common Shares will grant to Callco certain call rights, described under “Description of Exchangeable Shares and Related Agreements — Description of Exchangeable Shares” (the “Call Rights”). Zymeworks considers that the Call Rights have a nominal fair market value. This determination of value is not binding on the CRA and it is possible that the CRA could take a contrary view.

Based on the view of Zymeworks, the granting of the Call Rights will not result in any material adverse income tax consequences to a Resident Holder. If the Call Rights have a fair market value in excess of a nominal amount, however, Resident Holders who acquire Exchangeable Shares will realize a capital gain in an amount equal to the fair market value of the Call Rights. The general tax treatment of capital gains and capital losses is discussed below under the section titled “— Taxation of Capital Gain or Capital Loss”.

Exchange of Zymeworks Common Shares for Delaware Common Stock

A Resident Holder who disposes of Zymeworks Common Shares for Delaware Common Stock will realize proceeds of disposition equal to the aggregate fair market value, at the time of the disposition, of the Delaware Common Stock acquired on the exchange. The Resident Holder will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less

 

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than) the adjusted cost base to such Resident Holder of the Zymeworks Common Shares immediately before the disposition. The general tax treatment of capital gains and capital losses is discussed below under the section titled “Taxation of Capital Gain or Capital Loss”.

The cost to a Resident Holder of Delaware Common Stock acquired on the exchange will be equal to the fair market value of the Delaware Common Stock at that time. The cost of Delaware Common Stock so acquired will be averaged with the adjusted cost base of any other Delaware Common Stock held by such Resident Holder as capital property for purposes of determining such Resident Holder’s adjusted cost base of all Delaware Common Stock held by such Resident Holder.

Exchange of Zymeworks Common Shares for Exchangeable Shares — No Section 85 Election

A Resident Holder who (a) disposes of Zymeworks Common Shares pursuant to the Plan of Arrangement and who receives Exchangeable Shares including any ancillary rights, and (b) does not make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act in respect of the disposition, will be considered to have disposed of the Zymeworks Common Shares for proceeds of disposition equal to the sum of (i) the aggregate fair market value, at the time of the disposition, of the Exchangeable Shares acquired on the exchange, and (ii) the fair market value of any ancillary rights acquired on the exchange. The Resident Holder will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition of such Zymeworks Common Shares, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to such Resident Holder of such Zymeworks Common Shares immediately before the disposition. The general tax treatment of capital gains and capital losses is discussed below under the section titled “— Taxation of Capital Gain or Capital Loss”.

The cost to a Resident Holder of Exchangeable Shares acquired on the exchange will be equal to the fair market value of the Exchangeable Shares at that time. The cost to the Resident Holder of ancillary rights acquired on the exchange will be equal to the fair market value, at the time of acquisition, of the ancillary rights. As described above, Zymeworks is of the view that such rights have only nominal value (see the section titled “Receipt of Ancillary Rights” above).

Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election

A Resident Holder who (a) disposes of Zymeworks Common Shares pursuant to the Plan of Arrangement and who receives Exchangeable Shares including any ancillary rights, and (b) validly makes a joint election under subsection 85(1) or subsection 85(2) of the Tax Act in respect of the disposition, may defer all or a portion of any capital gain otherwise arising on the exchange, depending on the Elected Amount (as defined below) and the adjusted cost base to the Resident Holder of the Zymeworks Common Shares at the time of the exchange.

Section 85 Election

Subject to the limitations and conditions described below, ExchangeCo will make a joint election under subsection 85(1) or subsection 85(2), as applicable, of the Tax Act (and the corresponding provisions of any applicable provincial tax legislation) with an Eligible Holder who validly receives Exchangeable Shares (including any ancillary rights) as part of the Consideration, at the agreed amount selected by such Eligible Holder subject to the limitations under the Tax Act (the “Elected Amount”). Subject to the limitations under the Tax Act described generally below, the Elected Amount will be treated for the purposes of the Tax Act as the Eligible Holder’s proceeds of disposition of its Zymeworks Common Shares.

In order to make an election under subsection 85(1) or subsection 85(2), as applicable, of the Tax Act (and the corresponding provisions of any applicable provincial tax legislation), an Eligible Holder must provide two signed copies of the necessary prescribed election form(s) to the Depositary within sixty (60) days following the Effective Date, duly completed with the details of the number of Zymeworks Common Shares transferred and the Elected Amount for the purposes of such election. It is the responsibility of each Eligible Holder who wishes to

 

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make such an election to obtain and complete the necessary forms as required by the Tax Act (and applicable provincial income tax laws), including any necessary provincial election forms, and submit the forms for execution by ExchangeCo. Thereafter, subject to the election forms being correct and complete and complying with the provisions of the Tax Act (and applicable provincial income tax law), the forms will be signed by ExchangeCo and returned to such former beneficial owner of Zymeworks Common Shares within sixty (60) days after the receipt thereof by the Depositary for filing with the CRA (or the applicable provincial taxing authority) by such former Eligible Holder. ExchangeCo will not be responsible for the proper completion of any election form and, except for ExchangeCo’s obligation to sign and return (within sixty (60) days after the receipt thereof by the Depositary) duly completed election forms which are received by the Depositary within sixty (60) days of the Effective Date, ExchangeCo will not be responsible for any taxes, interest or penalties resulting from the failure by a former beneficial owner of Zymeworks Common Shares to properly complete or file the election forms in the form and manner and within the time prescribed by the Tax Act (or any applicable provincial legislation).

The relevant tax election form is CRA Form T2057 (or, in the event that the Zymeworks Common Shares are held as partnership property, CRA Form T2058). An Eligible Holder interested in making an election should so indicate in the Letter of Transmittal and Election Form in the space provided therein. Eligible Holders should consult their own tax advisors to determine whether separate election forms must be filed with any other provincial taxing authority.

Where Zymeworks Common Shares are held in co-ownership and two or more of the co-owners wish to elect, one of the co-owners designated for such purpose by the co-owners must file one copy of the CRA Form T2057 on behalf of all of the co-owners (and where applicable, the corresponding form in duplicate with the relevant provincial authorities). The CRA Form T2057 must be accompanied by a list containing the name, address, social insurance number or business number of all co-owners electing as well as the document signed by all co-owners electing authorizing the designated co-owner to complete and file the form. Where the Zymeworks Common Shares are held as partnership property, a partner designated by the partnership must file one copy of the CRA Form T2058 on behalf of all members of the partnership (and where applicable, the corresponding form in duplicate with the relevant provincial authorities). The CRA Form T2058 must be accompanied by a list containing the name, address, social insurance number or business number of each partner as well as the document signed by each partner authorizing the designated partner to complete and file the form.

In general, the Elected Amount is subject to the following limitations in respect of the Zymeworks Common Shares that are the subject of the election:

 

   

the Elected Amount may not be less than the aggregate fair market value at the Effective Time of any ancillary rights received on the exchange;

 

   

the Elected Amount may not be less than the lesser of the adjusted cost base to the Eligible Holder of its Zymeworks Common Shares disposed of, determined immediately before the time of the disposition, and the fair market value at the Effective Time of the Zymeworks Common Shares disposed of at that time; and

 

   

the Elected Amount may not be greater than the fair market value at the Effective Time of the disposition of the Zymeworks Common Shares so disposed of.

Elected Amounts which do not comply with these limitations will be automatically adjusted pursuant to the provisions of the Tax Act so that they comply. Any reference to an Elected Amount herein refers to the Elected Amount that complies (or is adjusted to comply) with these limitations.

 

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Where a Resident Holder who is an Eligible Holder and ExchangeCo make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act, as applicable, the tax treatment to such Eligible Holder generally will be as follows:

 

   

the Eligible Holder will be deemed to have disposed of the Zymeworks Common Shares for proceeds of disposition equal to the Elected Amount;

 

   

if the proceeds of disposition are equal to the aggregate of the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares, determined immediately before the disposition, and any reasonable costs of disposition, no capital gain or capital loss will be realized by the Eligible Holder;

 

   

to the extent that the proceeds of disposition of the Zymeworks Common Shares exceed (or are less than) the aggregate of the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares, determined immediately before the exchange, and any reasonable costs of disposition, the Eligible Holder will, in general, realize a capital gain (or loss);

 

   

the cost to the Eligible Holder of any ancillary rights received on the exchange will be equal to the fair market value thereof at the Effective Time; and

 

   

the cost to the Eligible Holder of Exchangeable Shares received on the exchange will be equal to the amount by which the proceeds of disposition exceed the fair market value at the Effective Time of the ancillary rights received on the exchange.

Where an Eligible Holder and ExchangeCo make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act, as applicable, the Eligible Holder may realize a capital gain on the disposition of the Zymeworks Common Shares to the extent that the value of ancillary rights, net of any reasonable costs of disposition, exceeds the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares immediately before the disposition. As described above, Zymeworks is of the view that such rights have only nominal value (see the section titled “Receipt of Ancillary Rights” above).

To avoid a late-filing penalty, the required election forms must be received by the appropriate tax authorities on or before the day that is the earliest of the days on or before which either ExchangeCo or the electing Eligible Holder is required to file a Canadian tax return for the taxation year in which the disposition of the Zymeworks Common Shares occurs. The current taxation year of ExchangeCo is scheduled to end on December 31, 2022. Thus, if the exchange occurs prior to January 1, 2023, the tax election forms will, in the case of an electing Eligible Holder who is an individual (other than a trust), generally be due by April 30, 2023. Electing Eligible Holders should consult their own advisors forthwith respecting the deadlines applicable to their own particular circumstances.

Any Eligible Holder who does not ensure that ExchangeCo has received two duly completed copies of the necessary election forms on or before the 60th day after the Effective Date may not be able to benefit from the rollover provisions of the Tax Act. Accordingly, all Eligible Holders who wish to enter into a tax election with ExchangeCo should give their immediate attention to this matter.

The comments herein with respect to such elections are provided for general assistance only. The Law in this area is complex and contains numerous technical requirements. Eligible Holders should consult Information Circular 76-19R3 and Interpretation Bulletin IT-291R3 (Archived), issued by the CRA, for further information respecting the subsections 85(1) and (2) elections under the Tax Act. Eligible Holders wishing to make the election should consult their own tax advisors.

Exchange of Zymeworks Common Shares for Exchangeable Shares and Delaware Common Stock — No Section 85 Election

A Resident Holder who (a) disposes of Zymeworks Common Shares pursuant to the Plan of Arrangement and who receives Exchangeable Shares including any ancillary rights and Delaware Common Stock, and (b) does not

 

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make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act in respect of the disposition, will be considered to have disposed of the Zymeworks Common Shares for proceeds of disposition equal to the sum of (i) the aggregate fair market value, at the time of the disposition, of the Exchangeable Shares and Delaware Common Stock acquired on the exchange, and (ii) the fair market value of any ancillary rights acquired on the exchange. The Resident Holder will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition of such Zymeworks Common Shares, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to such Resident Holder of such Zymeworks Common Shares. The general tax treatment of capital gains and capital losses is discussed below under the section titled “Taxation of Capital Gain or Capital Loss”.

The cost to a Resident Holder of Exchangeable Shares and Delaware Common Stock acquired on the exchange will be equal to the respective fair market value of the Exchangeable Shares and Delaware Common Stock at that time. The cost to the Resident Holder of ancillary rights acquired on the exchange will be equal to the fair market value, at the time of acquisition, of the ancillary rights.

Exchange of Zymeworks Common Shares for Exchangeable Shares and Delaware Common Stock — Section 85 Election

A Resident Holder who (a) disposes of Zymeworks Common Shares pursuant to the Plan of Arrangement and who receives Exchangeable Shares including any ancillary rights and Delaware Common Stock, and (b) validly makes a joint election under subsection 85(1) or subsection 85(2) of the Tax Act in respect of the disposition, may defer all or a portion of any capital gain otherwise arising on the exchange, depending on the Elected Amount and the adjusted cost base to the Resident Holder of the Zymeworks Common Shares at the time of the exchange.

Section 85 Election

Subject to the limitations and conditions described below, ExchangeCo will make a joint election under subsection 85(1) or subsection 85(2), as applicable, of the Tax Act (and the corresponding provisions of any applicable provincial tax legislation) with an Eligible Holder who validly receives Exchangeable Shares (including any ancillary rights) and Delaware Common Stock as part of the Consideration, at the Elected Amount. Subject to the limitations under the Tax Act described generally below, the Elected Amount will be treated for the purposes of the Tax Act as the Eligible Holder’s proceeds of disposition of its Zymeworks Common Shares.

For Section 85 election forms and procedures, see section titled “Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election”.

In general, the Elected Amount is subject to the following limitations in respect of the Zymeworks Common Shares that are the subject of the election:

 

   

the Elected Amount may not be less than the aggregate fair market value of the Delaware Common Stock and any ancillary rights received on the exchange;

 

   

the Elected Amount may not be less than the lesser of the adjusted cost base to the Eligible Holder of its Zymeworks Common Shares disposed of, determined immediately before the time of the disposition, and the fair market value of the Zymeworks Common Shares disposed of at that time; and

 

   

the Elected Amount may not be greater than the fair market value at the time of the disposition of the Zymeworks Common Shares so disposed of.

Elected Amounts which do not comply with these limitations will be automatically adjusted pursuant to the provisions of the Tax Act so that they comply. Any reference to an Elected Amount herein refers to the Elected Amount that complies (or is adjusted to comply) with these limitations.

 

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Where a Resident Holder who is an Eligible Holder and ExchangeCo make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act, as applicable, the tax treatment to such Eligible Holder generally will be as follows:

 

   

the Eligible Holder will be deemed to realize proceeds of disposition equal to the Elected Amount;

 

   

if the proceeds of disposition are equal to the aggregate of the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares, determined immediately before the disposition, and any reasonable costs of disposition, no capital gain or capital loss will be realized by the Eligible Holder;

 

   

to the extent that the proceeds of disposition of the Zymeworks Common Shares exceed (or are less than) the aggregate of the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares, determined immediately before the exchange, and any reasonable costs of disposition, the Eligible Holder will, in general, realize a capital gain (or loss);

 

   

the cost to the Eligible Holder of any Delaware Common Stock and ancillary rights received on the exchange will be equal to their respective fair market values at that time; and

 

   

the cost to the Eligible Holder of Exchangeable Shares received on the exchange will be equal to the amount by which the proceeds of disposition exceed the fair market value of the Delaware Common Stock and the ancillary rights received on the exchange.

Where an Eligible Holder and ExchangeCo make a joint election under subsection 85(1) or subsection 85(2) of the Tax Act, as applicable, the Eligible Holder may realize a capital gain on the disposition of the Zymeworks Common Shares to the extent that the value of the Delaware Common Stock and the ancillary rights, net of any reasonable costs of disposition, exceeds the adjusted cost base to the Eligible Holder of the Zymeworks Common Shares.

For applicable section 85 election deadlines, see section titled “Exchange of Zymeworks Common Shares for Exchangeable Shares — Section 85 Election”.

The comments herein with respect to such elections are provided for general assistance only. The Law in this area is complex and contains numerous technical requirements. Eligible Holders should consult Information Circular 76-19R3 and Interpretation Bulletin IT-291R3 (Archived), issued by the CRA, for further information respecting the subsections 85(1) and (2) elections under the Tax Act. Eligible Holders wishing to make the election should consult their own tax advisors.

Dividends on Exchangeable Shares

A dividend received or deemed to be received on the Exchangeable Shares by a Resident Holder who is an individual (other than certain trusts) will be included in computing such Resident Holder’s income for the taxation year in which such dividends are received or deemed to be received, subject to the gross-up and dividend tax credit rules normally applicable under the Tax Act to taxable dividends received from taxable Canadian corporations. Certain dividends may be eligible for the enhanced gross-up and dividend tax credit, to the extent designated as an “eligible dividend” by ExchangeCo. There are limitations on the ability of a corporation to designate dividends and deemed dividends as eligible dividends. A dividend received by an individual, or certain trusts, may also give rise to alternative minimum tax under the Tax Act, depending on the circumstances.

A dividend received or deemed to be received on Exchangeable Shares by a Resident Holder that is a corporation will be included in the corporation’s income for the taxation year in which such dividends are received or deemed to be received and will generally be deductible in computing its taxable income, subject to the restrictions and limitations under the Tax Act. Where a Resident Holder that is a corporation receives or is deemed to receive a dividend on Exchangeable Shares and such dividend is deductible in computing such Resident Holder’s income, all or part of the dividend may in certain circumstances be treated under the Tax Act

 

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as a capital gain from the disposition of a capital property (or as proceeds of disposition of Exchangeable Shares potentially giving rise to a capital gain) the taxable portion of which must be included in computing the Resident Holder’s income for the year in which the dividend was received. Resident Holders that are corporations should consult their own tax advisors in this regard.

Certain corporations, including “private corporations” and “subject corporations” (as such terms are defined in the Tax Act) may be liable to pay a refundable tax under Part IV of the Tax Act to the extent that the dividends received or deemed to be received on Exchangeable Shares are deductible in computing taxable income. The Exchangeable Shares will be “taxable preferred shares” for purposes of the Tax Act and therefore, Part IV.1 of the Tax Act will apply.

If Parent or Callco, or any other person with whom Parent does not deal at arm’s length (or any trust or partnership of which such person is a beneficiary or member), is a “specified financial institution” for purposes of the Tax Act at the time that dividends are paid on the Exchangeable Shares, dividends received or deemed to be received by a Resident Holder that is a corporation will not be deductible in computing such holder’s taxable income. Zymeworks is of the view that, immediately after the Effective Time, neither Parent nor Callco will be a “specified financial institution” for purposes of the Tax Act.

Resident Holders should consult their own tax advisors in relation to any foreign tax credit or deduction which may be available in respect of U.S. withholding tax, and the limitations under the Tax Act in that regard. Generally, a foreign tax credit or deduction in respect of a tax paid to a particular foreign country is limited to the Canadian tax otherwise payable in respect of income sourced in that country. Dividends received or deemed to be received on Exchangeable Shares by a Resident Holder may not be treated as U.S. source income for these purposes.

Dividends on Delaware Common Stock

A dividend received or deemed to be received on Delaware Common Stock by a Resident Holder who is an individual will be included in computing such Resident Holder’s income for the taxation year in which such dividends are received and will not be subject to the gross-up and dividend tax credit rules in the Tax Act.

A dividend received or deemed to be received on Delaware Common Stock by a Resident Holder that is a corporation will be included in the corporation’s income and will generally not be deductible in computing its taxable income.

Any U.S. non-resident withholding tax paid by or on behalf of a Resident Holder on such dividends generally should be eligible, subject to the specific rules and limitations under the Tax Act, to be credited against the Resident Holder’s income tax or deducted from income.

Redemption, Retraction, Exchange and Disposition of Exchangeable Shares

A Resident Holder will be considered to have disposed of Exchangeable Shares (a) on a redemption (including pursuant to a Retraction Request) of such Exchangeable Shares by ExchangeCo, and (b) on an acquisition of such Exchangeable Shares by Callco. However, as described below, the Canadian federal income tax consequences of the disposition will be different depending on whether the event giving rise to the disposition is a redemption or an acquisition. Resident Holders have certain rights under the Exchangeable Share Provisions that may affect whether the relevant disposition occurs by way of a redemption or an acquisition and such Resident Holders should consult their own tax advisors in relation to the potential exercise of any such rights.

On the redemption (including pursuant to a Retraction Request) of an Exchangeable Share by ExchangeCo, a Resident Holder will generally be deemed to receive a dividend equal to the amount, if any, by which the aggregate redemption proceeds exceed the paid-up capital (for purposes of the Tax Act) of the Exchangeable

 

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Share at the time the Exchangeable Share is so redeemed. On the redemption, the Resident Holder will be considered to have disposed of the Exchangeable Share for proceeds of disposition equal to the redemption proceeds less the amount of the foregoing deemed dividend. The Resident Holder will realize a capital loss (or capital gain) equal to the amount by which the sum of (a) the adjusted cost base to such Resident Holder of the Exchangeable Share immediately before the disposition, and (b) any reasonable costs of disposition, exceeds (or is less than) the proceeds of disposition. For this purpose, the “redemption proceeds” of such Exchangeable Share will be equal to the Exchangeable Share Price. The amount of any such deemed dividend will be generally subject to the tax treatment described in the section titled “— Dividends on Exchangeable Shares” above. The general tax treatment of capital gains and capital losses is discussed below under the section titled “Taxation of Capital Gain or Capital Loss”.

In the case of a Resident Holder of Exchangeable Shares that is a corporation, in some circumstances, the amount of any such deemed dividend may be treated as proceeds of disposition and not as a dividend.

On the acquisition of an Exchangeable Share by Callco or Parent, a Resident Holder will generally be considered to realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition exceed (or are less than) the total of (a) the adjusted cost base of the Exchangeable Share to such Resident Holder, and (b) any reasonable costs of disposition. For this purpose, the proceeds of disposition in respect of an acquisition of an Exchangeable Share by Callco or Parent will be equal to the Exchangeable Share Price. The acquisition of an Exchangeable Share by Callco or Parent will not result in a deemed dividend. The general tax treatment of capital gains and capital losses is discussed below under the section titled “— Taxation of Capital Gain or Capital Loss”.

A disposition or deemed disposition of Exchangeable Shares by a Resident Holder, other than on the redemption, retraction or other disposition of such shares to ExchangeCo, will generally result in a capital gain (or capital loss) equal to the amount by which the proceeds of disposition exceed (or are less than) the total of (a) the adjusted cost base of the Exchangeable Share to such Resident Holder, and (b) any reasonable costs of disposition.

Acquisition and Disposition of Delaware Common Stock

The cost of Delaware Common Stock received by a Resident Holder on the redemption or retraction of an Exchangeable Share by ExchangeCo or on the acquisition of an Exchangeable Share by Callco or Parent will be equal to the fair market value of such a Delaware Common Stock at the time of such event, and will be averaged with the adjusted cost base of any other Delaware Common Stock held at that time by such Resident Holder as capital property for the purpose of determining the adjusted cost base of all Delaware Common Stock held by such Resident Holder.

A disposition or deemed disposition of a Delaware Common Stock by a Resident Holder will generally result in a capital gain (or capital loss) equal to the amount by which the proceeds of disposition exceed (or are less than) the total of (a) the adjusted cost base of the Delaware Common Stock to such Resident Holder immediately before the disposition, and (b) any reasonable costs of disposition. The general tax treatment of capital gains and capital losses is discussed below under the section titled “— Taxation of Capital Gain or Capital Loss”.

Dissenting Resident Holders

A Resident Holder who exercises Dissent Rights and receives from Zymeworks the fair value of such Resident Holder’s Zymeworks Common Shares will be considered to have disposed of the Zymeworks Common Shares and will generally be deemed to receive a dividend equal to the amount, if any, by which the aggregate proceeds (less the amount of any interest awarded by the Court) exceed the paid-up capital (for purposes of the Tax Act) of such Resident Holder’s Zymeworks Common Shares. In certain circumstances, the dividend deemed to have been received by such Resident Holder that is a corporation may be treated as proceeds of disposition. In addition, the Resident Holder will be considered to have disposed of such Zymeworks Common Shares for

 

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proceeds of disposition equal to the aggregate proceeds (less the amount of any interest awarded by the Court) less the amount of any deemed dividend, as noted above. The Resident Holder will realize a capital loss (or capital gain) equal to the amount by which the sum of (a) the adjusted cost base to such Resident Holder of the Zymeworks Common Shares immediately before the disposition, and (b) any reasonable costs of disposition, exceeds (or is less than) the proceeds of disposition. The general tax treatment of capital gains and capital losses is discussed below under the section titled “Taxation of Capital Gain or Capital Loss”.

Any interest awarded by the Court to a dissenting Resident Holder will be included in computing such dissenting Resident Holder’s income for purposes of the Tax Act.

Taxation of Capital Gain or Capital Loss

In general, one-half of a capital gain realized by a Resident Holder must be included in computing such Resident Holder’s income as a taxable capital gain. One-half of a capital loss must be deducted as an allowable capital loss against taxable capital gains realized by the Resident Holder in the year and any excess may be deducted against net taxable capital gains in any of the three preceding years or in any subsequent year, to the extent and under the circumstances set out in the Tax Act.

The amount of any capital loss realized on the disposition or deemed disposition of Exchangeable Shares and Delaware Common Stock by a Resident Holder that is a corporation may be reduced by the amount of dividends received or deemed to have been received by it on such Exchangeable Shares and Delaware Common Stock (as applicable) or shares substituted for such Exchangeable Shares and Delaware Common Stock to the extent and in the circumstances specified by the Tax Act. Similar rules may apply where an Exchangeable Share or Delaware Common Stock is owned by a partnership or trust of which a corporation, trust or partnership is a member or beneficiary. Resident Holders to whom these rules may be relevant should consult their own tax advisors.

A Resident Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” as defined in the Tax Act may be liable to pay an additional refundable tax on its “aggregate investment income”, which is defined in the Tax Act to include taxable capital gains and interest income. Proposed Amendments announced by the Minister of Finance on April 7, 2022 are intended to extend this additional tax and refund mechanism to “substantive Canadian-controlled private corporations”, as defined in the Proposed Amendments. Resident Holders should consult their own tax advisors with respect to the application of these Proposed Amendments to their circumstances.

A taxable capital gain realized by an individual, or certain trusts, may give rise to a liability for alternative minimum tax under the Tax Act.

Foreign Property Information Reporting

A Resident Holder who is a “specified Canadian entity” as defined in the Tax Act for a taxation year or fiscal period whose total cost amount of “specified foreign property” as defined in the Tax Act, which includes the Delaware Common Stock and the Exchangeable Shares (including any ancillary rights), at any time in the year or fiscal period exceeds $100,000, is required to file an information return for the year or period disclosing prescribed information in respect of such property. Resident Holders to whom these rules may be relevant should consult their own tax advisors.

Eligibility for Investment

Based on the provisions of the Tax Act and the regulations thereunder as of the date hereof, the Delaware Common Stock will be “qualified investments” under the Tax Act for trusts governed by registered retirement savings plans (“RRSPs”), registered retirement income funds (“RRIFs”), deferred profit sharing plans (“DPSPs”), registered education savings plans (“RESPs”), registered disability savings plans (“RDSPs”) and

 

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tax-free savings accounts (“TFSAs”) (collectively, RRSPs, RRIFs, RESPs, RDSPs and TFSAs are referred to as “Registered Plans”), provided that the Delaware Common Stock are listed on a “designated stock exchange” for the purposes of the Tax Act (which currently includes the NYSE). Neither DPSPs nor Registered Plans are eligible to acquire Exchangeable Shares pursuant to the Plan of Arrangement.

The annuitant, holder or subscriber, as applicable of a Registered Plan will be subject to a penalty tax in respect of the Delaware Common Stock held by a trust governed by such Registered Plan, as the case may be, if such Delaware Common Stock are a “prohibited investment” for such Registered Plan for the purposes of the Tax Act. The Delaware Common Stock will not be a prohibited investment for a Registered Plan, provided that the annuitant, holder or subscriber of such a Registered Plan, as the case may be: (a) deals at arm’s length with Parent for purposes of the Tax Act and (b) does not have a “significant interest” within the meaning of the Tax Act in Parent. In addition, the Delaware Common Stock will not be a prohibited investment if the Delaware Common Stock are “excluded property” as defined in the Tax Act for trusts governed by a Registered Plan. Resident Holders who intend to hold Delaware Common Stock in a Registered Plan should consult their own tax advisors with respect to the application of the prohibited investment rules.

Based on Proposed Amendments released on August 9, 2022 to implement tax measures applicable to first home savings accounts (“FHSAs”) first proposed by the 2022 Federal Budget (Canada), FHSAs would generally be subject to the rules in the Tax Act applicable to Registered Plans (such amendments, the “FHSA Amendments”). In particular, pursuant to the FHSA Amendments, it is expected that the Delaware Common Stock will be a qualified investment for an FHSA provided the conditions discussed above in relation to Registered Plans are satisfied. In addition, the rules in respect of a “prohibited investment” are also proposed to apply to FHSAs and the holders thereof. The FHSA Amendments are proposed to come into force on January 1, 2023. Resident Holders who intend to hold Delaware Common Stock in an FHSA should consult their own tax advisors with respect to the application of the prohibited investment rules.

Holders Not Resident in Canada

This portion of the summary is generally applicable to a Holder (a “Non-Resident Holder”) who (a) for the purposes of the Tax Act and any applicable tax treaty, is neither resident nor deemed to be resident in Canada at any time while they hold Zymeworks Common Shares, Exchangeable Shares or Delaware Common Stock; and (b) does not and will not use or hold and is not and will not be deemed to use or hold the Zymeworks Common Shares, Exchangeable Shares or Delaware Common Stock in carrying on a business in Canada. Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer carrying on business in Canada and elsewhere or an authorized foreign bank. Such Holders should consult their own tax advisors.

Disposition of Zymeworks Common Shares Under the Plan of Arrangement

A Non-Resident Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition of a Zymeworks Common Share under the Plan of Arrangement unless the Zymeworks Common Share constitutes “taxable Canadian property” to the Non-Resident Holder thereof for purposes of the Tax Act, and the gain is not exempt from tax pursuant to the terms of an applicable tax treaty.

Generally, a Zymeworks Common Share will not constitute “taxable Canadian property” of a Non-Resident Holder at a particular time provided that such share is listed on a designated stock exchange as defined in the Tax Act (which includes the NYSE) at that time, unless at any time during the 60-month period immediately preceding the particular time (a) the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm’s length, partnerships in which the Non-Resident Holder or a non-arm’s length person holds a membership interest directly or indirectly through one or more partnerships, or the Non-Resident Holder together with such persons or partnerships, owned 25% or more of the issued shares of any class or series of shares of Zymeworks, and (b) more than 50% of the fair market value of the Zymeworks Common Share was derived

 

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directly or indirectly from one or any combination of real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Tax Act), “timber resource properties” (as defined in the Tax Act), and options in respect of, or interests in, or for civil law rights in, any such properties (whether or not such property exists). If the Zymeworks Common Shares are not listed on a designated stock exchange as defined in the Tax Act at the particular time, such shares will be considered “taxable Canadian property” of a Non-Resident Holder at the particular time if, at any time during the 60-month period immediately preceding the particular time, the Zymeworks Common Shares derived (directly or indirectly) more than 50% of their fair market value from one or any combination of real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Tax Act), “timber resource properties” (as defined in the Tax Act) or options in respect of, or interests in or rights in respect of, any such property (whether or not such property exists). Notwithstanding the foregoing, a Zymeworks Common Share may otherwise in certain circumstances be deemed to be taxable Canadian property to the Non-Resident Holder for the purposes of the Tax Act.

If the Zymeworks Common Shares constitute or are deemed to constitute taxable Canadian property to any Non-Resident Holder, such Non-Resident Holder may be entitled to relief under the provisions of an applicable income tax treaty or convention. Non-Resident Holders whose Zymeworks Common Shares may be taxable Canadian property should consult their own tax advisors.

Dissenting Non-Resident Holders

A Non-Resident Holder who exercises Dissent Rights and received from Zymeworks the fair value of such Non-Resident Holder’s Zymeworks Common Shares will be deemed to receive a dividend and to realize a capital loss (or capital gain) as described under the heading “Holders Resident in Canada — Dissenting Resident Holders” above. Any deemed dividends paid to such Non-Resident Holders will be subject to Canadian non-resident withholding tax at a rate of 25%, unless the rate is reduced under the provisions of an applicable income tax treaty. A dissenting Non-Resident Holder for whom Zymeworks Common Shares are not taxable Canadian property (as described above under the section titled “Holders Not Resident in Canada — Disposition of Zymeworks Common Shares Under the Plan of Arrangement”) will not be subject to capital gains tax under the Tax Act on the disposition of such Zymeworks Common Shares. Any interest paid to a dissenting Non-Resident Holder will not be subject to Canadian withholding tax.

Any interest awarded by the Court to a dissenting Non-Resident Holder will not be subject to Canadian non-resident withholding tax.

Dividends on Delaware Common Stock

A dividend received or deemed to be received on Delaware Common Stock by a Non-Resident Holder will not be subject to Canadian withholding tax or other income tax under the Tax Act.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion sets forth the material U.S. federal income tax consequences of the Redomicile Transactions to U.S. holders (as defined below) of Zymeworks Common Shares and of the ownership and disposition of shares of Delaware Common Stock received by Non-U.S. holders (as defined below) pursuant to the Redomicile Transactions.

The summary is based on current provisions of the Code, applicable Treasury regulations issued thereunder, judicial authority and IRS administrative rulings and pronouncements, all of which are subject to change, possibly with retroactive effect, or a different interpretation. Any such change or different interpretation could alter the tax consequences to the holders of Zymeworks Common Shares, as described herein. This summary does not purport to address all U.S. federal income tax matters that may be relevant to a particular holder of Zymeworks Common Shares or Delaware Common Stock.

The discussion applies only to holders of Zymeworks Common Shares or Delaware Common Stock that hold Zymeworks Common Shares or Delaware Common Stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), and does not address the tax consequences that may be relevant to holders of Zymeworks Common Shares or Delaware Common Stock who are subject to special tax rules that apply to certain types of investors, such as:

 

   

insurance companies,

 

   

tax-exempt entities or organizations (including an “individual retirement account” or “Roth IRA” as defined in Sections 408 or 408A of the Code),

 

   

banks, broker-dealers, other financial institutions,

 

   

traders in securities that elect to mark to market,

 

   

certain former citizens or long-term residents of the United States,

 

   

partnerships or other pass-through entities for U.S. federal income tax purposes,

 

   

holders who hold the Zymeworks Common Shares or Delaware Common Stock as part of a hedge, straddle, constructive sale or conversion transaction (or who may have acquired the Zymeworks Common Shares or Delaware Common Stock in a transaction subject to the gain rollover provisions of Section 1045 of the Code) or as “qualified small business stock”,

 

   

holders who are subject to the alternative minimum tax or the Medicare tax on net investment income provisions of the Code,

 

   

holders whose functional currency is not the U.S. dollar, or

 

   

holders who acquired the Zymeworks Common Shares or Delaware Common Stock pursuant to the exercise of employee incentive stock options or otherwise as compensation.

Further, the following discussion assumes that Delaware Common Stock received in the Redomicile Transactions represents consideration for the Zymeworks Common Shares and not compensation. Finally, the following discussion does not address (a) the tax consequences under U.S. federal estate and gift tax laws, or state, local or non-U.S. tax laws, (b) the tax consequences of transactions occurring prior to, concurrently with or after the Redomicile Transactions (whether or not such transactions are in connection with the Redomicile Transactions) including, without limitation, the conversion or exercise of warrants, options or rights to purchase Zymeworks Common Shares in anticipation of or in connection with the Redomicile Transactions, (c) the tax consequences to holders of notes, convertible notes, options or warrants, convertible equity securities, or other rights to acquire an equity interest in Zymeworks, (d) the tax consequences regarding any compensatory payments made to the holders of Zymeworks Common Shares in connection with the Redomicile Transactions, (e) the tax consequences that may be relevant to the holders of Zymeworks Common Shares that receive Exchangeable

 

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Shares in the Redomicile Transactions, or (f) the tax consequences with respect to holders of Zymeworks Common Shares who exercise appraisal or dissenter rights.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of Zymeworks Common Shares or Delaware Common Stock who is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States, as determined for U.S. federal income tax purposes:

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States or any state thereof or the District of Columbia;

 

   

a trust, (a) the substantial decisions of which are controlled by one or more United States Persons (within the meaning of the Code) and which is subject to the primary supervision of a United States court, or (b) that has validly elected under applicable Treasury regulations to be treated as a United States person for U.S. federal income tax purposes; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of source.

A “Non-U.S. holder” is a beneficial owner of Zymeworks Common Shares or Delaware Common Stock who is not a partnership (including any entity or arrangement treated as a partnership or other flow-through entity and the equity holders therein) and is not a U.S. holder for U.S. federal income tax purposes.

If an entity or an arrangement treated as a partnership or other flow-through entity for U.S. federal income tax purposes holds Zymeworks Common Shares or Delaware Common Stock, the U.S. federal income tax consequences of the Redomicile Transactions or owning or disposing of Delaware Common Stock to a partner in such partnership (or owner of such entity) generally will depend on the status of the partner (or owner of such entity) and the activities of the partnership (or entity). Any entity treated as a partnership or other flow-through entity for U.S. federal income tax purposes that holds Zymeworks Common Shares or Delaware Common Stock, and any partners in such partnership, are urged to consult their tax advisors with respect to the tax consequences of the Redomicile Transactions or owning or disposing of Delaware Common Stock in their specific circumstances.

Zymeworks Warrants may be eligible to be treated as Zymeworks Common Shares for U.S. federal income tax purposes; however, the tax treatment of Zymeworks Warrants is uncertain. Zymeworks Warrant holders should consult with their own tax advisors regarding the tax consequences of the Redomicile Transactions in their specific circumstances.

The tax consequences of the Redomicile Transactions and holding Delaware Common Stock will depend on a holder’s specific situation. You should consult with your tax advisor as to the tax consequences of the Redomicile Transactions and holding Delaware Common Stock in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.

Material U.S. Federal Income Tax Considerations of the Redomicile Transactions to U.S. Holders of Zymeworks Common Shares

The following discussion applies only to holders of Zymeworks Common Shares that are U.S. holders. Holders of Zymeworks Common Shares other than U.S. holders should consult with their own tax advisors regarding the tax consequences of the Redomicile Transactions.

In general

It is the opinion of Wilson Sonsini Goodrich and Rosati, P.C. that the Redomicile Transactions will qualify as an exchange described in Section 351(a) of the Code for U.S. federal income tax purposes. Such opinion is based on

 

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customary assumptions, representations and covenants. If any of the assumptions, representations or covenants on which the opinion is based is or becomes incorrect, incomplete, inaccurate or is otherwise not complied with, the validity of the opinion described above may be adversely affected and the tax consequences of the Redomicile Transactions could differ from those described herein. Zymeworks and Parent intend for the Redomicile Transactions to be treated as an exchange described in Section 351(a) of the Code for U.S. federal income tax purposes, and each party expects to report the Redomicile Transactions consistent with such intent. Neither Zymeworks nor Parent has requested a ruling from the IRS in connection with the Redomicile Transactions or related transactions. The discussion below neither binds the IRS nor precludes it from adopting a contrary position. The obligation of the parties to consummate the Redomicile Transactions is not conditioned upon the receipt of an opinion of counsel as of the date of the Redomicile Transactions (or otherwise) regarding the qualification of the Redomicile Transactions as an exchange described in Section 351(a) of the Code. Further, an opinion of counsel is not binding on the IRS or any court. Even if Zymeworks and Parent report the Redomicile Transactions as qualifying as an exchange described in Section 351 of the Code, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to the position taken by Zymeworks and Parent.

U.S. holders of Zymeworks Common Shares should consult with their tax advisors regarding the tax consequences of the Redomicile Transactions and the requirements that must be satisfied in order for the Redomicile Transactions to qualify as an exchange described in Section 351 of the Code.

Tax consequences if the Redomicile Transactions qualify as an exchange described in Section 351 of the Code

Provided that the Redomicile Transactions qualify as an exchange described in Section 351 of the Code, and subject to the discussion below under the caption heading “— PFIC Considerations”, the following U.S. federal income tax consequences will result to a U.S. holder of Zymeworks Common Shares in the Redomicile Transactions:

 

   

No gain or loss will be recognized by a U.S. holder of Zymeworks Common Shares for U.S. federal income tax purposes on the exchange of its Zymeworks Common Shares for Delaware Common Stock in the Redomicile Transactions.

 

   

The aggregate tax basis of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will be equal to the aggregate tax basis of the Zymeworks Common Shares it exchanged in the Redomicile Transactions.

 

   

The tax holding period of the Delaware Common Stock received in the Redomicile Transactions by a U.S. holder of Zymeworks Common Shares will include the holding period of the Zymeworks Common Shares that it surrendered in exchange therefor in the Redomicile Transactions.

 

   

The Redomicile Transactions may also qualify as a tax-free reorganization under Section 368(a) of the Code, in which case the tax consequences to U.S. holders will generally be similar.

Tax consequences if the Redomicile Transactions fail to qualify as an exchange described in Section 351 of the Code or a tax-free reorganization under Section 368 of the Code

If the Redomicile Transactions fail to qualify as an exchange described in Section 351 of the Code, and subject to the discussion below under the caption heading “— PFIC Considerations”, U.S. holders of Zymeworks Common Shares would be treated as if they sold their Zymeworks Common Shares in a fully taxable transaction. In that case, each U.S. holder of Zymeworks Common Shares would recognize gain or loss with respect to the disposition of each of its shares of Zymeworks Common Shares equal to the difference between (a) the U.S. holder’s basis in each such share of Zymeworks Common Shares and (b) the fair market value of the Delaware Common Stock received in the Redomicile Transactions, determined as of the date such stock is received. Such gain or loss would be treated as capital gain or capital loss and would be treated as long-term capital gain or loss if the Zymeworks Common Shares have been held for more than one year as of the date of the Redomicile Transactions. Long-term capitals gains of non-corporate U.S. holders generally are eligible for reduced rates of

 

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taxation. A U.S. holder’s aggregate tax basis in the Delaware Common Stock so received would equal its fair market value as of the date such stock is received, and a U.S. holder’s holding period for such Delaware Common Stock would begin the day after such stock is received.

PFIC Considerations

The Redomicile Transactions could be a taxable event to U.S. holders of Zymeworks Common Shares if Zymeworks were treated as a passive foreign investment corporation, or PFIC, for any taxable year during the period such U.S. holders held Zymeworks Common Shares.

A non-U.S. corporation will be classified as a PFIC for U.S. federal income tax purposes if either (a) at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income or (b) at least 50% of its assets in a taxable year (ordinarily determined based on fair market value and averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

Section 1291(f) of the Code requires that, to the extent provided in Treasury Regulations, a United States person who disposes of stock of a PFIC recognizes gain notwithstanding any other provision of the Code. No final Treasury Regulations are currently in effect under Section 1291(f) of the Code. However, proposed Treasury Regulations under Section 1291(f) of the Code have been promulgated with a retroactive effective date. If finalized in their current form, those proposed Treasury Regulations may require gain recognition to U.S. holders of Zymeworks Common Shares upon the Redomicile Transactions if (a) Zymeworks were classified as a PFIC at any time during such U.S. holder’s holding period for such Zymeworks Common Shares and (b) the U.S. holder had not timely made (i) a QEF Election (as described below) for the first taxable year in which the U.S. holder owned such Zymeworks Common Shares or in which Zymeworks was a PFIC, whichever is later, or (ii) a mark-to-market election (as described below) with respect to such Zymeworks Common Shares. The tax on any such recognized gain would be imposed based on a complex set of computational rules.

Under these rules:

 

   

the U.S. holder’s gain will be allocated ratably over the U.S. holder’s holding period for such U.S. holder’s Zymeworks Common Shares;

 

   

the amount of gain allocated to the U.S. holder’s taxable year in which the U.S. holder recognized the gain, or to the period in the U.S. holder’s holding period before the first day of the first taxable year in which Zymeworks was a PFIC, will be taxed as ordinary income;

 

   

the amount of gain allocated to other taxable years (or portions thereof) of the U.S. holder and included in such U.S. holder’s holding period would be taxed at the highest tax rate in effect for that year and applicable to the U.S. holder; and

 

   

an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the U.S. holder in respect of the tax attributable to each such other taxable year of such U.S. holder.

It is difficult to predict whether, in what form and with what effective date, final Treasury Regulations under Section 1291(f) of the Code will be adopted. Therefore, if Zymeworks has ever been a PFIC, U.S. holders of Zymeworks Common Shares that have not made a timely QEF Election or a mark-to-market election (both as defined and described below) may, pursuant to the proposed Treasury Regulations, be subject to taxation on the Redomicile Transactions to the extent their Zymeworks Common Shares have a fair market value in excess of their tax basis therein.

 

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The QEF Election is made pursuant to Section 1295 of the Code on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. Retroactive QEF Elections generally may be made only by filing a protective statement with the tax return for the first taxation year for which the statement will apply, and if certain other conditions are met or with the consent of the IRS. U.S. holders should consult their tax advisors regarding the availability and tax consequences of a retroactive QEF Election under their particular circumstances. A U.S. holder that makes a QEF Election may be referred to as an “Electing Shareholder.” An Electing Shareholder generally would not be subject to the adverse PFIC rules discussed above with respect to their Zymeworks Common Shares. As a result, a U.S. holder that is an Electing Shareholder should not recognize gain or loss as a result of the Redomicile Transactions.

The impact of the PFIC rules on a U.S. holder of Zymeworks Common Shares may also depend on whether the U.S. holder has made a “mark-to-market” election under Section 1296 of the Code. Pursuant to Section 1296 of the Code, U.S. holders who hold (actually or constructively) stock of a non-U.S. corporation that is classified as a PFIC may elect to mark such stock to its market value if such stock is regularly traded on an established exchange. No assurance can be given that Zymeworks Common Shares have been considered to be regularly traded for purposes of the mark-to-market election or whether the other requirements of this election have previously been satisfied.

Although Zymeworks does not believe that it was a PFIC for its most recent taxable year ended on December 31, 2021 or the year that includes the Redomicile Transactions, each U.S. holder should consult with its tax advisors regarding the application of PFIC rules in their particular circumstances. WSGR expresses no opinion regarding Zymeworks’ status as a PFIC.

Information reporting and backup withholding

U.S. holders of Zymeworks Common Shares that hold 5% or more (by vote or value) of the outstanding Delaware Common Stock will be required to attach a statement to their federal income tax returns that contains the information listed in Treasury Regulation Section 1.351-3 and Treasury Regulation Section 1.368-3. Such statement, among other things, must include the fair market value of Zymeworks Common Shares surrendered by the holder in the Redomicile Transactions and the holder’s tax basis in such stock, in both cases determined immediately prior to the Redomicile Transactions.

Under certain circumstances, information reporting and/or backup withholding may apply to U.S. holders with respect to the consideration received pursuant to the Arrangement, payments of dividends on Delaware Common Stock, and certain payments of proceeds on the sale, exchange or other disposition of Delaware Common Stock. However, U.S. holders generally can avoid backup withholding by furnishing a properly executed IRS Form W-9 (or an acceptable substitute form) certifying that such holder is not subject to backup withholding or by otherwise establishing an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability if the required information is furnished by the U.S. holder in a timely manner to the IRS.

THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REDOMICILE TRANSACTIONS UNDER CURRENT LAW. TAX MATTERS CAN BE COMPLICATED AND THE TAX CONSEQUENCES OF THE REDOMICILE TRANSACTIONS TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE REDOMICILE TRANSACTIONS TO YOU, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX LAWS.

 

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Material U.S. Federal Income Tax Considerations to Non-U.S. Holders of Ownership and Disposition of Delaware Common Stock

Distributions

If Parent makes distributions on Delaware Common Stock (including constructive distributions, but not including certain distributions of stock or rights to acquire Delaware Common Stock), those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from Parent’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed Parent’s current and accumulated earnings and profits, the excess will constitute a return of capital and will first reduce Non-U.S. holder’s basis in Delaware Common Stock, but not below zero, and then will be treated as gain from the sale of stock as described below under “— Gain on Disposition of Delaware Common Stock.

Subject to the discussions below regarding effectively connected income, backup withholding and Foreign Account Tax Compliance Act, or FATCA, withholding, any dividend paid to Non-U.S. holders generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty between the United States and a Non-U.S. holder’s country of residence. In order to receive a reduced treaty rate, a Non-U.S. holder must provide Parent or the applicable paying agent with an IRS Form W-8BEN or W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. Under applicable Treasury Regulations, Parent may withhold up to 30% of the gross amount of the entire distribution even if the amount constituting a dividend, as described above, is less than the gross amount. Non-U.S. holders may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. If Non-U.S. holders hold Delaware Common Stock through a financial institution or other agent acting on Non-U.S. holder’s behalf, such Non-U.S. holders will be required to provide appropriate documentation to the agent, which then will be required to provide certification to Parent or its paying agent, either directly or through other intermediaries. Special certification and other requirements apply to certain Non-U.S. holders that are pass-through entities rather than corporations or individuals.

Dividends received by a Non-U.S. holder that are treated as effectively connected with Non-U.S. holder’s conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, that are attributable to a permanent establishment or fixed base maintained by a Non-U.S. holder in the United States) are generally exempt from the 30% U.S. federal withholding tax, subject to the discussions below regarding backup withholding and FATCA withholding. In order to obtain this exemption, Non-U.S. holder must provide Parent with a properly executed IRS Form W-8ECI or other applicable IRS Form W-8 or a successor form properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal withholding tax, generally are taxed at the U.S. federal income tax rates applicable to U.S. persons, net of certain deductions and credits. In addition, if Non-U.S. holder is a corporate non-U.S. holder, dividends such Non-U.S. holder receives that are effectively connected with Non-U.S. holder’s conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty between the United States and Non-U.S. holder’s country of residence. Non-U.S. holders should consult their own tax advisors regarding the tax consequences of the ownership and disposition of Delaware Common Stock, including the application of any applicable tax treaties that may provide for different rules.

Gain on Disposition of Delaware Common Stock

Subject to the discussions below regarding backup withholding and FATCA withholding, Non-U.S. holders generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of Delaware Common Stock unless:

 

   

the gain is effectively connected with a Non-U.S. holder’s conduct of a U.S. trade or business (and, if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by a Non-U.S. holder in the United States);

 

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Non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

 

   

Delaware Common Stock constitutes a United States real property interest by reason of Parent’s status as a “United States real property holding corporation”, or a USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding Non-U.S. holder’s disposition of, or holding period for, Delaware Common Stock.

Parent believes that it is not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether Parent is a USRPHC depends on the fair market value of Parent’s U.S. real property interests relative to the fair market value of Parent’s U.S. and worldwide real property interests plus Parent’s other assets used or held for use in a trade or business, there can be no assurance that Parent will not become a USRPHC in the future. Even if Parent becomes a USRPHC, however, as long as Delaware Common Stock is regularly traded on an established securities market, a Non-U.S. holder’s Delaware Common Stock will be treated as U.S. real property interests only if a Non-U.S. holder actually (directly or indirectly) or constructively holds more than five percent of Parent’s regularly traded common stock at any time during the shorter of the five-year period preceding Non-U.S. holder’s disposition of, or holding period for, Delaware Common Stock.

Non-U.S. holders described in the first bullet above generally will be required to pay tax on the gain derived from the sale (net of certain deductions and credits) at U.S. federal income tax rates applicable to U.S. persons, and a corporate Non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders described in the second bullet above will be subject to tax at 30% (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses for the year, provided a Non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Non-U.S. holders should consult their tax advisors regarding any applicable income tax or other treaties that may provide for different rules.

Backup Withholding and Information Reporting

Generally, Parent must report annually to the IRS the amount of dividends paid to a Non-U.S. holder, the name and address of such Non-U.S. holder, and the amount of tax withheld, if any. A similar report will be sent to the Non-U.S. holder. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in the Non-U.S. holder’s country of residence.

Payments of dividends on or of proceeds from the disposition of Delaware Common Stock made to Non-U.S. holders may be subject to backup withholding at the applicable statutory rate unless a Non-U.S. holder establishes an exemption, for example, by properly certifying Non-U.S. holder’s non-U.S. status on a properly completed IRS Form W-8BEN or W-8BEN-E or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either Parent or Parent’s paying agent has actual knowledge, or reason to know, that a Non-U.S. holder is a U.S. person.

Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

Additional Withholding Requirements under the Foreign Account Tax Compliance Act

FATCA, including sections 1471 through 1474 of the Code and the Treasury Regulations and other official IRS guidance issued thereunder, generally imposes a U.S. federal withholding tax of 30% on dividends (including

 

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constructive dividends) on, and, subject to the proposed regulations discussed below, the gross proceeds from a sale or other disposition of, Delaware Common Stock, paid to a “foreign financial institution” (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends (including constructive dividends) on, and the gross proceeds from a sale or other disposition of, Delaware Common Stock paid to a “non-financial foreign entity” (as specially defined under these rules) unless such entity provides the withholding agent with a certification identifying the substantial direct and indirect U.S. owners of the entity, certifies that it does not have any substantial U.S. owners, or otherwise establishes an exemption.

The withholding obligations under FATCA generally apply to dividends (including constructive dividends) on Delaware Common Stock and to the payment of gross proceeds of a sale or other disposition of Delaware Common Stock. However, the U.S. Treasury Department has issued proposed regulations that, if finalized in their present form, would eliminate FATCA withholding on gross proceeds of the sale or other disposition of Delaware Common Stock (but not on payments of dividends). The preamble of such proposed regulations states that they may be relied upon by taxpayers until final regulations are issued or until such proposed regulations are rescinded. The withholding tax will apply regardless of whether the payment otherwise would be exempt from withholding tax, including under the exemptions described above under the heading “Distributions.” Under certain circumstances, Non-U.S. holders might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and Non-U.S. holder’s country of residence may modify the requirements described in this section. Each Non-U.S. holder should consult with its own tax advisors regarding the application of FATCA withholding to ownership and disposition of Delaware Common Stock.

THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE TO HOLDERS OF DELAWARE COMMON STOCK IN THEIR PARTICULAR CIRCUMSTANCES. NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSIDERATIONS OF OWNING AND DISPOSING OF DELAWARE COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

 

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DESCRIPTION OF PARENT CAPITAL STOCK

General

The following description summarizes certain important terms of Parent’s capital stock, as they are expected to be in effect prior to completion of the Redomicile Transactions. Parent expects to adopt the Parent Certificate of Incorporation, which will become effective at or prior to the time of the Redomicile Transactions, and the Parent Bylaws, which will become effective at or prior to the time of the Redomicile Transactions, and this description summarizes the provisions that are expected to be included in such documents. Because it is only a summary, it does not contain all the information that may be important to Zymeworks Securityholders. For a complete description of the matters set forth in this section titled “Description of Parent Capital Stock”, you should refer to the Parent Certificate of Incorporation, Parent Bylaws, Certificate of Designation for the Special Voting Stock and Certificate of Designation to be filed in connection with the Parent stockholder rights plan, which are included as exhibits to the registration statement of which this Proxy Statement/Prospectus forms a part, and to the applicable provisions of Delaware law.

Effective at or prior to the completion of the Redomicile Transactions, Parent’s authorized capital stock will consist of 1,000,000,000 shares of capital stock, $0.00001 par value per share, of which:

 

   

900,000,000 shares are designated as Common Stock; and

 

   

100,000,000 shares are designated as Preferred Stock, of which one share is designated as Special Voting Stock.

As of the Record Date, there were 1,000 shares of Delaware Common Stock outstanding, held by one stockholder of record. Assuming the exchange of all outstanding Zymeworks Common Shares in the Redomicile Transactions for shares of Delaware Common Stock, there would be 61,694,387 shares of Delaware Common Stock outstanding following the closing.

Common Stock

Dividend Rights

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Delaware Common Stock will be entitled to receive dividends out of funds legally available if Parent’s board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that Parent’s board of directors may determine.

No Preemptive or Similar Rights

Parent’s Common Stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

Voting Rights

Holders of Delaware Common Stock will be entitled to one vote for each share held as of the applicable record date on all matters submitted to a vote of Parent stockholders.

Parent stockholders do not have the ability to cumulate votes for the election of directors. As a result, the holders of a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors can elect all of the directors standing for election, if they should so choose. With respect to matters other than the election of directors, at any meeting of Parent stockholders at which a quorum is present or represented, the affirmative vote of a majority of the voting power of the shares cast for or against a proposal shall be the act of the stockholders and broker non-votes and abstentions will be

 

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considered for purposes of establishing a quorum, but will not be considered as votes cast for or against a proposal, except as otherwise provided by law, Parent’s governing documents or the rules of the stock exchange on which Parent’s securities are listed. The holders of 33 1/3% of the voting power of the capital stock issued and outstanding and entitled to vote as of the applicable record date, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders.

The Parent Certificate of Incorporation and Parent Bylaws will provide that members of the board of directors will be elected to one of three staggered three-year terms. Only the directors serving one term will be elected at each annual meeting of its stockholders, with the directors serving under the remaining two terms continuing for the remainder of their respective three-year terms.

Liquidation Rights

If Parent becomes subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to Parent’s stockholders would be distributable ratably among the holders of Delaware Common Stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.

Fully Paid and Nonassessable

In connection with this offering, Parent’s legal counsel will opine that the shares of Delaware Common Stock to be issued in this offering will be fully paid and non-assessable.

Preferred Stock

Parent’s board of directors will have the authority, subject to limitations prescribed by Delaware law, to issue shares of authorized but unissued preferred stock in one or more series, and to fix the designations, powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in each case without further vote or action by Parent’s stockholders. These powers, rights, preferences and rights could include dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price(s) and liquidation preferences, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of the common stock. The issuance of preferred stock could adversely affect the voting power of holders of Delaware Common Stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control or other corporate action. Except for the share of Special Voting Stock described below, as of the closing of the Redomicile Transactions, no shares of preferred stock will be outstanding.

Special Voting Stock

On the closing of the Arrangement, one share of Special Voting Stock will be issued to the Share Trustee, as trustee for and on behalf of the holders of the Exchangeable Shares (other than Parent and any affiliated entities of Parent). The holder of the Special Voting Stock will vote together with the holders of the Delaware Common Stock, as a single class (except as otherwise required under applicable Law), with respect to all meetings of stockholders of Parent at which the holders of the Delaware Common Stock are entitled to vote. The Special Voting Stock entitles the holder of record to that number of votes equal to the number of Exchangeable Shares outstanding at such time (other than those owned by Parent or any affiliated entity of Parent) multiplied by the Exchangeable Share Exchange Ratio, and in respect of each beneficial owner of the Special Voting Stock, rounded down to the nearest whole vote (and for which the Share Trustee has received voting instructions from such holders of Exchangeable Shares in accordance with the Trust Agreement).

 

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The holder of the Special Voting Stock is not entitled to receive any dividends declared and paid by Parent and, upon any liquidation, dissolution or winding up of Parent, whether voluntary or involuntary, shall rank senior to the Delaware Common Stock, and junior or all other or series of preferred stock of Parent, and is entitled to receive, prior to the holders of the Delaware Common Stock, an amount equal to US$1.00.

At such time as the share of Special Voting Preferred Stock has no votes attached to it, the Special Voting Preferred Stock shall be automatically cancelled for no consideration.

Stockholder Rights Plan

On June 9, 2022, the Zymeworks Board authorized and declared a dividend distribution of one Original Right for each outstanding Zymeworks Common Share to Zymeworks Shareholders of record as of the close of business on June 21, 2022. Each Original Right entitles the registered holder to purchase from Zymeworks one one-thousandth of a Series A Preferred Share of Zymeworks at an exercise price of $74.00, subject to adjustment. The complete terms of the Original Rights are set forth in the Zymeworks Rights Agreement, dated as of June 9, 2022, between the Company and Computershare Trust Company, N.A., as rights agent.

The Zymeworks Board adopted the Zymeworks Rights Agreement to protect Zymeworks Shareholders from coercive or otherwise unfair takeover tactics. In general terms, the Zymeworks Rights Agreement imposes a significant penalty on any person or group that acquires 10% or more (or 20% or more in the case of certain institutional investors who report their holdings on Schedule 13G) of the Zymeworks Common Shares without the approval of the Zymeworks Board.

The overall effect of the Zymeworks Rights Agreement and the issuance of the Original Rights may be to render more difficult or discourage a merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination involving Zymeworks that is not approved by the Zymeworks Board. However, neither the Zymeworks Rights Agreement nor the Original Rights should interfere with any merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination approved by the Zymeworks Board.

In connection with the Redomicile Transactions, the Zymeworks Rights Agreement with respect to the Original Rights will be terminated and Parent will adopt the Delaware Rights Agreement with respect to the Delaware Common Stock, which will be substantively similar in all material respects to the Zymeworks Rights Agreement. Under the Delaware Rights Agreement, in connection with the consummation of the Redomicile Transactions, the Parent board of directors will authorize and declare a dividend distribution of one Delaware Right for each outstanding share of Delaware Common Stock that is issued in connection with the Redomicile Transactions. Each Delaware Right will entitle the registered holder to purchase from Parent one one-thousandth of a share of Series B Participating Preferred Stock of Parent at an exercise price of $74.00, subject to adjustment.

For more information with respect to the Zymeworks Rights Agreement, including a summary of its terms, please refer to Zymeworks’ Current Report on Form 8- K filed with the SEC on June 10, 2022. The Zymeworks Rights Agreement is also attached as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part. For more information on the Delaware Rights Agreement, please see a substantially final form thereof attached as an exhibit to the registration statement of which this Proxy Statement/Prospectus forms a part.

Options and Restricted Stock Units

As of the Record Date, Zymeworks had outstanding options to purchase an aggregate of:

 

   

2,337,728 common shares, at a weighted average exercise price of C$19.48 per common share; and

 

   

5,609,431 common shares, at a weighted average exercise price of $17.61 per common share.

 

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As of the Record Date, Zymeworks had 183,883 outstanding restricted stock units.

In connection with the Redomicile Transactions, Parent will assume the Zymeworks Incentive Plans and each outstanding Zymeworks Incentive Award. The assumed Zymeworks Incentive Awards will remain subject to the terms and conditions of the Zymeworks Incentive Plans, except that the security issuable upon exercise or settlement of the Zymeworks Incentive Award, as applicable, will be shares of Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile Transactions and the Plan of Arrangement – Effect of the Redomicile Transactions on the Zymeworks Incentive Awards”.

Pre-Funded Warrants

As of the Record Date, Zymeworks had outstanding pre-funded warrants to purchase up to 4,794,224 common shares.

Parent will assume the Zymeworks Warrants, except that the security issuable upon exercise will be shares of Delaware Common Stock rather than Zymeworks Common Shares. See section titled “The Redomicile Transactions and the Plan of Arrangement – Effect of the Redomicile Transactions on the Zymeworks Warrants”.

Exercisability

The pre-funded warrants are exercisable at any time after their original issuance. The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part by delivering to Parent a duly executed exercise notice and by payment in full in immediately available funds for the number of common stock purchased upon such exercise. As an alternative to payment in immediately available funds, the holder may, in its sole discretion, elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of common stock determined according to the formula set forth in the pre-funded warrant. No fractional common stock will be issued in connection with the exercise of a pre-funded warrant. In lieu of fractional shares, Parent will pay the holder an amount in cash equal to the fractional amount multiplied by the fair market value of any fractional shares.

Exercise Limitations

Under the terms of the pre-funded warrants, Parent may not effect the exercise of any pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant, which, upon giving effect to such exercise, would cause (a) the aggregate number of Parent common stock beneficially owned by the holder (together with its affiliates) to exceed 9.99% of the number of Parent common stock outstanding immediately after giving effect to the exercise, or (b) the combined voting power of Parent securities beneficially owned by the holder (together with its affiliates) to exceed 9.99% of the combined voting power of all of Parent securities then outstanding immediately after giving effect to the exercise, as such percentage to any ownership is determined in accordance with the terms of the pre-funded warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 19.99% upon at least 61 days’ prior notice from the holder to Parent.

Exercise Price

The exercise price per whole common stock purchasable upon the exercise of the pre-funded warrants is $0.0001 per warrant share. The exercise price of the pre-funded warrants is subject to appropriate adjustment in the event of certain share dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting Parent common stock.

 

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Anti-Takeover Effects of Certain Provisions of Delaware, the Parent Certificate of Incorporation and Parent Bylaws

Delaware Law

Parent will be governed by the provisions of Section 203 of the DGCL. Section 203 generally prohibits a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

 

   

the business combination or transaction which resulted in the stockholder becoming an interested stockholder was approved by the board of directors prior to the time that the stockholder became an interested stockholder;

 

   

upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

   

on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

In general, Section 203 defines a business combination to include:

 

   

mergers or consolidations involving the corporation, or any direct or indirect majority-owned subsidiary of the corporation, and the interested stockholder or any other entity if the merger or consolidation is caused by the interested stockholder;

 

   

any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation or any direct or indirect majority-owned subsidiary of the corporation;

 

   

subject to exceptions, any transaction that results in the issuance or transfer by the corporation, or any direct or indirect majority-owned subsidiary of the corporation, of any stock of the corporation or such subsidiary to the interested stockholder;

 

   

any transaction involving the corporation, or any direct or indirect majority-owned subsidiary of the corporation, that has the effect of increasing the proportionate share of the stock or any class or series of the corporation or such subsidiary beneficially owned by the interested stockholder; and

 

   

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 of the DGCL defines an “interested stockholder” as an entity or person who, together with such person’s affiliates and associates, beneficially owns, or is an affiliate or associate of the corporation and within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

These provisions may have the effect of delaying, deferring or preventing changes in control of Parent, even though such a transaction may offer its stockholders the opportunity to sell their stock at a price above the prevailing market price.

 

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Parent Certificate of Incorporation and Parent Bylaws Provisions

Provisions of the Parent Certificate of Incorporation and Parent Bylaws will include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of Parent’s board of directors or management. Among other things, the Parent Certificate of Incorporation and Parent Bylaws will:

 

   

permit Parent’s board of directors to issue shares of preferred stock, with any powers, rights, preferences and privileges as they may designate;

 

   

provide that the authorized number of directors may be changed only by resolution of the board of directors; provided that the size of the board of directors may not be increased by more than 1/3 of the number of directors in office at the conclusion of the most recent annual meeting of stockholders prior to the next annual meeting of stockholders, and, prior to Parent’s first annual meeting, the size of the board of directors may not be increased by more than three;

 

   

provide that all vacancies and newly created directorships, may, except as otherwise required by law, Parent’s governing documents or resolution of Parent’s board of directors, and subject to the rights of holders of Parent’s preferred stock, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director; provided that no more than 1/3 of the number of directors in office at the conclusion of the most recent annual meeting of stockholders may be appointed by the board of directors prior to the next annual meeting of stockholders, and, prior to Parent’s first annual meeting of stockholders, the size of the board of directors may not be increased by more than three;

 

   

provide that members of the board of directors will serve one of three staggered three-year terms;

 

   

subject to the rights of holders of preferred stock, provide that a director may only be removed from the board of directors by the stockholders with the affirmative vote of at least 66 2/3% of the voting power of the shares cast on such proposal;

 

   

require that any action to be taken by Parent’s stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

 

   

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also meet specific requirements as to the form and content of a stockholder’s notice;

 

   

not provide for cumulative voting rights (therefore allowing the holders of a plurality of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

 

   

provide that special meetings of Parent’s stockholders may be called only by the board of directors, the chairperson of the board of directors, Parent’s chief executive officer or president or the secretary of Parent upon request from holders of no less than 20% of Parent’s outstanding voting stock, subject to the limitations and requirements set forth in the Parent Bylaws; and

 

   

provide that stockholders will be permitted to amend certain provisions of the Parent Certificate of Incorporation and Parent Bylaws only upon receiving at least 66 2/3% of the voting power of the then outstanding voting securities, voting together as a single class.

Exclusive Forum

The Parent Bylaws will provide that, unless Parent consents in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on Parent’s behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of Parent’s directors, stockholders, officers or other employees to Parent or its stockholders, (3) any action arising pursuant to any provision of the DGCL or the Parent Certificate of Incorporation or Parent Bylaws or (4) any other action asserting a claim that is governed

 

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by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware), except for, as to each of (1) through (4) above, any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction. The Parent Bylaws will also provide that, unless Parent consents in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act against any person in connection with any offering of Parent’s securities (including without limitation and for the avoidance of doubt, any underwriter, auditor, expert, control person or other defendant). Any person or entity purchasing or otherwise acquiring any interest in any of Parent’s securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. This provision would not apply to any action brought to enforce a duty or liability created by the U.S. Exchange Act and the rules and regulations thereunder. Parent’s stockholders will not be deemed to have waived Parent’s compliance with the federal securities laws and the rules and regulations thereunder as a result of Parent’s exclusive forum provisions.

Transfer Agent and Registrar

The transfer agent and registrar for the shares of Delaware Common Stock and Exchangeable Shares will be Computershare. The transfer agent and registrar’s address is 150 Royall Street, Canton, Massachusetts 02021.

Indemnification of Directors and Officers

The Parent Certificate of Incorporation will contain provisions that limit the liability of Parent’s directors and officers for monetary damages to the fullest extent permitted by the DGCL. In addition, if the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of Parent’s directors will be further limited to the greatest extent permitted by the DGCL.

The Parent Bylaws will provide that Parent will indemnify its directors and officers, and may indemnify its employees, agents and any other persons, to the fullest extent permitted by the DGCL. The Parent Bylaws will also provide that it must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to limited exceptions.

Further, Parent has entered into or will enter into indemnification agreements with each of its directors and executive officers that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements require Parent, among other things, to indemnify its directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also require Parent to advance all expenses reasonably and actually incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. Parent believes that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

Parent also expects to obtain and maintain insurance policies under which its directors and officers are insured, within the limits and subject to the limitations of those policies, against certain expenses in connection with the defense of, and certain liabilities which might be imposed as a result of, actions, suits, or proceedings to which they are parties by reason of being or having been Parent’s directors or officers. The coverage provided by these policies may apply whether or not Parent would have the power to indemnify such person against such liability under the provisions of the DGCL.

 

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COMPARISON OF RIGHTS OF ZYMEWORKS SHAREHOLDERS, EXCHANGEABLE SHAREHOLDERS AND PARENT STOCKHOLDERS

As part of the Redomicile Transactions, Zymeworks Shareholders will exchange Zymeworks Common Shares for:

 

   

Delaware Common Stock; and/or

 

   

in the case of Eligible Holders that make a valid election with respect to their Zymeworks Common Shares, Exchangeable Shares.

Zymeworks is currently a company continued under the BCBCA and, upon completion of the Redomicile Transactions, Parent will be a Delaware corporation.

The following is a summary comparison of the significant differences between:

 

   

the current rights of Zymeworks Shareholders under the BCBCA and Zymeworks’ Articles, each as amended to date;

 

   

the rights of holders of Exchangeable Shares under the BCBCA, the Support Agreement and the Trust Agreement, upon consummation of the exchange of Zymeworks Common Shares for Exchangeable Shares and completion of the Redomicile Transactions; and

 

   

the rights of holders of Delaware Common Stock under the DGCL and the Parent Certificate of Incorporation and Parent Bylaws, upon consummation of the exchange of Zymeworks Common Shares for shares of Delaware Common Stock and completion of the Redomicile Transactions.

Exchangeable Shareholders will not receive shares of Delaware Common Stock as a result of the Redomicile Transactions. However, the Exchangeable Shares and the rights of Exchangeable Shareholders as “Beneficiaries” under (and as defined in) the Voting Agreement that Exchangeable Shareholders receive in connection with the Redomicile Transactions are expected to hold voting rights equivalent to a holder of Delaware Common Stock.

The following is a summary of certain principal differences between Zymeworks’ Notice of Articles and Articles and the BCBCA, ExchangeCo’s Notice of Articles and Articles, the Support Agreement, the Trust Agreement and the BCBCA, and the Parent Certificate of Incorporation, Parent Bylaws and the DGCL. This summary is not intended to be complete, is qualified in its entirety by reference to the Notice of Articles and Articles of Zymeworks, the BCBCA, the Notice of Articles and Articles of ExchangeCo, the Parent Certificate of Incorporation and Parent Bylaws and the DGCL and should not be considered as legal advice to any particular shareholder. To see where copies of these documents can be obtained, see section titled “Where You Can Find More Information”. A shareholder who has any questions about such matters should consult with the shareholder’s own advisors.

 

    

Zymeworks

  

ExchangeCo

  

Parent

Authorized Capital Stock    Under Zymeworks’ current Notice of Articles, Zymeworks has the authority to issue an unlimited number of Common shares, an unlimited number of Preferred Shares, and an unlimited number of Series A Participating Preferred Shares, all without par value.    Under ExchangeCo’s Notice of Articles, ExchangeCo has the authority to issue an unlimited number of Common shares and an unlimited number of Exchangeable Shares, both without par value.    Under the Parent Certificate of Incorporation, Parent will have the authority to issue a total of 1,000,000,000 shares of stock, consisting of 900,000,000 shares of Common Stock, par value $0.00001 per share and 100,000,000 shares of Preferred Stock, par value $0.00001 per share.

 

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Zymeworks

  

ExchangeCo

  

Parent

Terms of Preferred Stock    The Preferred Shares are issuable in one or more series, have preference over the Common Shares with respect to dividends, a return of capital and such other preferences as may be fixed by the Zymeworks Board. Prior to any particular series being issued, the Zymeworks Board may determine any maximum number of a series to be issued (or determine that there will be no such maximum), create an identifying name for the series, and attach special rights and restrictions to the series, provided that (i) no series has priority over any other series in respect of dividends or a return of capital, and (ii) a right or special right attached to issued shares is not prejudiced or interfered with under the Notice of Articles unless the holders of such class or series consent by special separate resolution.    ExchangeCo does not have any preferred shares in its share structure, which consists of common shares and the Exchangeable Shares.    The Parent Certificate of Incorporation will provide that the board of directors will have the power to authorize by resolution or resolutions the issuance of preferred stock from time to time, in one or more series. Subject to limitations prescribed by law, the board of directors will have the ability to fix by resolution or resolutions the designation, powers, preferences and rights, and the qualifications, limitations or restrictions of the preferred stock, including, without limitation, authority to fix by resolution or resolutions the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing.
Liquidation Rights    In the event of the liquidation, dissolution or winding-up of Zymeworks, whether voluntary or involuntary, or any other distribution of the assets of Zymeworks among its shareholders for the purpose of winding up its affairs, the holders of the Preferred Shares will be entitled to preference over the Common Shares and any other shares ranking junior to the Preferred Shares with respect to the repayment of capital paid up on and the    Subject to applicable Laws, in the event of the liquidation, dissolution or winding-up of ExchangeCo, whether voluntary or involuntary, a holder of Exchangeable Shares will be entitled to receive the Liquidation Amount, to be paid in Exchangeable Share Consideration, for each Exchangeable Share from ExchangeCo or from Callco (under Callco’s overriding Liquidation Call Right), both as supported by Parent under the Support Agreement.    If Parent becomes subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to Parent’s stockholders would be distributable ratably among the holders of Delaware Common Stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any

 

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Zymeworks

  

ExchangeCo

  

Parent

   payment of unpaid dividends accrued on the Preferred Shares. The Preferred Shares may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be fixed by directors’ resolution as to the respective series authorized to be issued.   

 

The Exchangeable Shares are retractable by the holder at any time for the Retraction Price, to be paid in Exchangeable Share Consideration, which will be paid by ExchangeCo or Callco (under Callco’s overriding Retraction Call Right), both as supported by Parent under the Support Agreement.

 

The Exchangeable Shares are redeemable by ExchangeCo for the Redemption Price, to be paid in Exchangeable Share Consideration, which will be paid by ExchangeCo or Callco (under Callco’s overriding Redemption Call Right), both as supported by Parent under the Support Agreement. The “Redemption Date” is the date established by the ExchangeCo board of directors which will be on the Sunset Date unless: (i) the aggregate number of Exchangeable Shares outstanding (other than those held by Parent and its subsidiaries) is less than 5% of the number of Exchangeable Shares issued on the Effective Date (as adjusted pursuant to the Exchangeable Share Provisions), in which case the ExchangeCo board of directors may accelerate such Redemption Date upon at least thirty (30) days’ prior written notice to the holders of the Exchangeable Shares; or (ii) a Parent Control Transaction is proposed, in which case, provided the ExchangeCo

  

outstanding shares of preferred stock.

 

In a liquidation, dissolution or winding up of Parent, the Special Voting Stock will be entitled to receive, prior to distributions to the Delaware Common Stock but subject to prior satisfaction of all outstanding debt and liabilities, an amount equal to $1.00. The Special Voting Stock will not have participation rights.

 

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board of directors determines in good faith that it is not practicable to substantially replicate the Exchangeable Shares in such Parent Control Transaction or that the redemption of all of the outstanding Exchangeable Shares (other than Exchangeable Shares held by Parent and its subsidiaries) is necessary to enable the completion of the Parent Control Transaction in accordance with its terms, the ExchangeCo board of directors may accelerate such Redemption Date upon such prior written notice to the holders of the Exchangeable Shares as the ExchangeCo board of directors may determine to be reasonably practicable in such circumstances.

 

In the event of a Change of Law, Callco can purchase the Exchangeable Shares for the Change of Law Call Purchase Price, to be paid in Exchangeable Share Consideration, under Callco’s overriding Change of Law Call Right, as supported by Parent under the Support Agreement.

  
Dividends    Under the BCBCA, a company may declare and pay dividends out of profits, capital or otherwise by issuing shares or warrants and, unless the company is insolvent or the payment of the dividend would render the company insolvent, by payment in property including money.    Under the BCBCA, a company may declare and pay dividends out of profits, capital or otherwise by issuing shares or warrants and, unless the company is insolvent or the payment of the dividend would render the company insolvent, by payment in property including money.    Under the DGCL, a Delaware corporation may, subject to restrictions in its certificate of incorporation, declare and pay dividends out of the corporation’s surplus or, if there is no surplus, from its net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year, and Delaware common law imposes a solvency

 

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Under Zymeworks’ Articles, dividends may be declared at the sole discretion of the Zymeworks Board, subject to the rights, if any, of shareholders holding shares with special rights as to dividends and may be paid wholly or partly in money or by the distribution of specific assets or fully paid shares or bonds, debentures or other securities of Zymeworks or any other corporation, or in any one or more of those ways.

  

 

Under ExchangeCo’s Articles, dividends may be declared at the sole discretion of the ExchangeCo board, subject to the rights, if any, of shareholders holding shares with special rights (such as the Exchangeable Shares) as to dividends and may be paid wholly or partly in money or by the distribution of specific assets or fully paid shares or bonds, debentures or other securities of ExchangeCo or any other corporation, or in any one or more of those ways.

 

The Exchangeable Shares have preference over the common shares and any other shares ranking junior to the Exchangeable Shares on the payment of dividends to the extent provided in the Exchangeable Share Provisions.

 

When the Parent board of directors declares a dividend or any other distribution on the Delaware Common Stock (excluding distributions under a Preferred Stock Rights Agreement) the Exchangeable Shares are entitled to the following: (i) for cash dividends on the Delaware Common Stock, an amount in cash, payable in United States dollars, equal to the cash dividends per share declared on the Delaware Common Stock multiplied by the Exchangeable Share Exchange Ratio (which will initially be one), (ii) for

  

requirement for the payment of dividends. Dividends declared and paid out of net profits may not be paid when the capital of a Delaware corporation has diminished to an amount less than the aggregate amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets.

 

The decision whether or not to declare and pay dividends and the amount of any such dividends is subject to the discretion of the Parent Board and the existence of legally available funds.

 

Subject to the limitations and requirements set forth in the Exchangeable Share Provisions, on each date on which the Parent board of directors declares any dividend or other distribution on the Delaware Common Stock (but excluding any distributions pursuant to a Preferred Stock Rights Agreement) (i) a holder of an Exchangeable Share will be entitled to receive, and (ii) the ExchangeCo board of directors will declare, a dividend or other distribution on the Exchangeable Shares, as determined by the Exchangeable Share Provisions.

 

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      stock or share dividends or other distributions on the Delaware Common Stock payable in Delaware Common Stock, by the issue of Exchangeable Shares equal to the number of shares of Delaware Common Stock paid on each share of Delaware Common Stock, provided that ExchangeCo may elect to effect a corresponding, contemporaneous and economically equivalent (as determined by the ExchangeCo board of directors) subdivision of the outstanding Exchangeable Shares, or (iii) for dividends on the Delaware Common Stock in other property, such property for each Exchangeable Share as is the same as or economically equivalent (as determined by the ExchangeCo board of directors) and adjusted for the relevant Exchangeable Share Exchange Ratio, as applicable; provided that, in each case, the ExchangeCo board of directors may instead adjust the Exchangeable Share Exchange Ratio in lieu thereof to the extent the ExchangeCo board of directors determines in good faith and in its sole discretion that ExchangeCo would be liable for any unrecoverable tax as a result of paying any such dividend or distribution. Adjustments to the Exchangeable Share Ratio in lieu of equivalent dividends to those paid on the Delaware Common Stock, as determined by the ExchangeCo directors, shall be conclusive and binding.   

 

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Number of Directors and Size of Board   

The BCBCA provides that the board of directors of a public company must consist of at least three directors, and other than the first directors of a company, must be elected or appointed in accordance with the BCBCA and the articles of the company.

 

Zymeworks’ Articles provide that the number of directors (excluding additional directors appointed by the Zymeworks Board in accordance with the Articles and the BCBCA), is the greater of (i) three, and (ii) either the number most recently (a) set by the Zymeworks Board, and (b) elected or continued into office where the place of any retiring directors who do not continue in office are not filled. Zymeworks’ Articles also provide that at an annual general meeting, the setting or changing of the number of directors is not special business, and accordingly, the number of directors may also be set by the shareholders.

 

Under the BCBCA and Zymeworks’ Articles, between annual general meetings the directors may appoint one or more additional directors, the number of whom must not exceed 1/3 of the number of current directors elected or appointed other than under this provision.

  

The BCBCA provides that the board of directors of a public company must consist of at least three directors, and other than the first directors of a company, must be elected or appointed in accordance with the BCBCA and the articles of the company.

 

ExchangeCo’s Articles provide that the number of directors (excluding additional directors appointed by the ExchangeCo board of directors in accordance with the ExchangeCo Articles and the BCBCA), is (1) if ExchangeCo is a public company, the greater of (i) three, and (ii) either the number most recently (a) set by the ExchangeCo board of directors, and (b) elected or continued into office where the place of any retiring directors who do not continue in office are not filled; and (2) if ExchangeCo is not a public company, the most recent set of (i) the number set by the ExchangeCo Board, and (ii) the number) elected or continued into office where the place of any retiring directors who do not continue in office are not filled.

 

Under the BCBCA and ExchangeCo’s Articles, between annual general meetings or unanimous shareholder resolutions the directors may appoint one or more additional directors, the number of whom must not exceed 1/3 of the number

  

The DGCL provides that the board of directors of a Delaware corporation must consist of one or more directors, with the precise number thereof from time to time fixed by or in the manner provided by the certificate of incorporation or bylaws. The DGCL further permits the board of directors of a Delaware corporation to be divided into classes.

 

The Parent Certificate of Incorporation will provide that the number of directors may be fixed by resolution from time to time by the majority of the Parent Board; provided that (a) the Parent Board may not increase the number of directorships by more than 1/3 of the number of directors at the conclusion of the most recent annual meeting of stockholders prior to the next annual meeting of stockholders and (b) prior to the first annual meeting, the size of the Parent Board may not be increased by more than three.

 

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      of current directors elected or appointed other than under this provision.   
Director Qualifications   

Under the BCBCA, directors must (i) be 18 years of age or older, (ii) be capable of managing the director’s own affairs, (iii) have no undischarged bankruptcy and (iv) not be convicted of an offence in connection with the promotion, formation or management of a corporation or unincorporated business or of an offence involving fraud. Under the BCBCA, directors are not required to be residents of British Columbia or Canada.

 

Under the BCBCA and Zymeworks’ Articles, a director is not required to hold share capital in Zymeworks as qualification for office.

  

Under the BCBCA, directors must (i) be 18 years of age or older, (ii) be capable of managing the director’s own affairs, (iii) have no undischarged bankruptcy and (iv) not be convicted of an offence in connection with the promotion, formation or management of a corporation or unincorporated business or of an offence involving fraud. Under the BCBCA, directors are not required to be residents of British Columbia or Canada.

 

Under the BCBCA and ExchangeCo’s Articles, a director is not required to hold share capital in ExchangeCo as qualification for office.

   The DGCL requires that directors of Delaware corporations be natural persons. Under the DGCL, directors are not required to be residents of Delaware or the United States.
Election of Directors   

Under the BCBCA, directors must be elected or appointed in accordance with the BCBCA and the articles of a company.

 

Zymeworks’ Articles provide that directors may be elected at an annual general meeting or at a special meeting called for that purpose, or by unanimous resolution of the shareholders.

 

Under the BCBCA and Zymeworks’ Articles, between annual general meetings the directors may appoint one or more additional directors, the number of whom must not

  

Under the BCBCA, directors must be elected or appointed in accordance with the BCBCA and the articles of a company.

 

ExchangeCo’s Articles provide that directors may be elected at an annual general meeting or at a special meeting called for that purpose, or by unanimous resolution of the shareholders.

 

Under the BCBCA and ExchangeCo’s Articles, between annual general meetings or unanimous shareholder resolutions the directors may appoint one or more additional directors,

  

The DGCL provides that directors will be elected at an annual meeting or at a special meeting called for that purpose or by majority written consent in lieu thereof.

 

The Parent Certificate of Incorporation will provide that stockholders will not be permitted to cumulate votes at any election of directors. The Parent Bylaws will provide that directors will be elected by a plurality of the voting power of the shares present and entitled to vote on the election of directors.

 

Parent expects to adopt a majority voting policy in

 

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exceed 1/3 of the number of current directors elected or appointed other than under this provision. Under the BCBCA, unless otherwise provided under the BCBCA or the Articles, any action that must or may be taken or authorized by the shareholders may be taken or authorized by ordinary resolution (where ordinary resolution at a meeting is defined as the simple majority of the votes cast). Accordingly, except as provided above regarding the appointment of additional directors, directors are elected by ordinary resolution.

 

Zymeworks has adopted a majority voting policy to the effect that a nominee for election as a director of Zymeworks must receive a greater number of votes “for” than votes “withheld” with respect to the election of directors by shareholders to be elected.

   the number of whom must not exceed 1/3 of the number of current directors elected or appointed other than under this provision. Under the BCBCA, unless otherwise provided under the BCBCA or the Articles, any action that must or may be taken or authorized by the shareholders may be taken or authorized by ordinary resolution (where ordinary resolution at a meeting is defined as the simple majority of the votes cast). Accordingly, except as provided above regarding the appointment of additional directors, directors are elected by ordinary resolution.   

substantively the form of Zymeworks’ current majority voting policy.

 

The DGCL provides that, unless otherwise provided in the certificate of incorporation or bylaws, newly created directorships may be filled by a majority vote of the directors then in office, even if the number of directors then in office is less than a quorum. Delaware common law also gives stockholders power to fill vacancies, unless the corporation’s certificate of incorporation or bylaws provide otherwise.

 

The Parent Certificate of Incorporation will provide that newly-created directorships may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum or by a sole remaining director.

Advance Notice of Director Nominations by Stockholders    Zymeworks’ Articles provide that nominations of persons for election to the board may be made at any annual meeting of the shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called was the election of directors (i) by or at the direction of the board, (ii) at the request of one or more shareholders pursuant to a proposal made in accordance with the BCBCA or a requisition of the shareholders made in    ExchangeCo’s Articles do not require advance notice of director nominations.   

The DGCL does not contain any limits on or requirements for stockholders to nominate directors for annual meetings. Under the DGCL, the bylaws of a corporation may include provisions respecting the nomination of directors, including requirements for advance notice to the corporation.

 

The Parent Bylaws will provide that, to be timely, a nominating stockholder’s notice must be received by the secretary at the principal executive offices of the

 

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accordance with the provisions of the BCBCA, or (iii) by any shareholder seeking to nominate a candidate for election as a director (a “Nominating Shareholder”) who has given timely notice thereof in proper written form to Zymeworks’ Corporate Secretary at the executive or registered office of the Company.

 

To be timely, a Nominating Shareholder’s notice must be made: (i) in the case of an annual meeting of shareholders (including an annual and special meeting), not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the 10th day following the date of such first public announcement; and (ii) in the case of a special meeting of shareholders (which is not also an annual meeting) called for the purpose of electing directors (whether or not called for other purposes as well), not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting of shareholders was made. Zymeworks’ Articles also

     

Company no earlier than 8:00 a.m., local time, on the 120th day and no later than 5:00 p.m., local time, on the 90th day prior to the day of the first anniversary of the preceding year’s annual meeting of stockholders. However, if no annual meeting of stockholders was held in the preceding year, or if the date of the applicable annual meeting has been changed by more than 25 days from the first anniversary of the preceding year’s annual meeting, then to be timely such notice must be received by the secretary at the principal executive offices of the Company no earlier than 8:00 a.m., local time, on the 120th day prior to the day of the annual meeting and no later than 5:00 p.m., local time, on the 10th day following the later of the day on which public announcement of the date of the annual meeting was first made by the Company and the 120th day prior to the day of the annual meeting.

 

In the case of the first annual meeting of stockholders of Parent as a Delaware corporation, a nominating stockholder’s notice must be received by the secretary of Zymeworks at Zymeworks’ principal executive offices or by the secretary of Parent at Parent’s principal executive offices no earlier than 8:00 a.m., local time, on September 23, 2022 and no later than 5:00 p.m., local time, on October 4, 2022.

 

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   prescribe the proper written form for a Nominating Shareholder’s notice.      
Term of Directors   

The BCBCA does not contain specified term limits for directors.

 

Zymeworks’ Articles provide that, for the purposes of facilitating staggered terms on the Zymeworks Board, beginning on the date at which Zymeworks was continued as a British Columbia company: (i) three directors shall initially hold office for a one-year term, (ii) three directors shall initially hold office for a two-year term, and (c) the remaining directors shall initially hold office for a three-year term. Upon expiry of each directors’ initial term, the directors shall be elected for three-year terms. These provisions remain in effect until the End Date of June 30, 2117, after which all directors are elected annually.

  

The BCBCA does not contain specified term limits for directors.

 

ExchangeCo’s Articles provide that directors are elected at every annual general meeting of ExchangeCo (or by unanimous written resolution in lieu of an annual general meeting), and that the directors cease to hold office immediately before the election or appointment of directors at the annual general meeting (or the unanimous written resolution in lieu of the annual general meeting). Directors may also be elected at a special meeting called for this purpose.

  

The DGCL provides that directors of a Delaware corporation may, by the certificate of incorporation or by an initial bylaw, or by a bylaw adopted by a vote of the stockholders, be divided into one, two or three classes.

 

The Parent Board will be divided into three classes as nearly equal in size as is practicable. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class whose terms are then expiring.

Removal of Directors   

Under the BCBCA, a director can be removed by special resolution or if the articles provide, by less than a special majority.

 

Under the BCBCA and Zymeworks’ Articles, the shareholders may remove a director by special resolution. Zymeworks’ Articles also permit the directors to remove a director if the director is convicted of an indictable offense, or if the director ceases to be qualified to act

  

Under the BCBCA, a director can be removed by special resolution or if the articles provide, by less than a special majority.

 

Under the BCBCA and ExchangeCo’s Articles, the shareholders may remove a director by special resolution. ExchangeCo’s Articles also permit the directors to remove a director if the director is convicted of an indictable offense, or if the director ceases to be qualified to act

  

Under the DGCL, any or all directors may be removed with or without cause by the holders of a majority of shares entitled to vote at an election of directors unless the certificate of incorporation otherwise provides or in certain other circumstances if the corporation has cumulative voting.

 

The Parent Certificate of Incorporation will provide that any director or the entire Parent Board may be

 

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   as a director and does not promptly resign.    as a director and does not promptly resign.    removed by stockholders, with or without cause, with the affirmative vote of the holders of at least 66 2/3% of the voting power of the shares cast for or against such proposal, which shall be the act of the stockholders, and broker non-votes and abstentions will be considered for purposes of establishing a quorum, but will not be considered as votes cast for or against such removal.
Filling of Board Vacancies   

Under the BCBCA, a vacancy that occurs among directors must be filled in accordance with the BCBCA unless the company’s articles provide otherwise.

 

Under Zymeworks’ Articles, the shareholders may elect the directors needed to fill any vacancies in the board of directors up to the number of directors as set by the Articles, and if the shareholders do not do so contemporaneously with setting the number of directors, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

 

Under Zymeworks’ Articles, at every annual general meeting the shareholders are entitled to elect directors to fill vacancies created by the expiry of directors’ terms and vacancies created before the expiry of directors’ terms.

  

Under the BCBCA, a vacancy that occurs among directors must be filled in accordance with the BCBCA unless the company’s articles provide otherwise.

 

Under ExchangeCo’s Articles, the shareholders may elect the directors needed to fill any vacancies in the board of directors up to the number of directors as set by ExchangeCo’s Articles, and if the shareholders do not do so contemporaneously with setting the number of directors, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

 

Under ExchangeCo’s Articles, at every annual general meeting the shareholders are entitled to elect directors to fill vacancies created by the expiry of directors’ terms and vacancies created before the expiry of directors’ terms.

  

The DGCL provides that, unless otherwise provided in the certificate of incorporation or bylaws, vacancies and newly created directorships may be filled by a majority vote of the directors then in office, even if the number of directors then in office is less than a quorum. Delaware common law also gives stockholders power to fill vacancies, unless the corporation’s certificate of incorporation or bylaws provide otherwise.

 

The Parent Certificate of Incorporation will provide that all vacancies, including those resulting from newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

 

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Under Zymeworks’ Articles, any casual vacancy occurring in the board of directors may be filled by the directors.

 

Under Zymeworks’ Articles, if the Company has no directors or fewer directors in office than the number set for quorum, then the shareholders may elect or appoint directors to fill any vacancies.

 

Under Zymeworks’ Articles, if a director is removed by special resolution before the expiry of their term, the shareholders may contemporaneously fill the vacancy by ordinary resolution, and if they fail to do so, then the directors may appoint, or the shareholders may elect by ordinary resolution, a director to fill the vacancy.

 

If the directors remove a director who is convicted of an indictable offence or who ceases to be qualified, then the directors may appoint a director to fill the vacancy.

  

 

Under ExchangeCo’s Articles, any casual vacancy occurring in the board of directors may be filled by the directors.

 

Under ExchangeCo’s Articles, if the Company has no directors or fewer directors in office than the number set for quorum, then the shareholders may elect or appoint directors to fill any vacancies.

 

Under ExchangeCo’s Articles, if a director is removed by special resolution before the expiry of their term, the shareholders may contemporaneously fill the vacancy by ordinary resolution, and if they fail to do so, then the directors may appoint, or the shareholders may elect by ordinary resolution, a director to fill the vacancy.

 

If the directors remove a director who is convicted of an indictable offence or who ceases to be qualified, then the directors may appoint a director to fill the vacancy.

  
Board Quorum and Vote Requirements   

The BCBCA does not set out any requirements for a meeting of directors, except that minutes must be kept of all proceedings at meetings of directors or committees of directors. The articles of a company may set out requirements and quorum for board meetings.

 

Under Zymeworks’ Articles, the quorum necessary for the transaction of business of the

  

The BCBCA does not set out any requirements for a meeting of directors, except that minutes must be kept of all proceedings at meetings of directors or committees of directors. The articles of a company may set out requirements and quorum for board meetings.

 

Under ExchangeCo’s Articles, the quorum necessary for the transaction

  

Under the DGCL, a majority of the total number of directors shall constitute a quorum for the transaction of business unless the certificate or bylaws require a greater number. The bylaws may lower the number required for a quorum to one-third the number of directors, but no less.

 

The Parent Bylaws will provide that a majority of the

 

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directors is a majority of the number of directors. At meetings of directors, questions are to be decided by a majority of votes, and in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

Under the BCBCA and Zymeworks’ Articles, directors are also permitted to pass resolutions by a unanimous written consent signed by all the directors entitled to vote on it.

  

of business of the directors is a majority of the number of directors in office, or such greater number as the directors may determine from time to time. At meetings of directors, questions are to be decided by a majority of votes, and in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

Under the BCBCA and ExchangeCo’s Articles, directors are also permitted to pass resolutions by a unanimous written consent signed by all the directors entitled to vote on it.

  

total number of authorized directorships will constitute a quorum for the transaction of business. It will also provide that the affirmative vote of a majority of the directors present at any meeting at which a quorum is present will be the act of the board of directors, except as may be otherwise specifically provided by statute, the Parent Certificate of Incorporation or the Parent Bylaws.

 

Under the DGCL, directors are also permitted to act by unanimous written consent signed by all of the members of the board of directors or of any committee thereof, as applicable.

Annual Meeting of Stockholders    In accordance with the BCBCA, Zymeworks’ Articles provide that an annual general meeting must be held at least once in each calendar year, and not more than 15 months after the last annual reference date (where annual reference date generally means the date of the last annual general meeting), at such time and place as may be determined by the directors. The BCBCA provides that an annual meeting of shareholders may be held at a location outside British Columbia if (i) the location for the meeting is provided for in the articles, (ii) the articles do not restrict the company from holding a meeting outside of British Columbia and the location is approved as required by the articles (and if not so    In accordance with the BCBCA, ExchangeCo’s Articles provide that an annual general meeting must be held at least once in each calendar year, and not more than 15 months after the last annual reference date (where annual reference date generally means the date of the last annual general meeting), at such time and place as may be determined by the directors. The BCBCA provides that an annual meeting of shareholders may be held at a location outs