Contract

SCHEDULE "B" EXCHANGEABLE SHARE PROVISIONS The Exchangeable Shares in the capital of the Company shall have the following rights, privileges, restrictions and conditions: ARTICLE 1 INTERPRETATION SECTION 1.1 DEFINITIONS. In these share provisions, the following terms have the following meanings: "ACT" means the Companies Act (Nova Scotia), as amended, consolidated or re-enacted from time to time. "BOARD OF DIRECTORS" means the board of directors of the Company. "BUSINESS DAY" means any day, other than a Saturday, a Sunday or a day when banks are not generally open for business in Toronto, Ontario. "CALL RIGHTS" has the meaning provided in the Exchange Agreement. "CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a currency other than Canadian dollars (the "FOREIGN CURRENCY AMOUNT"), at any date, the product obtained by multiplying: (a) the Foreign Currency Amount, by (b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such noon spot exchange rate on the Business Day most recently preceding on such date, or, if no such noon spot exchange rate is reported by the Bank of Canada, such spot exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors acting reasonably to be appropriate for such purpose. "COMMON SHARES" means the common shares in the capital of the Company and any other securities into which such shares may be changed. "CONVERTIBLE VOTING SHARES" means the convertible voting shares in the capital of the Company each of which entitles the holder thereof to receive one Exchangeable Share upon conversion. "CONVERTIBLE VOTING SHARE PROVISIONS" means the rights, privileges, restrictions and conditions attaching to the Convertible Voting Shares. "COMPANY" means IntelliPharmaCeutics Corp., a company amalgamated and existing under the Act, and includes any successor company. "CURRENT MARKET PRICE" means, in respect of a IPC Delaware Common Share on any date, the average closing price per IPC Delaware Common Share over the period of 30 consecutive trading days ending five trading days before such date on such national stock exchange in the United States on which the IPC Delaware Common Shares are listed and posted for trading which has the highest volume of trading in such shares in the relevant period (the "RELEVANT EXCHANGE") or, if IPC Delaware Common Shares are not then listed on a national stock exchange in the United States, on such other principal stock exchange or automated quotation system on which IPC Delaware Common Shares are listed or quoted, as the case may be, as may be selected by the board of directors of IPC Delaware for such purpose; provided, however, that if there is no public distribution or trading activity of IPC Delaware common shares during such period, then the Current Market Price of a IPC Delaware Common Share shall be the fair market value of the IPC Delaware Common Share as determined by the board of directors of IPC Delaware in good faith based upon the advice of such qualified independent financial advisors as the board of directors of IPC Delaware in good faith may deem to be appropriate, and provided further that any such selection, opinion or determination by the board of directors of IPC Delaware shall be conclusive and binding. "DIVIDEND AMOUNT" means an amount equal to and in satisfaction of all declared and unpaid dividends or distributions on any Exchangeable Share (or any Convertible Share upon the conversion of which the Exchangeable Share was issued) on any dividend or distribution record date which occurred on or prior to the effective time of any action described in the definition of "Exchangeable Share Consideration" in these share provisions. "ECONOMIC EQUIVALENT" has the meaning provided in Section 3.2 hereof. "EFFECTIVE DATE" means the date of first issue of the Convertible Voting Shares. "EXCHANGE AGREEMENT" means that certain Exchange Agreement between IPC Delaware, the Company and certain shareholders of the Company to be entered into contemporaneously with the first issue of Convertible Voting Shares. "EXCHANGEABLE SHARE CONSIDERATION" means, with respect to each Exchangeable Share, for any action which is an acquisition of, or redemption of, or distribution of assets of the Company in respect of, the Exchangeable Share or purchase of the Exchangeable Share by the Company or by IPC Delaware or a Subsidiary of IPC Delaware pursuant to the Exchange Agreement or hereunder or otherwise, the aggregate of the following: (a) the Current Market Price of one IPC Delaware Common Share, such consideration to be fully paid, non-assessable, free and clear of any lien, claim or encumbrance and satisfied by the delivery of one IPC Delaware Common Share to be registered in the name of the Holder, as evidenced by a certificate representing the aggregate number of such IPC Delaware Common Shares; plus (b) the Dividend Amount payable in U.S. dollars or the Canadian Dollar Equivalent by means of a cheque payable at any branch of the bankers of the payor; plus (c) unless the corresponding equivalent dividend has already been declared pursuant to Section 3.1 of these share provisions or Section 3.1 of the Convertible Voting Share Provisions, as the case may be, on the Exchangeable Share (or the Convertible Voting Share upon the conversion of which the Exchangeable Share was issued), the amount of all cash dividends declared by IPC Delaware on a IPC Delaware Common Share on or prior to the effective time of any such action, payable in U.S. dollars or -2- the Canadian Dollar Equivalent by means of a cheque payable at any branch of the bankers of the payor; plus (d) unless the corresponding equivalent has already been declared pursuant to Section 3.1 of these share provisions or Section 3.1 of the Convertible Voting Share Provisions, as the case may be, on the Exchangeable Share (or the Convertible Voting Share upon the conversion of which the Exchangeable Share was issued), the amount of all declared non-cash dividends or other distributions by IPC Delaware on a IPC Delaware Common Share on or prior to the effective time of any such action, payable by means of a cheque payable at any branch of the bankers of the payor in an amount equal to the fair market value of the property distributed on the effective date of the relevant action in the U.S. dollars or the Canadian Dollar Equivalent or, at the option of the Board of Directors, payable by the delivery of such non-cash items; provided that (i) any such Delaware Common Share shall be duly issued as fully paid and non-assessable, free and clear of any lien, hypothec, pledge, claim, encumbrance, security interest or adverse claim or interest other than those under applicable securities laws and (ii) such consideration shall be paid less any amounts required to be deducted and withheld therefrom pursuant to Section 12.3 hereof, and all without interest. "EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the capital of the Company having the rights, privileges, restrictions and conditions set forth herein. "HOLDER" means a holder of Exchangeable Shares shown from time to time in the register maintained by or on behalf of the Company in respect of the Exchangeable Shares. "IPC DELAWARE" means IntelliPharmaCeutics Ltd., a Delaware corporation, and includes any successor corporation. "IPC DELAWARE COMMON SHARES" means the shares of common stock in the capital of IPC Delaware, par value US$.001 per share and any other shares or other securities into which such shares may be changed or converted. "IPC DELAWARE DIVIDEND DECLARATION DATE" means the date on which the board of directors of IPC Delaware declares any dividend on the IPC Delaware Common Shares. "IPC DELAWARE SPECIAL VOTING SHARES" means the shares of non-participating Special Voting Stock in the capital of IPC Delaware, par value US$.001 per share. "LIQUIDATION AMOUNT" has the meaning provided in Section 5.1 hereof. "LIQUIDATION CALL RIGHT" has the meaning provided in the Exchange Agreement. "LIQUIDATION DATE" has the meaning provided in Section 5.1 hereof. "REDEEMED SHARES" has the meaning provided in Section 6.1 hereof. "REDEMPTION CALL RIGHT" has the meaning provided in the Exchange Agreement. "REDEMPTION DATE" has the meaning provided in Section 6.1(b) hereof. -3- "REDEMPTION PRICE" has the meaning provided in Section 6.1 hereof. "REDEMPTION PUT REQUEST" has the meaning provided in Section 6.1 hereof. "SUBSIDIARY" OR "SUBSIDIARIES", in relation to any Person, means any body corporate, partnership, joint venture, association or other entity of which more than 50% of the total voting power of shares or units of ownership or beneficial interest entitled to vote in the election of directors (or members of a comparable governing body) is owned or controlled, directly or indirectly, by such person. "TOTAL EXCHANGEABLE SHARE CONSIDERATION" means at a particular time, the Exchangeable Share Consideration per Exchangeable Share at that time multiplied by the number of Exchangeable Shares in respect of which the Exchangeable Consideration is paid or is payable at that time. "TOTAL LIQUIDATION AMOUNT" has the meaning provided in Section 5.1 hereof. "TOTAL REDEMPTION PRICE" has the meaning provided in Section 6.1 hereof. "VOTING AND SUPPORT AGREEMENT" means the agreement in respect of, among other things, the Exchangeable Shares to be made between IPC Delaware and the Company as of the Effective Date, as it may be amended from time to time. ARTICLE 2 RANKING OF EXCHANGEABLE SHARES SECTION 2.1 RANKING. In accordance with Article 5, the Exchangeable Shares shall be entitled to a preference over the Common Shares, the Preferred Shares and any other shares which by their terms rank junior to the Exchangeable Shares, but shall rank pari passu with the Convertible Voting Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs. In the event that the Board of Directors desire to declare a dividend on the Exchangeable Shares in accordance with Section 3.1 hereof, such dividends shall neither be declared nor paid unless a dividend is also declared and paid on the Convertible Voting Shares at the same time, in equal amounts per share to the dividend so declared on the Exchangeable Shares (unless the holders of the Convertible Voting Shares otherwise consent in writing). In the event that rights are conferred upon the holders of the Exchangeable Shares pursuant to Section 10.1 or 10.2 as a result of IPC Delaware taking any of the actions in Section 10.1 or 10.2, such similar rights as are conferred upon the holders of the Convertible Voting Shares under Section 10.1 or 10.2, as the case may be, of the Convertible Voting Share Provisions shall be exercised at the same time as the exercise of such rights conferred upon the holders of the Exchangeable Shares. -4- ARTICLE 3 DIVIDENDS SECTION 3.1 DIVIDENDS. A Holder shall be entitled to receive, and the Board of Directors shall (subject to applicable law) declare, a dividend on each Exchangeable Share on each IPC Delaware Dividend Declaration Date (which shall be paid in accordance with Section 3.4): (a) in the case of a cash dividend declared on the IPC Delaware Common Shares, in an amount in cash for each Exchangeable Share in US dollars, or the Canadian Dollar Equivalent thereof on the IPC Delaware Dividend Declaration Date, in each case, equal to the cash dividend declared on each IPC Delaware Common Share; (b) in the case of a stock dividend declared on the IPC Delaware Common Shares to be paid in IPC Delaware Common Shares, by the issuance by the Company of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of IPC Delaware Common Shares to be paid on each IPC Delaware Common Share; (c) in the case of a dividend declared on the IPC Delaware Common Shares in properly other than cash or IPC Delaware Common Shares, in such type and amount of property for each Exchangeable Share as is the same as or the Economic Equivalent of the type and amount of property declared as a dividend on each IPC Delaware Common Share; or (d) in the case of a dividend declared on the IPC Delaware Common Shares to be paid in securities of IPC Delaware other than IPC Delaware Common Shares, in such number of either such securities or economically and legally equivalent securities of the Company, as the Board of Directors determines, for each Exchangeable Share as is equal to the number of securities of IPC Delaware to be paid on each share or IPC Delaware Common Shares. Such dividends shall be paid out of money, assets or property of the Company properly applicable to the payment of dividends, or out of authorized but unissued shares of the Company, as applicable. Any dividend which should have been declared on the Exchangeable Shares pursuant to this Section 3.1 but was not so declared due to the provisions of applicable law shall be declared and paid by the Company as soon as payment of such dividend is permitted by such law. SECTION 3.2 DETERMINATION OF ECONOMIC EQUIVALENCE. The Board of Directors shall determine, in good faith and in its sole discretion (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the Board of Directors may require) what the "ECONOMIC EQUIVALENT" or the economical and legal equivalent is for the purposes of these share provisions and each such determination shall be conclusive and binding. In making such determination, the following factors shall (without excluding other factors determined by the Board of Directors to be relevant) be considered by the Board of Directors: (a) in the case of a distribution payable in IPC Delaware Common Shares (other than in the case of a stock dividend), the number of such shares issued in proportion to the number of IPC Delaware Common Shares previously outstanding; -5- (b) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase IPC Delaware Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire IPC Delaware Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a IPC Delaware Common Share; (c) in the case of the issuance or distribution of any other form of property (including without limitation any shares or securities of IPC Delaware of any class other than IPC Delaware Common Shares, any rights, options or warrants other than those referred to in Section 3.2(b), any evidences of indebtedness of IPC Delaware or any assets of IPC Delaware), the relationship between the fair market value (as determined by the Board of Directors in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding IPC Delaware Common Share and the Current Market Price of a IPC Delaware Common Share; (d) in the case of any subdivision, redivision or change of the then-outstanding IPC Delaware Common Shares into a greater number of IPC Delaware Common Shares or the reduction, combination, consolidation or change of the then-outstanding IPC Delaware Common Shares into a lesser number of IPC Delaware Common Shares or any amalgamation, merger, reorganization or other transaction affecting IPC Delaware Common Shares, the effect thereof upon the then-outstanding IPC Delaware Common Shares; and (e) in all such cases, the general taxation consequences of the relevant event to the Holders to the extent that such consequences may differ from the taxation consequences to the holders of IPC Delaware Common Shares as a result of differences between the taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of Holders). SECTION 3.3 PAYMENT OF DIVIDENDS. Cheques of the Company payable at any branch of the bankers of the Company shall be issued in respect of any cash dividends contemplated by Section 3.1(a) hereof and the sending of such a cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Certificates registered in the name of the registered holder of Exchangeable Shares shall be issued or transferred in respect of any stock dividends contemplated by Section 3.1(b) or (d) hereof and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend represented thereby or dividend payable in other securities represented thereby. Such other type and amount of property in respect of any dividends contemplated by Section 3.1(c) hereof shall be issued, distributed or transferred by the Company in such manner as it shall determine and the issuance, distribution or transfer thereof by the Company to each holder of an Exchangeable Share shall satisfy the dividend represented thereby. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Company any dividend that is represented by a cheque that has not been duly presented to the Company's bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable. -6- SECTION 3.4 RECORD AND PAYMENT DATES. The record date for the determination of the Holders entitled to receive payment of, and the payment date for, any dividend declared on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the IPC Delaware Common Shares. ARTICLE 4 CERTAIN RESTRICTIONS SECTION 4.1 PROHIBITED ACTS. So long as any of the Exchangeable Shares are outstanding, the Company shall not at any time without, but may at any time with, the approval of the Holders given as specified in Section 9.2 hereof: (a) amend the constating documents of the Company in a manner which would prejudicially or adversely affect the holders of Exchangeable Shares in any respect; or (b) initiate the voluntary liquidation, dissolution or winding-up of the Company nor take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding-up of the Company; or (c) issue any further Convertible Voting Shares or Exchangeable Shares, or any other shares or securities of the Company ranking equally with, or superior to, the Exchangeable Shares, to any person, other than as contemplated by these share provisions, the Convertible Voting Share Provisions or the Exchange Agreement. SECTION 4.2 RESTRICTIONS IF DIVIDENDS UNPAID. So long as any of the Exchangeable Shares are outstanding and any dividends required to have been declared and paid on the outstanding Exchangeable Shares pursuant to Article 3 have not been declared and paid in full, the Company shall not at any time without, but may at any time with, the approval of the Holders given as specified in Section 9.2 hereof. (a) pay any dividends on the Common Shares, or any other shares ranking junior to the Exchangeable Shares other than share dividends payable in any such other shares ranking junior to the Exchangeable Shares; (b) redeem, or purchase, or make any capital distribution in respect of Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends or on any liquidation distribution; (c) redeem, or purchase, any other shares of the Company ranking equally with the Exchangeable Shares with respect to the payment of dividends or on any liquidation distribution; or (d) issue any Exchangeable Shares or any shares of the Company ranking equally with, or superior to, the Exchangeable Shares other than by way of stock dividends to the -7- Holders or for purposes of implementing the required Economic Equivalent in respect of Exchangeable Shares as provided in Section 10.1 hereof. ARTICLE 5 DISTRIBUTION ON LIQUIDATION SECTION 5.1 LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, a Holder shall be entitled, subject to applicable law and the Liquidation Call Right as set forth in the Exchange Agreement, to receive from the assets of the Company in respect of each Exchangeable Share held by such Holder on the effective date of such liquidation, dissolution or winding-up (the "LIQUIDATION DATE"), before any distribution of any part of the assets of the Company to the holders of the Common Shares or any other shares ranking junior to the Exchangeable Shares, an amount equal to the Exchangeable Share Consideration applicable on the last Business Day prior to the Liquidation Date (the "LIQUIDATION AMOUNT"), which as set forth in Section 5.2 shall be fully paid and satisfied by the delivery by or on behalf of the Company of the Total Exchangeable Share Consideration in respect of the Holder's Exchangeable Shares representing such Holder's total Liquidation Amount (the "TOTAL LIQUIDATION AMOUNT"). SECTION 5.2 PAYMENT AND DELIVERY OF LIQUIDATION AMOUNT. On or promptly after the Liquidation Date, and subject to the exercise by IPC Delaware of the Liquidation Call Right, the Company shall cause to be delivered to the Holders the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with the certificate or certificates representing the same number and IPC Delaware Special Voting Shares and together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares and the IPC Delaware Voting Shares under the Act and the constating documents of the Company to effect a transfer of the IPC Delaware Special Voting Shares and such additional documents and instruments as the Company may reasonably require, at the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the Holders. The Total Exchangeable Share Consideration representing the Total Liquidation Amount for such Holder's Exchangeable Shares shall be delivered to such Holder, at the Company's expense, at the address of the Holder recorded in the securities register of the Company for the Exchangeable Shares, or, if requested by the Holder, by holding for pick-up by the Holder at the place of delivery. On and after the Liquidation Date, the Holders shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of Holders in respect thereof, other than the right of receive their proportionate share of the Total Exchangeable Share Consideration representing the Total Liquidation Amount of all such Exchangeable Shares unless payment of the Total Liquidation Amount for a Holder's Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of such Holder shall remain unaffected until the Total Exchangeable Share Consideration representing the Holder's Total Liquidation Amount has been paid in the manner hereinbefore provided. The Company shall have the right at any time after the Liquidation Date to deposit or cause to be deposited the Total Exchangeable Share Consideration representing the Total Liquidation Amount in respect of the Exchangeable Shares represented by certificates that have not at the Liquidation Date been surrendered by the Holders thereof in a custodial account or for safekeeping, in the case of non-cash items, with any chartered bank or trust company in Canada. Upon such deposit being made, the rights -8- of the Holders shall be limited to receiving their proportionate share of the Total Exchangeable Share Consideration representing the Total Liquidation Amount so deposited for such Exchangeable Shares, against presentation and surrender of such certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of such Total Exchangeable Share Consideration, the Holders shall thereafter be considered and deemed for all purposes to be the holders of the IPC Delaware Common Shares delivered to them or the custodian on their behalf. SECTION 5.3 RIGHTS AFTER LIQUIDATION. After the Company has satisfied its obligations to pay a Holder the Total Exchangeable Share Consideration representing the Holder's Total Liquidation Amount, such Holder shall not be entitled to share in any further distribution of the assets of the Company. Notwithstanding the foregoing, until such payment or deposit of such Holder's Total Liquidation Amount, the Holder shall be deemed to still be a Holder for purposes of all voting rights with respect thereto. Such rights shall remain unaffected until such payment or deposit. ARTICLE 6 REDEMPTION OF EXCHANGEABLE SHARES BY HOLDER SECTION 6.1 REDEMPTION RIGHTS. A Holder shall be entitled at any time, subject to the exercise by IPC Delaware of the Redemption Call Right as set forth in the Exchange Agreement and applicable, law, and otherwise upon compliance with the provisions of this Article 6, to require the Company to redeem any or all of the Exchangeable Shares registered in the name of such Holder for an amount equal to the Exchangeable Share Consideration for each Exchangeable Share which the Holder desires the Company to redeem (the "REDEEMED SHARES") applicable on the last Business Day prior to the Redemption Date (the "REDEMPTION PRICE"), to be fully paid and satisfied by the delivery by or on behalf of the Company of the Total Exchangeable Share Consideration representing such Holder's total Redemption Price for all such Redeemed Shares (the "TOTAL REDEMPTION PRICE"). To effect such redemption, the Holder shall present and surrender at the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the Holders, the certificates representing the Redeemed Shares, together with certificates representing the same number of IPC Delaware Special Voting Shares and, together with such other documents and instruments as may be required to effect a transfer of Redeemed Shares and to effect a transfer of the IPC Delaware Special Voting Shares under the Act and the constating documents of the Company and such additional documents and instruments as the Company may reasonably require, and together with a duly executed statement (the "REDEMPTION PUT REQUEST") in the form of Exhibit "A" hereto or in such other form as may be acceptable to the Company; (a) specifying that the Holder desires to have all or any number specified therein of the Redeemed Shares represented by such certificate or certificates redeemed by the Company; (b) stating the date on which the Holder desires to have the Company redeem the Redeemed Shares (the "REDEMPTION DATE") which shall be the 30th day (or, if such day is not a Business Day, the first Business Day thereafter) after the date on which the Redemption Put Request is received by the Company; and -9- duly authorized attorney. The Holder shall also pay any governmental, transfer or other tax imposed in respect of such conversion. Upon receipt of such notice, the Company shall issue certificates representing the Exchangeable Shares upon the basis above prescribed and in accordance with the provisions hereof to the registered holder of the Convertible Voting Shares represented by the certificate accompanying such notice. If less than all of the Convertible Voting Shares represented by any certificate are to be converted, the Holder shall be entitled to receive a new certificate for the Convertible Voting Shares representing the shares comprised in the original certificate which are not to be converted. All Exchangeable Shares resulting from any conversion provided for herein shall be fully paid and assessable. ARTICLE 7 PURCHASE FOR CANCELLATION SECTION 7.1 PURCHASE FOR CANCELLATION. Subject to applicable law, the Company may at any time and from time to time purchase for cancellation all or any part of the Convertible Voting Shares by private contract with any Holder, including all rights to any declared and unpaid dividends or distributions thereon, at any price agreed to between the Company and such Holder. ARTICLE 8 VOTING RIGHTS SECTION 8.1 VOTING RIGHTS. The Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Company and, as a class of shareholders, shall be entitled, notwithstanding the number of common shares and Convertible Voting shares which shall at any time be outstanding, to such number of votes as a class as is equal to 50% of all votes on any matter to be dealt with at any such meeting. The number of votes to which a Holder is entitled shall be the aggregate number of votes to which the Convertible Voting Shares as a class are entitled to exercise, divided by the number of Convertible Voting Shares held by that Holder. ARTICLE 9 AMENDMENT AND APPROVAL SECTION 9.1 HOLDER APPROVAL. The rights, privileges, restrictions and conditions attaching to the Convertible Voting Shares may be added to, changed or removed, only with the approval of the holders of the Convertible Voting Shares (excluding Convertible Voting Shares beneficially owned by IPC Delaware or its Subsidiaries) voting separately as a class, given as hereinafter specified. SECTION 9.2 QUORUM. Any approval given by the Holders to add to, change or remove any right, privilege, restriction or condition attaching to the Convertible Voting Shares or any other matter requiring the approval or consent of the Holders shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law, provided, however, that such approval must be evidenced by a resolution passed by not less than 66 2/3% (excluding Convertible Voting Shares beneficially owned by IPC Delaware or its Subsidiaries) of the votes cast on such resolution by persons represented in person or by proxy or such other authorized person at a meeting of Holders duly called and held at which the Holders of at least 50% of the Convertible Voting Shares outstanding at that time are present or represented by proxy or such other authorized person (excluding Convertible Voting Shares beneficially owned by IPC Delaware or its Subsidiaries) or by a written resolution signed by the Holders of the then-outstanding Convertible Voting Shares (excluding Convertible Voting Shares -9- (c) acknowledging the Redemption Call Right of IPC Delaware in the Exchange Agreement to purchase all but not less than all of the Redeemed Shares directly from the Holder and that the Redemption Put Request shall be deemed to be a revocable offer by the Holder to sell the Redeemed Shares in accordance with the Exchange Agreement. SECTION 6.2 PURCHASE BY COMPANY. Subject to the exercise by IPC Delaware of the Redemption Call Right, upon receipt by the Company in the manner specified in Section 6.1 hereof of a certificate or certificates representing the number of Redeemed Shares, together with a Redemption Put Request, and provided that the Redemption Put Request is not revoked by the Holder in the manner specified in Section 6.6 hereof, the Company shall redeem the Redeemed Shares effective at the close of business on the Redemption Date and shall cause to be delivered to such holder the Total Exchangeable Share Consideration representing the Total Redemption Price with respect to such Redeemed Shares in accordance with Section 6.3 hereof. If not all of the Exchangeable Shares represented by any certificate are redeemed, a new certificate for the balance of such Exchangeable Shares shall be issued to the Holder at the expense of the Company. SECTION 6.3 PAYMENT OF REDEMPTION PRICE. The Company shall deliver or cause to be delivered, the Total Exchangeable Share Consideration representing the Total Redemption Price to the relevant Holder, at the address of the Holder recorded in the securities register of the Company for the Exchangeable Shares or at the address specified in the Holder's Redemption Put Request or if request by the Holder by holding for pick-up by the Holder at the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the Holder's and such delivery of such Total Exchangeable Share Consideration to the Holder in respect of the Holder's Redeemed Shares shall be deemed to be payment of and shall satisfy and discharge all liability for the Total Redemption Price with respect to such Redeemed Shares to the extent that the same is represented by such share certificates and cheques, except as to any cheque included therein which is not paid upon due presentation (less any tax deducted and withheld therefrom and remitted to the proper tax authority). SECTION 6.4 RIGHTS AFTER REDEMPTION. After the close of business on the Redemption Date, the holder of the Redeemed Shares shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive the Exchangeable Share Consideration representing the total Redemption Price of the Holder's Redeemed Shares, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the Total Exchangeable Share Consideration representing the Total Redemption Price of such Redeemed Shares shall not be made, in which case the rights of such Holder shall remain unaffected until the Total Exchangeable Share Consideration representing such Total Redemption Price has been paid in the manner hereinbefore provided. After the close of business on the Redemption Date, provided that presentation and surrender of certificates and payment of the Total Redemption Price has been made in accordance with the foregoing provisions, the holder of the Redeemed Shares so redeemed by the Company shall thereafter be considered and deemed for all purposes to be a holder of the IPC Delaware Common Shares delivered to it. Notwithstanding the foregoing, until payment of the Exchangeable Share Consideration to the Holder in respect of an Exchangeable Share, the Holder shall be deemed to still be a holder of such Exchangeable Share for purposes of all voting rights with respect thereto. Such rights shall remain unaffected until any cheque(s) received by Holder have cleared upon due presentation by Holder. -10- SECTION 6.5 LIMITATION ON REDEMPTION RIGHTS. Notwithstanding any other provision of this Article 6, the Company shall not be obligated to redeem Redeemed Shares specified by a Holder in a Redemption Put Request to the extent that such redemption of Redeemed Shares would be contrary to liquidity or solvency requirements or other provisions of applicable law. If the Company believes that on any Redemption Date it would not be permitted by any of such provisions to redeem the Redeemed Shares tendered for redemption on such date, and provided that IPC Delaware shall not have exercised the Redemption Call Right with respect to the Redeemed Shares, the Company shall only be obligated to redeem Redeemed Shares specified by a Holder in a Redemption Put Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the Holder at least five Business Days prior to the Redemption Date as to the number of Redeemed Shares which will not be redeemed by the Company. In any case in which the redemption by the Company of Redeemed Shares would be contrary to liquidity or solvency requirements or other provisions of applicable law, the Company shall redeem Redeemed Shares in accordance with Section 6.2 of these share provisions on a pro rata basis and shall issue to each holder of Redeemed Shares a new certificate, at the expense of the Company, representing the Redeemed Shares not redeemed by the Company pursuant to Section 6.2 hereof. Provided that the Redemption Put Request is not revoked by the Holder in the manner specified in Section 6.6 hereof, the holder of any such Redeemed Shares not redeemed by the Company pursuant to Section 6.2 of these share provisions as a result of liquidity or solvency requirements or applicable law shall be deemed by giving the Redemption Put Request to require IPC Delaware to purchase such Redeemed Shares from such holder on the Redemption Date or as soon as practicable thereafter on payment by IPC Delaware to such holder of the Exchangeable Share Consideration representing the Redemption Price for each such Redeemed Share, all as more specifically provided in the Exchange Agreement. SECTION 6.6 WITHDRAWAL OF REDEMPTION PUT REQUEST. A holder of Redeemed Shares may, be notice in writing given by the Holder to the Company before the close of business on the Business Day immediately preceding the Redemption Date, withdraw its Redemption Put Request in which event such Redemption Put Request shall be null and void and, for greater certainty, the revocable offer constituted by the Redemption Put Request to sell the Redeemed Shares to IPC Delaware shall be deemed to have been revoked. ARTICLE 7 PURCHASE FOR CANCELLATION SECTION 7.1 PURCHASE FOR CANCELLATION. Subject to applicable law, the Company may at any time and from time to time purchase for cancellation all or any part of the Exchangeable Shares by private contract with any Holder, including all rights to any declared and unpaid dividends or distributions thereon, at any price agreed to between the Company and such Holder. ARTICLE 8 VOTING RIGHTS SECTION 8.1 VOTING RIGHTS. Subject to the Act, the holders of the Exchangeable Shares shall not be entitled as such (except as hereinafter specifically provided and except as otherwise provided by the Act) to receive notice of or -11- to attend all meetings of the shareholders of the Company and shall not be entitled to vote at any such meeting. ARTICLE 9 AMENDMENT AND APPROVAL SECTION 9.1 HOLDER APPROVAL. The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed, only with the approval of the holders of Exchangeable Shares (excluding Exchangeable Shares beneficially owned by IPC Delaware or its Subsidiaries), voting separately as a class, given as hereinafter specified. SECTION 9.2 QUORUM. Any approval given by the Holders 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 shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law, provided, however, that such approval must be evidenced by a resolution passed by not less than 66 2/3% (excluding Exchangeable Shares beneficially owned by IPC Delaware or its Subsidiaries) of the votes cast on such resolution by persons represented in person or by proxy or such other authorized person at a meeting of Holders duly called and held at which the Holders of at least 50% of the Exchangeable Shares outstanding at that time present or represented by proxy or such other authorized person (excluding Exchangeable Shares beneficially owned by IPC Delaware or its Subsidiaries) or by a written resolution signed by the Holders of the then-outstanding Exchangeable Shares (excluding Exchangeable Shares beneficially owned by IPC Delaware or its Subsidiaries). If at any such meeting the Holders of at least 50% of the Exchangeable Shares outstanding at that time are not present or represented by proxy or such other authorized person within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than ten days thereafter and to such time and place as may be designated by the Chairman of such meeting. At such adjourned meeting the Holders present or represented by proxy or such other authorized person thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than 66 2/3% of the votes cast on such resolution by persons represented in person or by proxy or such other authorized person at such meeting (excluding Exchangeable Shares beneficially owned by IPC Delaware or its Subsidiaries) shall constitute the approval or consent of the Holders. For the purposes of this Section, any spoiled votes, illegible votes, defective votes and abstinences shall be deemed to be votes not cast. ARTICLE 10 RECIPROCAL CHANGES, ETC. IN RESPECT OF IPC DELAWARE COMMON SHARES SECTION 10.1 In the event IPC Delaware takes any of the following actions: (a) issues or distributes IPC Delaware Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire IPC Delaware Common Shares) to the holders of all or substantially all of the then-outstanding IPC Delaware Common Shares by way of stock dividend or other distribution, other than an issue of IPC -12- Delaware Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire IPC Delaware Common Shares) to holders of IPC Delaware Common Shares who exercise an option to receive dividends in IPC Delaware Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire IPC Delaware Common Shares) in lieu of receiving cash dividends; or (b) issues or distributes rights, options or warrants to the holders of all or substantially all of the then-outstanding IPC Delaware Common Shares entitling them to subscribe for or to purchase IPC Delaware Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire IPC Delaware Common Shares); or (c) issues or distributes to the holders of all or substantially all of the then-outstanding IPC Delaware Common Shares, (i) shares or securities of IPC Delaware of any class other than IPC Delaware Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire IPC Delaware Common Shares), (ii) rights, options or warrants other than those referred to in Section 10.1(a) above, (iii) evidences of indebtedness of IPC Delaware, or (iv) assets of IPC Delaware, the Company will ensure that the Economic Equivalent on a per share basis of such rights, options, securities, shares, evidence of indebtedness or other assets shall be issued or distributed, in accordance with applicable law simultaneously to the holders of Exchangeable Shares. SECTION 10.2 In the event IPC Delaware takes any of the following actions: (a) subdivides, redivides or changes the then-outstanding IPC Delaware Common Shares into a greater number of IPC Delaware Common Shares; or (b) reduces, combines, consolidates or changes the then-outstanding IPC Delaware Common Shares into a lesser number of IPC Delaware Common Shares; or (c) reclassifies of otherwise changes any of the terms and conditions of the IPC Delaware Common Shares, of effects an amalgamation, merger, reorganization or other transaction affecting IPC Delaware Common Shares, the Company will provide at least 7 days prior written notice thereof to the Holders and take all steps necessary to ensure that the same or an Economically Equivalent change shall simultaneously be made to, or in the rights of the Holders as provided for in these share provisions and will submit same to the Holders for their approval in the manner provided in Article 9 hereof. The company will, to the extent required, upon due notice from IPC Delaware, 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 the Company, or subdivisions, redivisions or changes are made to the Exchangeable Shares, in order to implement the required Economic Equivalent with respect to the IPC Delaware Common Shares and Exchangeable Shares as provided for in these share provisions and will submit same to the Holders for their approval in the manner provided in Article 9 hereof . -13- ARTICLE 11 ACTIONS BY THE CORPORATION UNDER THE VOTING AND SUPPORT AGREEMENT AND THE EXCHANGE AGREEMENT SECTION 11.1 The company will take all actions and do all such thing as shall be necessary or advisable, and will take all reasonable efforts to perform and comply with and to ensure performance and compliance by IPC Delaware and the Company with all provisions of the Voting and Support Agreement and the Exchange Agreement applicable to IPC Delaware and the Company, respectively, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Company and the Holders, all rights and benefits in favour of the Company and the Holders under or pursuant thereto. SECTION 11.2 The Company will not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its obligations under, the Voting and Support Agreement or the Exchange Agreement without the approval of the Holders (other than IPC Delaware or any of its Subsidiaries) given in accordance with section 9.2 hereof other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purpose of: (a) adding to the covenants of the other party of parties to such agreement for the protection of the Holders(other than IPC Delaware or any of its Subsidiaries); or (b) making such provisions or modifications not inconsistent with the spirit and intent of such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the Board of Directors, after consultation with counsel, it may be expedient to make, provided that such provisions and modifications will not be prejudicial or adverse to the interests of any Holder; or (c) making such changes in or corrections to such agreement which, on the advice of counsel to the Company, are required for the purpose of curing or correcting any defect or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial or adverse to the interests of any Holder. ARTICLE 12 LEGEND; CALL RIGHTS SECTION 12.1 LEGEND. The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend, in form and on terms approved by the Board of Directors, with respect to the Call Rights and all other rights of the holders of Exchangeable Shares pursuant to the Voting and Support Agreement and the Exchange Agreement. -14- SECTION 12.2 ACKNOWLEDGEMENT. Each Holder, whether of record or beneficial, by virtue of becoming and being such a Holder shall be deemed to acknowledge each of the Call Rights in favour of IPC Delaware or its assignee (as provided in the Exchange Agreement) and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Company or the redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of IPC Delaware or its assignee (as provided in the Exchange Agreement) as therein provided. SECTION 12.3 WITHHOLDING RIGHTS. The Company and IPC Delaware, as the case may be, shall be entitled to deduct and withhold from any dividend or consideration otherwise payable to any Holder such amounts as the Company or IPC Delaware, as the case may be, is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada), the United States tax laws or any other relevant provisions of provincial, state, local or foreign tax laws, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to such Holder in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate tax authority. To the extent that such amount so required to be deducted or withheld from any payment to a Holder exceeds the cash portion of the consideration otherwise payable to the Holder, the Company or IPC Delaware, as the case may be, shall promptly notify the Holder and unless such Holder remits the difference in cash to the Company or IPC Delaware, as the case may be, before the tax amount is required to be remitted to the tax authority, then the Company or IPC Delaware, as the case may be, may sell or otherwise dispose of such portion of the consideration (including, without limitation, any of the IPC Delaware Common Shares) as is necessary to provide sufficient funds to the Company or IPC Delaware, as the case may be, to enable it to comply with such deduction or withholding requirement and the Company or IPC Delaware, as the case may be, shall give an accounting to the Holder with respect thereto and shall pay over to such Holder and remit any unapplied balance of the net proceeds of such sale that was not remitted to such tax authority in satisfaction of a deducting or withholding requirement. In order to assist the Company and IPC Delaware, as the case may be, in complying with any such deduction and withholding requirement, the relevant Holder shall, to the extent applicable, deliver to the Company or IPC Delaware, as the case may be, (i) if such Holder is an individual, trust or corporation, a declaration sworn by the individual, a trustee or a director, as the case may be, before a notary or commissioner for oaths to the effect that such Holder is not, and will not be, on the date of payment, a non-resident of Canada for the purposes of the Income Tax Act (Canada) or (ii) if such Holder is a partnership, a declaration sworn by a general partner before a notary or commissioner for oaths to the effect that such Holder is a Canadian partnership, as defined in the Income Tax Act (Canada). ARTICLE 13 MISCELLANEOUS SECTION 13.1 NOTICE TO THE COMPANY. Any notice, request or other communication to be given to the Company by a Holder shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or delivery to the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the Holders, and addressed to the attention of the President. Any such notice, request or other communication, if given by mail, telecopy, facsimile or -15- delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Company. SECTION 13.2 MANNER AND RISK OF SURRENDER. Any presentation and surrender by a Holder to the Company of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of the Company or the redemption of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the Holders, in each case addressed to the attention of the President of the Company. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by the Company, as the case may be, and the method of any such presentation and surrender of certificates shall be at the sole risk of the Holder, mailing the same. SECTION 13.3 NOTICE TO HOLDERS. Any notice, request or other communication to be given to a Holder by or on behalf of the Company shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or delivery to the address of the Holder recorded in the securities register of the Company or, in the event of the address of any such Holder not being so recorded, then at the last known address of such Holder. Any such notice, request or other communication, if given by mail or telecopy, shall only be deemed to have been given and received on the second Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more Holders shall not invalidate or otherwise alter or affect any action or proceeding to be or intended to be taken by the Company. SECTION 13.4 CONVERSION TO COMMON SHARES. Immediately upon the issuance and delivery to a Holder at any time and from time to time of IPC Delaware Common Shares and the other Exchangeable Share Consideration (if any) pursuant to any Call Right, or any Insolvency Put Right or Automatic Exchange Right (as such terms are defined in the Exchange Agreement), the Exchangeable Shares which are acquired pursuant to such right shall be automatically converted into Common Shares of the Company on a one-for-one basis and the holder thereof shall be entitled to a certificate or certificates upon demand representing the Common Shares resulting from such conversion. All Common Shares issued by the Company in respect of any conversion of issued and fully paid Exchangeable Shares shall be deemed to be fully paid and assessable. SECTION 13.5 CONFLICT OR INCONSISTENCY In the event of any inconsistency or conflict between all (or part of) a right, privilege, restriction, or condition attaching to the Exchangeable Shares and all (or part of) an Article of the Articles of Association of the Company, that right, privilege, restriction, or condition, or part thereof, as the case may be, attaching to the Exchangeable Shares shall to the extent of such inconsistency or conflict govern. -16- EXHIBIT "A" REDEMPTION PUT REQUEST TO: IntelliPharmaCeutics Corp. (the "COMPANY") AND TO: IntelliPharmaCeutics Ltd. ("IPC DELAWARE") This notice is given pursuant to Article 6 of the provisions (the "EXCHANGEABLE SHARE PROVISIONS") attaching to the Exchangeable Shares of the Company represented by this certificate and all capitalized words and expressions used in this notice which are defined in the Exchangeable Share Provisions have the meaning attributed to such words and expressions in such Exchangeable Share Provisions. The undersigned hereby notifies the Company that, subject to the Redemption Call Right referred to below, the undersigned desires to have the Company redeem in accordance with Article 6 of the Exchangeable Share Provisions: [ ] all share(s) represented by this certificate; or [ ] _________________________share(s) only. The undersigned hereby notifies the Company that the Redemption Date shall be ______________. NOTE: The Redemption Date will be the 30th day after the date upon which this notice is received by the Company (or, if such day is not a Business Day, the first Business Day thereafter). The undersigned acknowledges the overriding Redemption Call Right of IPC Delaware to purchase all but not less than all the Redeemed Shares from the undersigned and that this request is and shall be deemed to be a revocable offer by the undersigned to sell the Redeemed Shares to IPC Delaware in accordance with the Redemption Call Right on the Redemption Date for the price and on the other terms and conditions set out in the Exchange Agreement and in the Exchangeable Share Provisions. If IPC Delaware determines not to exercise the Redemption Call Right, the Company will notify the undersigned of such fact as soon as possible. This notice of redemption, and this offer to sell the Redeemed Shares to IPC Delaware, may be revoked and withdrawn by the undersigned by notice in writing given to the Company at any time before the close of business on the Business Day immediately preceding the Redemption Date. The undersigned acknowledges that if, as a result of liquidity or solvency provisions of applicable law, the Company is unable to redeem all Redeemed Shares, the undersigned will be deemed to have exercised the Insolvency Put Right (as defined in the Exchange Agreement) so as to require IPC Delaware to purchase the unredeemed Redeemed Shares. The undersigned represents and warrants to the Company and IPC Delaware that the undersigned: [ ] is [ ] is not a non-resident of Canada for purposes of the Income Tax Act (Canada). The undersigned acknowledges that in the absence of an indication that the undersigned is not a non-resident of Canada, withholding on account of Canadian tax may be made from amounts payable to the undersigned from net proceeds of sale or IPC Delaware Common Shares deliverable on the redemption or purchase of the Redeemed Shares. The undersigned hereby represents and warrants to the Company and IPC Delaware that the undersigned has good title to, and owns, the share(s) represented by this certificate to be acquired by the Company or IPC Delaware, as the case may be, free and clear of all liens, hypothecs, pledges, claims, encumbrances, security interests and adverse claims or interests except pursuant to the Exchange Agreement or the Exchangeable Share Provisions. ______________ _________________________ ________________________ (Date) (Signature of Shareholder) (Guarantee of Signature) [ ] Please check box if the securities and any cheque(s) or other non-cash assets resulting from the redemption of the Redeemed Shares are to be held for pick-up by the shareholder at the principal executive offices of the Company or at such other reasonable place as may be specified by the Board of Directors by notice to the holders of Exchangeable Shares, failing which the securities and any cheque(s) or other non-cash assets will be delivered to the shareholder, at the Company's expense in accordance with the Exchangeable Share Provisions. NOTE: This panel must be completed and the accompanying share certificate(s), together with such additional documents as the Company may reasonably require, must be deposited with the Company at its principal executive offices or at such other reasonable place as may be specified by the Board of Directors by notice to the holders of Exchangeable Shares. The securities and any cheque(s) or other non-cash assets resulting from the redemption or purchase of the Redeemed Shares will be issued and registered in, and made payable to, or transferred into, respectively, the name of the shareholder as it appears on the register of the Company and the securities, cheque(s) and other non-cash assets resulting from such redemption or purchase will be delivered to the shareholder in accordance with the Exchangeable Share Provisions. Date Name of person in whose name securities or cheque(s) or other non-cash assets are to be registered, issued or delivered (PLEASE PRINT) ____________________________________________ Street Address or P.O. Box ____________________________________________ City, Province and Postal Code ____________________________________________ Signature of Shareholder ____________________________________________ Signature guaranteed by NOTE: If this notice of redemption is for less than all of the share(s) represented by this certificate, a certificate representing the remaining shares of the Company will be issued and registered, at the Company's expense in the name of the shareholder as it appears on the register of the Company, unless the share certificate is duly endorsed for transfer in respect of such shares. -2-