Contract

by Vernalis
June 29th, 2006
EXHIBIT 4.7(D) THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST IN ACCORDANCE WITH RULE 24B-2 OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***. ALX SHARE PURCHASE AGREEMENT (FOR THE PURCHASE OF SHARES FROM ALX LIMITED PARTNERSHIP) THIS AGREEMENT is made as of the 18th day of November, 2005, BETWEEN: ALX LIMITED PARTNERSHIP, a limited partnership formed under the laws of Ontario (the "VENDOR") -and- VERNALIS PLC, a corporation incorporated under the laws of England and Wales, with company number 2304992 ("VERNALIS") -and- VERNALIS (CANADA) INC., a corporation incorporated under the laws of New Brunswick (the "PURCHASER") RECITALS: A. Certain holders of warrants, conversion rights and options to acquire Class A Preference Shares, Class D Preference Shares and common shares (the "PRINCIPAL SHAREHOLDERS") in the capital of Cita Neuropharmaceuticals Inc. (the "CORPORATION"), the Purchaser, Vernalis and the Corporation have entered into a share purchase agreement substantially in the form attached in Schedule A (the "PRINCIPAL PURCHASE AGREEMENT") dated the date hereof whereby the Principal Shareholders have agreed to sell to the Purchaser all of their shares in the capital of the Corporation, including those issuable upon exercise of warrants, conversion rights, options and other rights to acquire shares in the capital of the Corporation, or to exchange certain options to acquire shares in the capital of the Corporation (both the shares and options being, collectively, the "PRINCIPAL SHAREHOLDERS' SECURITIES"). B. The Corporation and the Vendor are parties to a partnership call option agreement dated December 23, 2004 (the "CALL OPTION AGREEMENT") pursuant to which the Corporation has an option to purchase Class A limited partnership units of the GTTS XV Limited Partnership (the "OPTIONED UNITS") from the Vendor. The Corporation has delivered a written notice pursuant to the Call Option Agreement stating its intention to purchase the Optioned Units as of an effective date of January 6, 2006 (the "CALL DATE"). Under the Call Option Agreement, the Corporation may be required to pay a portion of the option price for the Optioned Units by issuing up to *** common shares in the capital of the Corporation to the Vendor depending on the fair market value of the Optioned Units, such number of shares to be determined on or before the Principal Date of Closing. C. The Purchaser and the Vendor wish to facilitate the purchase and sale of the common shares in the capital of the Corporation that the Corporation may issue pursuant to the Call Option Agreement, subject to and in accordance with the terms and conditions of this Agreement. D. The Vendor wishes to appoint The VenGrowth Advanced Life Sciences Fund Inc. to act as its representative with respect to certain matters with respect to this Agreement and related documents. E. The Purchaser is also entering into separate agreements with other holders of shares in the capital of the Corporation and holders of warrants, conversion rights, options or rights to acquire shares in the capital of the Corporation to acquire all such shares and/or rights. NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows: ARTICLE 1 INTERPRETATION 1.1 DEFINITIONS In this Agreement, 1.1.1 "AFFILIATE" has the meaning attributed to such term under the Business Corporations Act (Ontario); 1.1.2 "AGREED PAIN PROJECT BUDGET" means the budget for the Pain Project agreed between the Corporation and the Purchaser; 1.1.3 "AGREED PARKINSON'S PROJECT BUDGET" means the budget for the Parkinson's Project agreed between the Corporation and the Purchaser; 1.1.4 "AGREEMENT" means this agreement and all schedules attached to this agreement, in each case as they may be amended or supplemented from time to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and -2- similar expressions refer to this agreement; and unless otherwise indicated, references to Articles and sections are to Articles and sections in this agreement; 1.1.5 "ALZHEIMER'S PROJECT" means the Business which relates to CNP1061 for the indication of Alzheimer's disease; 1.1.6 "ALX PURCHASED SHARES" means the common shares, if any, in the capital of the Corporation issued to the Vendor pursuant to the Call Option Agreement; 1.1.7 "ALX TIME OF CLOSING" means 11:00 a.m. on January 6, 2006 or such later time or date to which the Vendor and the Purchaser agree in writing; 1.1.8 "BUSINESS" means the business of the Corporation of researching, developing and testing drug candidates related to the Pain Project, the Parkinson's Project and the Alzheimer's Project; 1.1.9 "BUSINESS DAY" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario or London, England; 1.1.10 "CANADIAN DOLLARS", "CDN. DOLLARS" or "CDN.$" means lawful currency of Canada; 1.1.11 "CHARGE" means any security interest, lien, charge, pledge, encumbrance, mortgage, adverse claim or title retention agreement of any nature or kind; 1.1.12 "CLASS 2 PREFERRED SHARES" means the Class 2 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser, having the share provisions set out in Schedule D and subject to the prior redemption right of the Class 1 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser, with a stated redemption price of U.S.$1.00 per share; 1.1.13 "CLASS 3 PREFERRED SHARES" means the Class 3 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser, having the share provisions set out in Schedule D and subject to the prior redemption right of the Class 1 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser and the Class 2 Preferred Shares, with a stated redemption price of U.S.$1.00 per share and with an aggregate Redemption Price as set out in the Final Proceeds Schedule, plus the aggregate Redemption Price of any additional Class 3 Preferred Shares issued in accordance with section 2.6 and to other Persons in respect of Net Cash, and subject to further reduction and set-off in accordance with section 2.3.7 and the share provisions attached to the Purchaser Shares; 1.1.14 "CLASS 4 PREFERRED SHARES" means the Class 4 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser, having the share provisions set out in Schedule D and subject to the prior redemption right of the Class 1 non-voting, retractable, redeemable, preferred shares, in registered form, of the Purchaser and the Class 2 Preferred Shares, with a stated redemption price of U.S.$1.00 per share; -3- 1.1.15 "CONVERSION RATE" means, in relation to the conversion of one Currency to another on a particular day, the rate of exchange quoted by the Bank of Canada as its spot rate of exchange for the conversion of the one Currency to the other at approximately noon (Toronto time) on such day; 1.1.16 "CREST" means the relevant system, as defined in the UK Uncertificated Securities Regulations 1995 (SI 1995 No. 93/3272), as amended (in respect of which CRESTCo Limited is operator); 1.1.17 "CURRENCY" means Canadian Dollars, Pounds Sterling or United States Dollars; 1.1.18 "FDA" means the Food and Drug Administration of the United States of America; 1.1.19 "FINAL CLOSING BALANCE SHEET" means the consolidated balance sheet of the Corporation and the Subsidiaries as at the Principal Date of Closing, and the calculation of Net Cash as at the Principal Date of Closing, prepared pursuant to the Principal Purchase Agreement; 1.1.20 "FINAL PROCEEDS SCHEDULE" means the schedule setting out, as at the Principal Date of Closing, the allocation of Purchaser Shares, each class of shares in the capital of the Purchaser, options to acquire such shares, Redemption Amounts based on the occurrence of Milestones and the other amounts set forth therein (subject to the number of common shares issuable pursuant to the Call Option Agreement and prior to reduction and set-off in accordance with section 2.3.7 and excluding the allocation of the Redemption Amounts in respect of any additional Class 2 Preferred Shares, Class 3 Preferred Shares and Class 4 Preferred Shares issued in accordance with section 2.6 or to other Persons in respect of Net Cash), a pro forma of which is set out in Schedule B (the "PRO FORMA PROCEEDS SCHEDULE"), such schedule in final form to be agreed between Vernalis and the Corporation pursuant to the Principal Purchase Agreement; 1.1.21 "INTERIM EXPENDITURE" has the meaning attributed to such term in the Principal Purchase Agreement; 1.1.22 "MILESTONE", in respect of the Purchaser Shares, has the meaning attributed to such term in section 2.3.2; 1.1.23 "MILESTONE CONSIDERATION" means the issue of Class 3 Preferred Shares to the Vendor as set out in the Final Proceeds Schedule and in accordance with section 2.3.1; 1.1.24 "MILESTONE SHARE PRICE" means, in respect of any Vernalis Shares to be issued on a Redemption Date, the average of the closing middle market prices of a Vernalis Share as shown in the Daily Official List of the London Stock Exchange plc on the 30 trading days up to and including the trading day (the "FINAL TRADING DAY") -4- immediately prior to the occurrence of the relevant Milestone and converted to the relevant Currency at the Conversion Rate on the Final Trading Day; 1.1.25 "MILESTONE SHARES" means, in respect of any Redemption Amount, such number of Vernalis Shares, if any, to be allotted and issued to satisfy such Redemption Amount in accordance with section 2.3.5; 1.1.26 "NET CASH" has the meaning attributed thereto in, and shall be determined in accordance with, the Principal Purchase Agreement; 1.1.27 "PAIN PROJECT" means the Business which relates to CNP3381 for the indication of diabetic neuropathic pain; 1.1.28 "PARKINSON'S PROJECT" means the Business which relates to CNP1512 for the indication of Parkinson's disease; 1.1.29 "PERSON" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted; 1.1.30 "POUNDS STERLING" or "L" means lawful currency of the United Kingdom; 1.1.31 "PRINCIPAL DATE OF CLOSING" means such date for completion of the purchase of the Principal Shareholders' Securities pursuant to the Principal Purchase Agreement as determined pursuant to the Principal Purchase Agreement; 1.1.32 "PRO FORMA PROCEEDS SCHEDULE" has the meaning attributed to such term in section 1.1.20; 1.1.33 "PURCHASE PRICE" has the meaning attributed to such term in section 2.2; 1.1.34 "PURCHASER SHAREHOLDERS AGREEMENT" means the unanimous shareholders agreement to be entered into pursuant to the Business Corporations Act (New Brunswick) among all of the shareholders of the Purchaser, the Purchaser and Vernalis, substantially in the form attached as Schedule C; 1.1.35 "PURCHASER SHARES" means the Class 3 Preferred Shares to be issued to the Vendor, if applicable, the Principal Shareholders and the other holders of the common shares and rights to acquire common shares in the capital of the Corporation, with share rights, privileges, restrictions and conditions set out in the share provisions substantially in the form attached as Schedule D; 1.1.36 "REDEMPTION AMOUNT" means, in respect of any Redemption Date, the aggregate Redemption Price payable in cash and/or Vernalis Shares owing to the Vendor by the Purchaser upon the retraction or redemption of its Purchaser Shares in accordance with the share provisions attached to the Purchaser Shares, or by Vernalis -5- (or its designee or assignee) upon exercise of its call right in accordance with section 2.3.4, and, subject in either case, to reduction or set-off of the Vendor's entitlement thereto in accordance with section 2.3.7 and the share provisions attached to the Purchaser Shares; 1.1.37 "REDEMPTION DATE" means, in respect of any Milestone, the 45th day after the occurrence of that Milestone, or such other date as may be agreed between the Purchaser and the Vendors' Representative; 1.1.38 "REDEMPTION PRICE" means the stated redemption price of each Purchaser Share in respect of a Redemption Date of U.S.$*** each; 1.1.39 "REPORT" means the customary final report produced for filing with the FDA; 1.1.40 "SPECIAL REDEMPTION DATE" has the meaning attributed to such term in section 2.5; 1.1.41 "SUBSIDIARIES" means 2037137 Ontario Inc. and 2060347 Ontario Inc., each incorporated under the laws of the Province of Ontario and each a wholly owned subsidiary of the Corporation; 1.1.42 "UNITED STATES DOLLARS", "U.S. DOLLARS" or "U.S.$" means lawful currency of the United States of America; 1.1.43 "VALUATOR" means Mr. Ezra Lwowski, or such other Person as proposed by the Corporation and acceptable to the Vendor to value the Optioned Units on or before the Principal Date of Closing; 1.1.44 "VENDORS' REPRESENTATIVE" has the meaning attributed to such term in section 2.4; 1.1.45 "VENDORS' REPRESENTATIVE AGREEMENT" has the meaning attributed to such term in section 2.4; and 1.1.46 "VERNALIS SHARES" means the ordinary shares of L0.05 each in the capital of Vernalis, adjusted for any stock split or consolidation effected after the date of this Agreement. 1.2 HEADINGS The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof. 1.3 GENDER AND NUMBER In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing gender include all genders or the neuter, and words importing the neuter include all genders. -6- 1.4 CURRENCY CONVERSION AND INDEMNITY If, in connection with any action or proceeding brought in connection with this Agreement or any judgment or order obtained as a result thereof, it becomes necessary to convert any amount due hereunder in one Currency (the "OTHER CURRENCY") into Canadian Dollars, then the conversion shall be made at the Conversion Rate on the first Business Day prior to the day on which payment is received. If the conversion is not able to be made in the manner contemplated by the preceding paragraph in the jurisdiction in which the action or proceeding is brought, then the conversion shall be made at the Conversion Rate on the date fixed by the court for such conversion. If the Conversion Rate on the date of payment is different from the Conversion Rate on such first Business Day or on the date fixed for conversion by the court, as the case may be, the party liable to make the payment (the "PAYOR") shall pay such additional amount (if any) in Canadian Dollars as may be necessary to ensure that the amount paid on such payment date is the aggregate amount in Canadian Dollars which, when converted at the Conversion Rate on the date of payment, is the amount due in the Other Currency, together with all costs, charges and expenses of conversion. Any additional amount owing by the payor to the party or parties entitled to payment thereof pursuant to the provisions of this section 1.4 shall be due as a separate debt and shall give rise to a separate cause of action and shall not be affected by or merge into any judgment obtained for any other amounts due under or in respect of this Agreement. 1.5 ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties pertaining to the purchase of the common shares in the capital of the Corporation. This Agreement supersedes all prior arrangements and understandings, whether written or oral, relating to such subject matter in any way. There are no warranties, conditions, or representations (including any that may be implied by statute) and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneous with, or after entering into this Agreement, or any amendment or supplement thereto, by any party to this Agreement or its directors, officers, employees or agents, to any other party to this Agreement or its directors, officers, employees or agents, except to the extent that the same has been reduced to writing and included as a term of this Agreement, and none of the parties to this Agreement has been induced to enter into this Agreement or any amendment or supplement by reason of any such warranty, representation, opinion, advice or assertion of fact. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such warranty, representation, opinion, advice or assertion of fact, except to the extent contemplated above. To the extent that there is any inconsistency between the share provisions attached to the Purchaser Shares and the terms of this Agreement, the terms of this Agreement shall prevail. -7- 1.6 WAIVER, AMENDMENT Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. 1.7 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 1.8 ATTORNMENT The Vendor, Vernalis, and the Purchaser (collectively, the "ATTORNING PARTIES" and, individually, an "ATTORNING PARTY") each agrees that any suit, action or proceeding arising out of or relating to this Agreement against an attorning party or any of an attorning party's assets may be brought in any court in the Province of Ontario, and the attorning parties hereby irrevocably and unconditionally attorn and submit to the jurisdiction of such courts. The attorning parties irrevocably waive and agree not to raise any objection any of them might now or hereafter have to the bringing of any such suit, action or proceeding in any such court including, without limitation, any objection that the place where such court is located is an inconvenient forum or that there is any other suit, action or proceeding in any other place relating in whole or in part to the same subject matter. Each attorning party agrees that any judgment or order against that attorning party in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon that attorning party and consents to any such judgment or order being recognized and enforced in the courts of its jurisdiction of incorporation. ARTICLE 2 PURCHASE AND SALE 2.1 AGREEMENT TO PURCHASE AND SELL 2.1.1 Subject to the completion of the purchase from the Principal Shareholders of the Principal Shareholders' Securities pursuant to the Principal Purchase Agreement on or before the Principal Date of Closing, to the issuance of the ALX Purchased Shares to the Vendor on or before the ALX Time of Closing by the Corporation, and to the terms of this Agreement, the Vendor shall sell and the Purchaser shall purchase the ALX Purchased Shares at the ALX Time of Closing. 2.1.2 If the Vendor is not issued the ALX Purchased Shares on or before the ALX Time of Closing, none of the provisions of this Agreement will apply to ALX Limited Partnership and it will not be and be deemed not to be the Vendor under this Agreement. -8- 2.1.3 The Vendor and the Purchaser shall jointly elect under section 85 of the Income Tax Act (Canada) in order to transfer the ALX Purchased Shares to the Purchaser on a tax deferred basis, provided that the transfer meets the conditions of the rollover thereunder. 2.2 PURCHASE PRICE The purchase price (the "PURCHASE PRICE") to be paid by the Purchaser to the Vendor for the ALX Purchased Shares shall be equal to the Milestone Consideration, subject to adjustment on the Special Redemption Date in accordance with section 2.5. 2.3 SATISFACTION OF MILESTONE CONSIDERATION 2.3.1 The Milestone Consideration shall be satisfied at the ALX Time of Closing by the issue of such number of Class 3 Preferred Shares as is set out opposite the Vendor's name in the Final Proceeds Schedule, credited as paid in full, and delivered by the Purchaser to the Vendor in certificated form. The Purchaser Shares shall be redeemed by the Purchaser (and delivered by the Vendor to the Purchaser for redemption) on each Redemption Date for the applicable Redemption Amount in accordance with the share provisions attached to the Purchaser Shares and the provisions of this Agreement or, if Vernalis exercises its call right in accordance with section 2.3.4, purchased by Vernalis (and delivered by the Vendor to Vernalis for purchase) on such Redemption Date for the applicable Redemption Amount in accordance with the share provisions attached to the Purchaser Shares and the provisions of this Agreement. Each of the Vendor, the Purchaser and Vernalis agrees to be bound by the share provisions attached to the Purchaser Shares, subject to the terms of this Agreement. 2.3.2 The occurrence of each of the following events (each a "MILESTONE") shall give rise to a retraction, redemption or call right in respect of the Purchaser Shares up to the amounts specified below (each a "MILESTONE PAYMENT"), in accordance with the share provisions attached to the Purchaser Shares and the provisions of this Agreement, and Vernalis shall notify the Vendors' Representative of the occurrence of each Milestone within 10 Business Days of its occurrence and shall indicate the Redemption Date with respect to such Milestone: 2.3.2.1 in respect of the Pain Project: 2.3.2.1.1 U.S.$5,833,334, upon the completion of a report by Vernalis or its affiliates to be produced in a timely manner following completion of a clinical study which generates data sufficient to support the requirements of 21 CFR 312.21(b) sufficient to justify Vernalis progressing with a Phase IIb or a Phase III study programme, as the case may be; 2.3.2.1.2 U.S.$5,833,333, upon the completion of a Report by Vernalis or its affiliates to be provided in a timely manner following completion of a clinical study which generates data sufficient to support the requirements of 21 CFR 312.21(c) for a submission for regulatory approval to the FDA -9- to market and sell in the USA a product comprising CNP3381 for the treatment of diabetic neuropathic pain; and 2.3.2.1.3 U.S.$5,833,333, upon the issuance by the FDA of a written notification to Vernalis or its affiliates pursuant to 21 CFR 314.105(a) that the FDA approves CNP3381 for the treatment of diabetic neuropathic pain, Alzheimer's disease, post-operative pain or mixed pain related to palliative care. For greater certainty, if CNP3381 is developed for more than one of the above-noted indications, only the first FDA approval for one of the indications noted above shall be a Milestone. If the Milestone referred to in section 2.3.2.1.2 has not occurred prior to the FDA approval contemplated by this section 2.3.2.1.3, that Milestone shall be deemed to occur concurrently with the occurrence of the Milestone contemplated in this section 2.3.2.1.3; and 2.3.2.2 in respect of the Parkinson's Project: 2.3.2.2.1 U.S.$5,833,334, upon the enrollment by Vernalis or its affiliates of the first patient into a Phase III study for the purpose of generating data to support the requirements of 21 CFR 312.21(b); 2.3.2.2.2 U.S.$5,833,333, upon the completion of a Report by Vernalis or its affiliates to be produced in a timely manner following completion of a trial which generates data sufficient to support the requirements of 21 CFR 312.21(c) for a submission for regulatory approval to the FDA to market and sell in the USA a product comprising CNP1512 for the treatment of Parkinson's disease; and 2.3.2.2.3 U.S.$5,833,333, upon the issuance by the FDA of a written notification to Vernalis or its affiliates pursuant to 21 CFR 314.105(a) that the FDA approves CNP1512 for the treatment of Parkinson's disease, provided that the Milestone Payment in respect of each of the first two Milestones to occur shall be reduced by an amount equal to one-half of the amount of the Interim Expenditure. 2.3.3 Subject to section 2.3.4, the Redemption Amount in respect of a Redemption Date shall be satisfied by the allotment and issue of Vernalis Shares or, at the option of the Purchaser, by payment in cash or by a combination of cash and Vernalis Shares (such combination of cash and Vernalis Shares to be at the discretion of the Purchaser) on that Redemption Date. Notwithstanding the foregoing, the Redemption Amount in respect of the Special Redemption Date, if applicable, may only be satisfied in cash. 2.3.4 Vernalis (or its designee or assignee) may, at its option, elect, by notice to the Vendors' Representative at any time after the occurrence of a Milestone and on or before the relevant Redemption Date, to purchase, on the relevant Redemption Date, such Purchaser Shares which may be redeemed on such Redemption Date for the applicable Redemption Amount, notwithstanding that the Vendor or the Purchaser has -10- exercised its retraction or redemption right, respectively, pursuant to the share provisions attached to the Purchaser Shares. If Vernalis exercises its call right in accordance with this section 2.3.4 and the share provisions attached to the Purchaser Shares in respect of a Redemption Date, the Redemption Amount payable on that Redemption Date shall be satisfied by the allotment and issue of Vernalis Shares or, at the option of Vernalis, by payment in cash or by a combination of cash and Vernalis Shares (such combination of cash and Vernalis Shares to be at the discretion of Vernalis) on that Redemption Date and in accordance with the share provisions attached to the Purchaser Shares. Upon exercise by Vernalis of its call right in accordance with this section 2.3.4, the retraction and redemption right of the Vendor or the Purchaser pursuant to the share provisions attached to the Purchaser Shares in respect of the Redemption Date shall be cancelled. Notwithstanding the foregoing, the Redemption in respect of the Special Redemption Date, if applicable, may only be satisfied in cash. 2.3.5 To the extent the Purchaser or Vernalis, as applicable, elects not to satisfy any Redemption Amount in cash, Vernalis shall allot and issue Vernalis Shares, credited as paid in full, and deliver on the relevant Redemption Date to the Vendor (or its nominee), in uncertificated form to an account in CREST designated by the Vendor, such number of Vernalis Shares as at the Milestone Share Price shall be equal to the Vendor's entitlement to a Redemption Amount divided by the Milestone Share Price (rounded up to the nearest whole share), subject to any further reduction as provided in section 2.3.7. 2.3.6 Any Redemption Amount to be satisfied in cash, subject to any further reduction as provided in section 2.3.7, shall be paid on the relevant Redemption Date to the Vendors' Representative, on behalf of the Vendor, and the Vendors' Representative shall pay such Redemption Amount to the Vendor in accordance with its entitlement on the Redemption Date and neither the Purchaser nor Vernalis, as applicable, shall have any responsibility for such distribution. The Vendors' Representative may, not less than five Business Days prior to the relevant Redemption Date, direct the Purchaser or Vernalis, as applicable, to pay to the Vendor directly any amounts contemplated by this section 2.3.6. 2.3.7 The Vendor's entitlement to a Redemption Amount on a Redemption Date may be further reduced and set-off by the Purchaser or Vernalis by and against the amount of any claim against the Vendor in respect of any loss, damages or deficiencies suffered by the Purchaser or Vernalis as a result of any breach by the Vendor of a representation or covenant contained in this Agreement, being either the approximate and reasonable estimate of the likely amount of any such claim as determined by the Purchaser or Vernalis, as applicable, or, if such claim has been settled or finally determined, the amount of such claim, to the extent not satisfied in full on the fifth Business Day preceding the Redemption Date (using the Milestone Share Price as the value of the Milestone Shares when calculating the number of Milestone Shares to be reduced). -11- 2.3.8 In the event the Vendor's entitlement to a Redemption Amount is reduced by the amount of an estimated claim (the "ESTIMATED CLAIM") as provided in section 2.3.7, upon such claim becoming settled or finally determined (the "DETERMINED CLAIM"), the Purchaser or Vernalis, as applicable, shall, if and to the extent the amount of the Determined Claim for which the Vendor is responsible is less than the Estimated Claim for which the Vendor is responsible, satisfy the difference (up to the amount of the reduction made pursuant to section 2.3.7) in cash or Vernalis Shares or a combination of the two (depending upon and proportionately to whether the relevant Redemption Amount was satisfied in cash or Vernalis Shares or a combination of the two) and the provisions of this section 2.3 shall apply mutatis mutandis, with the Milestone Share Price, when calculating the number of Vernalis Shares to be issued pursuant to this section 2.3.8, being that used in respect of the relevant Redemption Date. 2.3.9 Notwithstanding that the Purchaser or Vernalis, as applicable, elects to pay a Redemption Amount, in whole or in part, in Vernalis Shares, the Purchaser or Vernalis, as applicable, may elect to pay to any Person who is located or resident in a jurisdiction on the Redemption Date, or date for payment pursuant to section 2.3.8, where the issuance of such shares would be in contravention of applicable securities laws (with no obligation to qualify or register the shares or rely upon an exemption from such requirement), its entitlement to a Redemption Amount in cash only. 2.3.10 In the event that any partner of the Vendor is a non-resident of Canada under the Income Tax Act (Canada) on any Redemption Date, or date for payment pursuant to section 2.3.8, it shall deliver to the Purchaser or Vernalis, as applicable, a certificate issued pursuant to section 116 of the Income Tax Act (Canada) on account of the Vendor's entitlement to a Redemption Amount on such Redemption Date, or date for payment pursuant to section 2.3.8. Notwithstanding the foregoing, neither the Purchaser nor Vernalis, as applicable, shall be required to issue any Purchaser Shares or Vernalis Shares to the Vendor until the delivery of such certificate, as applicable. The Purchaser or Vernalis, as applicable, shall be entitled to deduct or withhold from any Redemption Amount payable to the Vendor any amount required to be deducted or withheld under applicable law. 2.3.11 Vernalis (or its designee or assignee) may, at its option, elect by notice to the Vendors' Representative at any time after the earlier of (i) the tenth anniversary of the Principal Date of Closing or (ii) the Redemption Date in respect of the last Milestone to occur, provided that any Redemption Amount owing in respect of such Redemption Date has been satisfied in full, to purchase, on the date specified in such notice, all of the outstanding Purchaser Shares for a purchase price of U.S. $*** per share, payable in cash to the Vendors' Representative on behalf of the Vendor. 2.4 APPOINTMENT OF VENDORS' REPRESENTATIVE The Vendor hereby appoints The VenGrowth Advanced Life Sciences Fund Inc. to act as its representative (the "VENDORS' REPRESENTATIVE") to carry out such duties and responsibilities and to exercise such rights and powers on its behalf as are provided in this -12- Agreement and in related documents in accordance with an agreement (the "VENDORS' REPRESENTATIVE AGREEMENT") to be entered into among the Vendors' Representative, the Vendor, and certain other Persons to become shareholders or optionholders of the Purchaser (other than Vernalis). In the event of any disagreement between the Vendor and/or the Vendors' Representative resulting in adverse claims or demands with respect to the amounts delivered under this Agreement to the Vendors' Representative on behalf of the Vendor, the Vendors' Representative shall be entitled, at its option, to refuse to comply with any claims or demands on it with respect thereto so long as such disagreement shall continue, and in so refusing, the Vendors' Representative may elect to make no delivery of such amounts. In doing so, the Vendors' Representative shall not be or become liable in any way to the Vendor, Vernalis or the Purchaser for its failure or refusal to comply with such claims or demands. The Vendors' Representative may resign from such position at any time by written notice to the parties to the Vendors' Representative Agreement, the Purchaser and Vernalis provided that the Vendors' Representative shall have appointed a successor to the Vendors' Representative satisfactory to the Purchaser, acting reasonably, which appointment will be binding on the parties to the Vendors' Representative Agreement, and provided that such successor shall have consented to act in such capacity. 2.5 DELIVERY OF SHARE CERTIFICATES At the ALX Time of Closing, subject to having received the same from the Corporation, the Vendor shall deliver to the Purchaser share certificates representing the ALX Purchased Shares duly endorsed in blank for transfer or accompanied by duly signed powers of attorney for transfer in blank. 2.6 NET CASH PAYMENT On the 15th Business Day after the final determination of the Final Closing Balance Sheet in accordance with the Principal Purchase Agreement, if the Net Cash as set out in the Final Closing Balance Sheet is a positive number, the Purchaser shall issue to the Vendor on such date (the "SPECIAL REDEMPTION DATE") such number of Class 3 Preferred Shares (rounded upwards to the nearest whole share) with an aggregate Redemption Price equal to the amount of such Net Cash, converted to U.S. Dollars at the Conversion Rate as at the Principal Date of Closing, multiplied by a fraction, (i) the numerator of which is the aggregate of the number of Class 3 Preferred Shares owned by the Vendor on the Special Redemption Date and (ii) the denominator of which is the aggregate of all Class 3 Preferred Shares outstanding on the Special Redemption Date and of all Class 4 Preferred Shares issuable upon exercise of all options outstanding on the Special Redemption Date. Such Class 3 Preferred Shares issuable to the Vendor shall be credited as paid in full, and delivered by the Purchaser to the Vendors' Representative, on behalf of the Vendor, in certificated form. 2.7 FINAL PROCEEDS SCHEDULE The Final Proceeds Schedule shall be based on the Pro Forma Proceeds Schedule and calculated in accordance with, and in a manner consistent with, the spreadsheet contained -13- within the CD-Rom delivered by the Corporation to Vernalis on the date of this Agreement, updated to reflect the final resolution as at the Principal Date of Closing of the variable factors noted in the Pro Forma Proceeds Schedule (other than those variables to be reflected in the Final Closing Balance Sheet). The Final Proceeds Schedule as agreed between Vernalis and the Corporation shall be binding upon the parties to this Agreement, and neither the Purchaser nor Vernalis shall have any responsibility or liability for any dispute or claim arising as to the allocation, in accordance with the Final Proceeds Schedule, of Purchaser Shares, each class of shares in the capital of the Purchaser, options to acquire such shares, Redemption Amounts and the other amounts set forth therein. The Vendor acknowledges and agrees that the Pro Forma Proceeds Schedule and the Final Proceeds Schedule are intended only to set out the allocation of Purchaser Shares, each class of shares in the capital of the Purchaser, options to acquire such shares, Redemption Amounts and the other amounts set forth therein (prior to reduction and set-off in accordance with section 2.3.7 and excluding the issue of any additional Class 2 Preferred Shares, Class 3 Preferred Shares and Class 4 Preferred Shares pursuant to section 2.6 or to other Persons in respect of Net Cash), and, subject to section 2.6, nothing in this section 2.7 shall oblige the Purchaser or Vernalis to pay, issue or allot (or procure the payment, issue or allotment of) additional consideration to the Vendor. In the event that additional Class 2 Preferred Shares, Class 3 Preferred Shares or Class 4 Preferred Shares are issued pursuant to section 2.6 or to other Persons in respect of Net Cash, the Final Proceeds Schedule shall be updated by the Purchaser and the Vendors' Representative accordingly. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 VENDOR'S REPRESENTATIONS AND WARRANTIES The Vendor hereby represents and warrants to each of the Purchaser and Vernalis as follows and the Vendor acknowledges that each of the Purchaser and Vernalis is relying upon the following representations and warranties in connection with the purchase of the ALX Purchased Shares (and such representations and warranties shall be deemed to be repeated at the Principal Date of Closing and, in the case of the representation and warranty contained in section 3.1.10, unless the Purchaser and Vernalis have been notified otherwise in writing at least 10 Business Days prior thereto, on each Redemption Date or date of payment under section 2.3.8): 3.1.1 FORMATION. It is a limited partnership duly formed, organized and subsisting under the laws of Ontario. 3.1.2 CAPACITY AND DUE AUTHORIZATION. It has the corporate power and capacity to enter into, and to perform its obligations under, this Agreement. 3.1.3 ENFORCEABILITY. This Agreement has been duly authorized, executed and delivered by it and is its valid and binding obligation, enforceable against it in accordance with its terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies. 3.1.4 TITLE TO, AND RIGHT TO, SELL ALX PURCHASED SHARES. There are no agreements or restrictions which in any way limit or restrict the transfer to the -14- Purchaser of the ALX Purchased Shares nor are there any shareholders agreements, pooling agreements, voting trusts or other agreements or understandings with respect to the voting of the ALX Purchased Shares. At the ALX Time of Closing, subject to any restriction or Charge imposed by the Corporation's articles, by-laws or any agreement to which the Corporation is a party (and to which the Vendor is not a party or has not agreed to be bound thereby), it will be the sole registered and beneficial owner of the ALX Purchased Shares with good and marketable title thereto, free of all Charges and it will have full legal right, power and authority to sell the ALX Purchased Shares to the Purchaser. 3.1.5 AMOUNTS OWING BY THE CORPORATION. At the ALX Time of Closing, there shall be no liabilities, indemnities or amounts owing to the Vendor by the Corporation or the Subsidiaries (other than the valid issuance by the Corporation of the ALX Purchased Shares to the Vendor as fully paid in accordance with the Call Option Agreement). 3.1.6 NO CONTRAVENTION. None of the entering into of this Agreement nor the performance by it of any of its obligations under this Agreement will contravene, breach or result in any default under its articles, by-laws, constating documents or other organizational documents, if applicable, or under any mortgage, lease, agreement, other legally binding instrument, licence, permit, statute, regulation, order, judgment, decree or law to which it is a party or by which it may be bound. 3.1.7 CONSENTS AND APPROVALS. No authorization, consent or approval of, or filing with or notice to, any governmental agency, regulatory body, court or other Person is required in connection with the execution, delivery or performance by it of this Agreement or the sale by it of any of the ALX Purchased Shares hereunder. 3.1.8 COMPLIANCE WITH CONFIDENTIALITY OBLIGATIONS. It has complied with all applicable confidentiality or proprietary obligations in favour of the Corporation and has not, directly of indirectly, used for its own purposes or disclosed to any Person any confidential or proprietary information of the Corporation or its Subsidiaries, including know-how and data, technical or non-technical, relating to the Business. 3.1.9 TAX RESIDENCY. It is a Canadian partnership under the Income Tax Act (Canada). 3.1.10 U.S. SECURITIES LAWS. It is not located or resident in the United States of America for securities laws purposes. 3.2 PURCHASER'S AND VERNALIS' REPRESENTATIONS AND WARRANTIES The Purchaser and Vernalis each jointly and severally represents and warrants to the Vendor as follows and acknowledges that the Vendor is relying upon the following representations and warranties in connection with its sale of the ALX Purchased Shares (and such representations and warranties shall be deemed to be repeated at the Principal Date of Closing): -15- 3.2.1 INCORPORATION. The Purchaser is duly incorporated and validly existing under the laws of New Brunswick. Vernalis is duly incorporated and validly existing under the laws of England and Wales. 3.2.2 CORPORATE POWER AND DUE AUTHORIZATION. The Purchaser and Vernalis each have the corporate power and capacity to enter into, and to perform its obligations under, this Agreement, subject to shareholder and regulatory approvals and requirements and filings in connection with the issue of securities of the Purchaser and Vernalis as contemplated herein. This Agreement has been duly authorized by the board of directors of each of the Purchaser and Vernalis. This Agreement has been duly executed and delivered by the Purchaser and Vernalis. 3.2.3 ENFORCEABILITY. This Agreement is a valid and binding obligation of each of the Purchaser and Vernalis, enforceable in accordance with its terms, subject to the usual exceptions as to bankruptcy and the availability of equitable remedies. 3.2.4 NO CONTRAVENTION. None of the entering into of this Agreement nor the performance by the Purchaser nor Vernalis of any of its obligations under this Agreement will contravene, breach or result in any default under its articles, by-laws, constating documents or other organizational documents or under any mortgage, lease, agreement, other legally binding instrument, licence, permit, statute, regulation, order, judgment, decree or law to which it is a party or by which it may be bound. 3.2.5 CONSENTS AND APPROVALS. No authorization, consent or approval of, or filing with or notice to, any governmental agency, regulatory body, court or other Person is required in connection with the execution, delivery or performance by the Purchaser nor Vernalis of this Agreement nor the performance by it of any of its obligations, subject to shareholder and regulatory approvals and requirements and filings in connection with the issue of securities of the Purchaser and Vernalis as contemplated herein. 3.2.6 ISSUE OF PURCHASER SHARES AND VERNALIS SHARES. At the time of issue of the Purchaser Shares or Vernalis Shares in accordance with the share provisions attached to the Purchaser Shares and the provisions of this Agreement, such Purchaser Shares and Vernalis Shares, as the case may be, shall be validly issued and fully paid and such Vernalis Shares will be listed for trading on a recognized stock exchange. ARTICLE 4 COVENANTS 4.1 VENDOR'S COVENANTS The Vendor covenants in favour of the Purchaser and Vernalis as follows: 4.1.1 PURCHASER SHAREHOLDERS AGREEMENT. To enter into, at the ALX Time of Closing, the Purchaser Shareholders Agreement and hereby authorizes the Vendors' Representative to execute the Purchaser Shareholders Agreement on its behalf. -16- 4.1.2 VENDORS' REPRESENTATIVE AGREEMENT. To enter into, at the ALX Time of Closing, the Vendors' Representative Agreement. 4.1.3 WITHDRAWAL RIGHT. To not exercise, or attempt to exercise, any statutory right or entitlement to withdraw which may be applicable to, or enforceable by, it under United Kingdom securities laws relating to the issue of Vernalis Shares to it under this Agreement. The Vendor acknowledges that the issue of Vernalis Shares to it under this Agreement will not entitle it to withdraw in the event that Vernalis publishes a supplementary prospectus. The Vendor further covenants in favour of Vernalis that, in the event it is so entitled to withdraw, by signing this Agreement, it is confirming its acceptance of the offer of Vernalis Shares contained in this Agreement on the same terms immediately after such withdrawal. ARTICLE 5 GENERAL MATTERS 5.1 CONFIDENTIALITY 5.1.1 The Vendor shall not directly or indirectly use for its own purposes or disclose to any other Person any confidential or proprietary information, including know-how and data, technical or non-technical, relating to the business of Vernalis which becomes known to the Vendor or its accountants, legal advisers or representatives as a result of Vernalis making the same available in connection with the transaction contemplated hereby. 5.1.2 The Vendor shall not directly or indirectly use for its own purposes or disclose to any Person any confidential or proprietary information of the Corporation or the Subsidiaries, including know-how and data, technical or non-technical, relating to the Business. 5.2 PUBLIC NOTICES No press release or other public announcement concerning the transaction contemplated by this Agreement shall be made by the Vendor without the prior written consent of Vernalis. 5.3 EXPENSES Each of the Vendor, the Purchaser and Vernalis shall be responsible for the expenses (including fees and expenses of legal advisers, accountants and other professional advisers) incurred by it in connection with the negotiation and settlement of this Agreement and the completion of the transactions contemplated hereby. 5.4 TERMINATION This Agreement shall terminate and the obligations and covenants of the parties hereunder, other than those set out in sections 5.1, 5.2 and 5.3 shall terminate upon the -17- termination of the Principal Purchase Agreement or in the event that the Valuator determines that no shares are issuable to the Vendor pursuant to its valuation of the Optioned Units, but shall not terminate prior thereto in any circumstances. 5.5 ASSIGNMENT Except as provided in this section, no party may assign its rights or benefits under this Agreement, nor may the Vendor transfer its Purchaser Shares to any Person other than Vernalis or an affiliate of Vernalis. The Purchaser or Vernalis may, at any time after the Principal Date of Closing and from time to time, assign its rights and benefits under this Agreement, in whole or in part, to any affiliate or to any Person who acquires all or substantially all of the assets or shares of the Corporation. 5.6 NOTICES Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the seventh Business Day after the post-marked date thereof, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section 5.6. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section 5.6. Notices and other communications shall be addressed as follows: (a) if to the Vendor: ALX Limited Partnership Suite 550, 141 Adelaide Street West Toronto, Ontario M5H 3L5 Attention: ALX GP Inc. Telecopier number: 416-304-0669 -18- with a copy to the Vendor's counsel at: Kavanagh Bateman & Baek LLP Suite 550, 141 Adelaide Street West Toronto, Ontario M5H 3L5 Attention: Peter H. Baek Telecopier number: 416-304-0669 and with a copy to the Vendors' Representative at: The VenGrowth Advanced Life Sciences Fund Inc. 105 Adelaide Street West, Suite 1000 Toronto, Ontario M5H 1P9 Attention: Dr. Luc Marengere/Phil Kurtz Telecopier number: 416-971-6519 (b) if to the Purchaser or Vernalis: Vernalis plc Oakdene Court 613 Reading Road Winnersh, Berkshire RG 41 5UA Attention: John Slater Telecopier number: + 44 118 989 9300 with a copy to the Purchaser's counsel at: Torys LLP Suite 3000, 79 Wellington Street West Box 270, TD Centre Toronto, Ontario M5K 1N2 Attention: Kathleen L. Keller-Hobson Telecopier number: (416) 865-7380 and to: -19- Allen & Overy LLP One New Change London EC4M 9QQ United Kingdom Attention: Anna Buscall Telecopier number: + 44 20 7330 9999 The failure to send or deliver a copy of a notice to the Purchaser's Counsel or the Vendors' Counsel, as the case may be, shall not invalidate any notice given under this section 5.6. 5.7 TIME OF ESSENCE Time is of the essence of this Agreement. 5.8 FURTHER ASSURANCES Each of the parties shall promptly do, make, execute, deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and shall use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement. 5.9 COUNTERPARTS This Agreement may be signed in counterparts and each such counterpart shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument. -20- IN WITNESS WHEREOF the parties hereto have executed this Agreement. ALX LIMITED PARTNERSHIP, BY ALX GP INC. IN ITS CAPACITY AS THE GENERAL PARTNER by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- VERNALIS PLC by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- VERNALIS (CANADA) INC. by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- The undersigned hereby agrees to act as the Vendors' Representative and to carry out such duties and responsibilities on behalf of the Vendor as provided in this Agreement. THE VENGROWTH ADVANCED LIFE SCIENCES FUND INC., as Vendors' Representative by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- by: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Signature Page for ALX Purchase Agreement