EXHIBIT 4.7(A)
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 ***.
SHARE PURCHASE AGREEMENT
(FOR THE PURCHASE OF SHARES OR OPTIONS FROM CLASS A PREFERENCE
SHAREHOLDERS AND MANAGEMENT SHAREHOLDERS)
THE VENGROWTH ADVANCED LIFE SCIENCES FUND INC.
MEDINNOVA PARTNERS INC.
NEUROSCIENCE DEVELOPMENT INC.
WORKING VENTURES CMDF QUEEN'S SCIENTIFIC BREAKTHROUGH FUND INC.
XXXXXXX XXXXXXXXXX
XXXX XX XXXXX
XXXXX XXXXXXXX
as Vendors
-and-
CITA NEUROPHARMACEUTICALS INC.
-and-
VERNALIS PLC
-and-
VERNALIS (CANADA) INC.
as Purchaser
November 18, 2005
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION.......................................................... 3
1.1 Definitions........................................................ 3
1.2 Schedules.......................................................... 15
1.3 Headings and Table of Contents..................................... 15
1.4 Gender and Number.................................................. 15
1.5 Currency Conversion and Indemnity.................................. 15
1.6 Generally Accepted Accounting Principles........................... 16
1.7 Invalidity of Provisions........................................... 16
1.8 Entire Agreement................................................... 16
1.9 Waiver, Amendment.................................................. 17
1.10 Governing Law...................................................... 17
1.11 Attornment......................................................... 17
1.12 Knowledge.......................................................... 17
ARTICLE 2
PURCHASE AND SALE....................................................... 18
2.1 Agreement to Purchase and Sell..................................... 18
2.2 Purchase Price..................................................... 18
2.3 Satisfaction of the Initial Consideration.......................... 18
2.4 Satisfaction of Milestone Consideration............................ 19
2.5 Appointment of Vendors' Representative............................. 23
2.6 Development of the Pain Project and the Xxxxxxxxx'x Project........ 24
2.7 Location and Time of the Closing................................... 24
2.8 Delivery of Share Certificates..................................... 24
2.9 Delivery of Option Agreements...................................... 24
2.10 Estimated Signing Balance Sheet.................................... 25
2.11 Final Signing Balance Sheet........................................ 25
2.12 Estimated Closing Balance Sheet.................................... 26
2.13 Final Closing Balance Sheet........................................ 26
2.14 Net Cash Payment................................................... 27
2.15 Final Proceeds Schedule............................................ 28
2.16 Resale Restrictions on Non-Vendor Placing Shares................... 28
ARTICLE 3
REPRESENTATIONS AND WARRANTIES.......................................... 29
3.1 Vendors' Personal Representations and Warranties................... 29
3.1.1 Incorporation................................................. 29
3.1.2 Capacity and Due Authorization................................ 29
3.1.3 Enforceability................................................ 29
3.1.4 Title to, and Right to, Sell Purchased Securities............. 29
3.1.5 Amounts Owing by Corporation.................................. 30
3.1.6 No Contravention.............................................. 30
3.1.7 Consents and Approvals........................................ 30
3.1.8 Compliance with Confidentiality Obligations................... 30
3.1.9 Tax Residency................................................. 30
3.1.10 U.S. Securities Laws.......................................... 31
3.2 Vendors' Business Representations and Warranties................... 31
3.2.1 Incorporation and Status of the Corporation and
the Subsidiaries.............................................. 31
3.2.2 Corporate Power of the Corporation and the Subsidiaries....... 31
3.2.3 No Contravention.............................................. 31
3.2.4 Approvals and Consents........................................ 31
3.2.5 Capital of the Corporation.................................... 31
3.2.6 Subsidiaries.................................................. 31
3.2.7 No Obligations to Issue or Purchase Securities................ 32
3.2.8 Disclosure.................................................... 32
3.2.9 Financial Statements.......................................... 32
3.2.10 Liabilities and Guarantees.................................... 32
3.2.11 Indebtedness.................................................. 32
3.2.12 Absence of Unusual Transactions and Events.................... 33
3.2.13 Non-Arm's Length Transactions................................. 34
3.2.14 As to Certain Contracts In and Out of the Ordinary Course..... 34
3.2.15 Employment Matters............................................ 35
3.2.16 Employee Benefit Plan......................................... 36
3.2.17 Consultants................................................... 36
3.2.18 No Default Under Agreements................................... 36
3.2.19 Title to Assets............................................... 37
3.2.20 Real Property................................................. 37
3.2.21 Environmental Matters......................................... 37
3.2.22 Assets in Good Condition...................................... 37
3.2.23 Tax, etc., Matters............................................ 37
3.2.24 Insurance..................................................... 38
3.2.25 Corporation IP................................................ 38
3.2.26 Title to Corporation Owned IP................................. 38
3.2.27 Prosecution................................................... 38
3.2.28 Validity and Enforceability of Corporation Owned IP........... 39
3.2.29 Non-Infringement of Intellectual Property Rights.............. 39
3.2.30 Corporation Licensed IP....................................... 39
3.2.31 Licenses of Corporation Owned IP to Third Persons............. 39
3.2.32 Confidentiality Agreements with Directors, Officers,
Employees
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and Contractors............................................... 32
3.2.33 Permits and Registrations..................................... 40
3.2.34 Compliance with Laws.......................................... 40
3.2.35 Litigation and Other Proceedings.............................. 40
3.2.36 Corporate Records............................................. 40
3.2.37 Books of Account.............................................. 40
3.2.38 Bank Accounts, etc............................................ 40
3.2.39 Suppliers..................................................... 41
3.2.40 Material Facts Disclosed...................................... 41
3.3 Purchaser's and Vernalis' Representations and Warranties........... 41
3.3.1 Incorporation and Status...................................... 41
3.3.2 Corporate Power and Due Authorization......................... 41
3.3.3 Enforceability................................................ 41
3.3.4 No Contravention.............................................. 41
3.3.5 Consents and Approvals........................................ 41
3.3.6 Circular...................................................... 42
3.3.7 Securities Laws............................................... 42
3.3.8 Issue of Purchaser Shares and Vernalis Shares................. 42
3.4 No Finder's Fees................................................... 42
3.5 Survival of Covenants, Representations and Warranties.............. 42
ARTICLE 4
CONDITIONS.............................................................. 43
4.1 Mutual Conditions.................................................. 43
4.1.1 Shareholder Approval.......................................... 43
4.1.2 Placing Agreement............................................. 43
4.1.3 Agreement to Admit For Listing................................ 43
4.1.4 Admission Condition........................................... 43
4.1.5 UK Treasury Consent........................................... 43
4.1.6 Vendors' Representative Agreement............................. 44
4.1.7 No Material Adverse Condition................................. 44
4.1.8 No Termination................................................ 44
4.2 Conditions for the Benefit of the Purchaser........................ 44
4.2.1 Accuracy of Representations of Vendors and
Compliance With Covenants..................................... 44
4.2.2 Closing Documents and Proceedings............................. 44
4.2.3 No Action to Restrain......................................... 45
4.2.4 Consents and Approvals........................................ 45
4.2.5 GTTS XV Limited Partnership (GTTS XV) Call Option............. 45
4.2.6 Exercise of Rights............................................ 45
4.2.7 Purchase of Other Shares...................................... 45
4.2.8 Corporation Shareholders Agreement............................ 46
4.2.9 Purchaser Shareholders Agreement.............................. 46
4.2.10 Purchaser Option Plan and Purchaser Option Agreement.......... 46
4.3 Conditions for the Benefit of the Vendors.......................... 46
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4.3.1 Accuracy of Representations of Purchaser and
Compliance With Covenants..................................... 46
4.3.2 Closing Documents and Proceedings............................. 47
4.4 Mutual Right to Terminate.......................................... 47
ARTICLE 5
COVENANTS............................................................... 47
5.1 Vendors' Personal Covenants........................................ 47
5.1.1 Exercise of Rights............................................ 47
5.1.2 Release of Charges............................................ 47
5.1.3 Purchaser Shareholders Agreement.............................. 48
5.1.4 Actions....................................................... 48
5.1.5 Withdrawal Rights............................................. 48
5.2 Corporation's Business Covenants................................... 48
5.2.1 Access to Information......................................... 48
5.2.2 Conduct of Business........................................... 48
5.2.3 Corporate Action, Resignations and Releases................... 49
5.2.4 Obtaining of Consents and Approvals........................... 49
5.2.5 Circular...................................................... 49
5.2.6 Negative Covenant............................................. 49
5.2.7 Actions....................................................... 50
5.3 Purchaser's Covenants.............................................. 50
5.3.1 Prepayment of MMV Loan........................................ 50
5.3.2 Funding....................................................... 50
5.4 Vernalis' Covenants................................................ 50
5.4.1 Shareholder Approval.......................................... 50
5.4.2 Placing Agreement............................................. 50
5.4.3 Reporting..................................................... 51
5.4.4 Purchaser's Obligations....................................... 51
5.4.6 Purchaser's Corporate Existence............................... 51
5.4.6 Actions....................................................... 51
5.5 Cooperation........................................................ 51
ARTICLE 6
INDEMNIFICATION......................................................... 51
6.1 Indemnification for Vendors' Personal Representations and
Vendors' Personal Covenants........................................ 51
6.2 Indemnification for Vendors' Business Representations and
Other Claims....................................................... 52
6.3 Indemnification for Purchaser's and Vernalis' Representations...... 52
6.4 Notice of Claim.................................................... 53
6.5 Limitation of Indemnity............................................ 53
6.6 Satisfaction of Claims............................................. 53
6.7 No Indemnification by Corporation.................................. 54
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6.8 Procedure for Indemnification...................................... 54
6.8.1 Purchaser's Claims............................................ 54
6.8.2 Vendor's Claims............................................... 55
6.8.3 Third Party Claims............................................ 55
6.9 Additional Rules and Procedures.................................... 56
6.10 Indemnification Claims............................................. 56
ARTICLE 7
GENERAL MATTERS......................................................... 57
7.1 Confidentiality.................................................... 57
7.2 Public Notices..................................................... 57
7.3 Expenses........................................................... 57
7.4 Assignment......................................................... 58
7.5 Notices............................................................ 58
7.6 Time of Essence.................................................... 59
7.7 Further Assurances................................................. 60
7.8 Counterparts....................................................... 60
SCHEDULES
Schedule 1.1.3 - Agreed Pain Project Budget
Schedule 1.1.4 - Agreed Xxxxxxxxx'x Project Budget
Schedule 1.1.7 - API Inventory Amount
Schedule 1.1.20 - Form of Circular
Schedule 1.1.48 - Pro Forma Proceeds Schedule
Schedule 1.1.67 - Net Cash Calculation
Schedule 1.1.76 - Form of Placing Agreement
Schedule 1.1.85 - Form of Purchaser Option Plan
Schedule 1.1.86 - Form of Purchaser Shareholders Agreement
Schedule 1.1.88 - Form of Share Provisions for Purchaser Shares
Schedule 3.1.4 - Title To, and Right To, Sell Purchased Securities
Schedule 3.1.7 - Consents and Approvals
Schedule 3.2.5 - Capital of the Corporation
Schedule 3.2.7 - Obligations to Issue or Purchase Securities
Schedule 3.2.8 - Disclosure
Schedule 3.2.10 - Liabilities and Guarantees
Schedule 3.2.11 - Indebtedness
Schedule 3.2.12 - Unusual Transactions and Events
Schedule 3.2.14 - Certain Contracts In and Out of the Ordinary Course
Schedule 3.2.15 - Employment Matters
Schedule 3.2.16 - Employment Benefit Plan
Schedule 3.2.19 - Title to Assets
Schedule 3.2.21 - Environmental Matters
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Schedule 3.2.24 - Insurance Policies
Schedule 3.2.25 - Corporation IP
Schedule 3.2.38 - Bank Accounts, Etc.
Schedule 3.4 - Finder's Fees
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SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 18th day of November, 2005,
BETWEEN:
THE VENGROWTH ADVANCED LIFE SCIENCES FUND INC., a corporation
incorporated under the laws of Canada
("VENGROWTH")
-and-
MEDINNOVA PARTNERS INC., a corporation incorporated under the laws of
Ontario
("MEDINNOVA")
-and-
NEUROSCIENCE DEVELOPMENT INC., a corporation incorporated under the
laws of Ontario
("NDI")
-and-
WORKING VENTURES CMDF QUEEN'S SCIENTIFIC BREAKTHROUGH FUND INC., a
corporation incorporated under the laws of Ontario
-and-
XXXXXXX XXXXXXXXXX, of the City of Brampton
("GIOVINAZZO")
-and-
XXXX XX XXXXX, of the City of Xxxxxxxx
("DE SOMER")
-and-
XXXXX XXXXXXXX, of the City of Aurora
("FIELDING")
(the above parties being collectively referred to as the "VENDORS"
and individually as a "VENDOR")
-and-
CITA NEUROPHARMACEUTICALS INC., a corporation incorporated under the
laws of Ontario
(the "CORPORATION")
-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. Purchaser wishes to acquire all of the shares or rights to acquire shares
in the capital of the Corporation for aggregate consideration of up to
U.S.$64,500,000.
B. The Institutional Vendors wish to sell all of their Class A Preference
shares in the capital of the Corporation issuable upon exercise of
warrants, conversion rights, options and other rights, and the Purchaser
wishes to purchase such shares, on and subject to the terms and conditions
of this Agreement.
C. The Management Vendors wish to sell Class D Preference shares in the
capital of the Corporation issuable upon exercise of certain of their
options, and the Purchaser wishes to purchase such shares, and to exchange
their remaining options to acquire Class D Preference shares in the capital
of the Corporation for options to acquire Class 1 Preferred Shares in the
Purchaser, on and subject to the terms of this Agreement.
D. The Management Vendors wish to exchange their options to acquire common
shares in the capital of the Corporation for options to acquire Class 4
Preferred Shares in the Purchaser, on and subject to the terms of this
Agreement.
E. The Vendors wish to appoint VenGrowth to act as their representative with
respect to certain matters with respect to this Agreement and related
documents.
F. The Purchaser is entering into separate agreements with other holders of
shares in the capital of the Corporation, and holders of warrants,
conversion rights, options and other
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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 "ADMISSION CONDITION" means the admission of the Non-Vendor Placing
Shares, the Vendor Placing Shares and the Vernalis Shares to be allotted
and issued on Closing to Chiesi and MMV Financial Inc. (in connection with
the purchase by the Purchaser of their shares or rights to acquire shares
in the capital of the Corporation) to the Official List and to trading on
the London Stock Exchange becoming effective ("ADMISSION") and the Placing
Agreement not having been terminated before such Admission;
1.1.2 "AFFILIATE" has the meaning attributed to such term under the
Business Corporations Act (Ontario);
1.1.3 "AGREED PAIN PROJECT BUDGET" means the budget for the Pain Project
agreed between the Corporation and the Purchaser and attached as Schedule
1.1.3;
1.1.4 "AGREED XXXXXXXXX'X PROJECT BUDGET" means the budget for the
Xxxxxxxxx'x Project agreed between the Corporation and the Purchaser and
attached as Schedule 1.1.4;
1.1.5 "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 similar expressions refer to this agreement; and unless
otherwise indicated, references to Articles and sections are to Articles
and sections in this agreement;
1.1.6 "ALZHEIMER'S PROJECT" means the Business which relates to CNP1061 for
the indication of Alzheimer's disease;
1.1.7 "API INVENTORY AMOUNT" means the aggregate purchase price of
specified inventory acquired in respect of the Pain Project and the
Xxxxxxxxx'x Project as set out in Schedule 1.1.7;
1.1.8 "APPLICABLE LAW" means, in respect of any Person, property,
transaction, event or course of conduct, all applicable laws, statutes,
rules, by-laws and regulations,
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regulatory policies and all applicable official directives, orders,
judgments and decrees of any domestic or foreign government (federal,
provincial, municipal or otherwise) or of any regulatory authority, agency,
commission or board of any domestic or foreign government, or of any court
or any other law, regulation or rule-making entity having jurisdiction in
the relevant circumstances;
1.1.9 "AUDITED FINANCIAL STATEMENTS" means the audited consolidated balance
sheet of the Corporation and the Subsidiaries as at November 30, 2004 and
the accompanying consolidated statements of loss and deficit and cash flow
for the year then ended, including the notes thereto, and the report of the
auditors of the Corporation thereon;
1.1.10 "AUDITED STATEMENTS DATE" means November 30, 2004;
1.1.11 "BANK" means Xxxxx Xxxxxxx Limited;
1.1.12 "BUSINESS" means the business of the Corporation of researching,
developing and testing drug candidates related to the Pain Project, the
Xxxxxxxxx'x Project and the Alzheimer's Project;
1.1.13 "BUSINESS DAY" means any day, other than Saturday, Sunday or any
statutory holiday in the Province of Ontario or London, England;
1.1.14 "CANADIAN DOLLARS", "CDN. DOLLARS" or "CDN.$" means lawful currency
of Canada;
1.1.15 "CASH REALISATION AGREEMENT" means the agreement dated as of the
date hereof entered into between the Vendors and the Bank in respect of the
proceeds of the Vendor Placing;
1.1.16 "CHARGE" means any security interest, lien, charge, pledge,
encumbrance, mortgage, adverse claim or title retention agreement of any
nature or kind;
1.1.17 "CHIESI" means Chiesi Farmaceutici S.p.A.;
1.1.18 "CHIESI LICENCE AGREEMENTS" means, together, the amended and
restated licence agreement dated as of the date hereof between Chiesi and
the Corporation in respect of the CNP1512 compound and the amended and
restated licence agreement dated as of the date hereof between Chiesi and
the Corporation in respect of the CNP3381 compound;
1.1.19 "CHIESI VENDOR PLACING SHARES" means *** Vernalis Shares to be
allotted and issued pursuant to the Vendor Placing in connection with the
sale by Chiesi of its right to acquire Class C Preference shares in the
capital of the Corporation;
1.1.20 "CIRCULAR" means the combined prospectus and shareholder circular of
Vernalis to be published on the date of this Agreement, substantially in
the form attached hereto as Schedule 1.1.20;
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1.1.21 "CLAIM" has the meaning attributed to such term in section 6.4;
1.1.22 "CLASS 1 PREFERRED SHARE OPTIONS" means the options to acquire Class
1 Preferred Shares to be granted on the Closing Date to the Management
Vendors, as set forth opposite each Management Vendor's name in the Final
Proceeds Schedule, pursuant to Purchaser Option Agreements, in exchange for
options to acquire Class D Preference shares in the capital of the
Corporation, each Class 1 Preferred Share Option being exercisable for one
Class 1 Preferred Share;
1.1.23 "CLASS 1 PREFERRED SHARES" means the Class 1 non-voting,
retractable, redeemable, preferred shares, in registered form, of the
Purchaser, having the share provisions set out in Schedule 1.1.88, 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, and subject to
further reduction and set-off in accordance with sections 2.4.7 and 6.6 and
the share provisions attached to the Purchaser Shares;
1.1.24 "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 1.1.88 and subject to the prior
redemption right of the Class 1 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 2 Preferred Shares issued in accordance with section
2.14.2 or to other Persons in respect of Net Cash, and subject to further
reduction and set-off in accordance with sections 2.4.7 and 6.6 and the
share provisions attached to the Purchaser Shares;
1.1.25 "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 1.1.88 and
subject to the prior redemption right of the Class 1 Preferred Shares 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 2.14.1 or to
other Persons in respect of Net Cash, and subject to further reduction and
set-off in accordance with sections 2.4.7 and 6.6 and the share provisions
attached to the Purchaser Shares;
1.1.26 "CLASS 4 PREFERRED SHARE OPTIONS" means the options to acquire Class
4 Preferred Shares to be granted on the Closing Date to the Management
Vendors, as set forth opposite each Management Vendor's name in the Final
Proceeds Schedule, pursuant to Purchaser Option Agreements, in exchange for
options to acquire common shares in the capital of the Corporation, each
Class 4 Preferred Share Option being exercisable for one Class 4 Preferred
Share;
1.1.27 "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 1.1.88 and
subject to the prior redemption right of the Class 1 Preferred Shares and
the Class 2 Preferred Shares, with a stated redemption
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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 4 Preferred Shares issued in accordance with section
2.14.1 or to other holders of Class 4 Preferred Share Options in respect of
Net Cash, and subject to further reduction and set-off in accordance with
sections 2.4.7 and 6.6 and the share provisions attached to the Purchaser
Shares;
1.1.28 "CLOSING" means the completion of the sale and purchase and exchange
of the Purchased Securities pursuant to this Agreement at the Time of
Closing;
1.1.29 "CLOSING DATE" means the later of (i) the Business Day following the
shareholder approval referred to in section 4.1.1 and (ii) the date on
which all other conditions specified in Article 4 are either satisfied or
waived, or such other date as may be agreed upon in writing between the
Vendors' Representative and Vernalis;
1.1.30 "CONFIDENTIALITY AGREEMENT" means the confidentiality agreement
between the Corporation and Vernalis dated June 6, 2005;
1.1.31 "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;
1.1.32 "CORPORATION" means Cita Neuropharmaceuticals Inc., a corporation
incorporated under the laws of Ontario;
1.1.33 "CORPORATION IP" means, together, the Corporation Licensed IP and
the Corporation Owned IP;
1.1.34 "CORPORATION LICENSED IP" means the Intellectual Property licensed
to the Corporation or any of the Subsidiaries in respect of the Alzheimer's
Project, the Pain Project and the Xxxxxxxxx'x Project;
1.1.35 "CORPORATION OWNED IP" means the Intellectual Property owned by the
Corporation or any of the Subsidiaries;
1.1.36 "CORPORATION SHAREHOLDERS AGREEMENT" means the Amended and Restated
Shareholders Agreement dated May 4, 2004 among the shareholders of the
Corporation and the Corporation;
1.1.37 "CORPORATION SHARES" means, collectively, the Class A Preference
shares, the Class D Preference shares and the common shares in the capital
of the Corporation;
1.1.38 "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);
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1.1.39 "CURRENCY" means Canadian Dollars, Pounds Sterling or United States
Dollars;
1.1.40 "DETERMINED CLAIM" means a Claim that has been settled or finally
determined in accordance with Article 6;
1.1.41 "EGM" means the extraordinary general meeting of Vernalis, or any
adjournment thereof, notice of which is set out in the Circular;
1.1.42 "EMPLOYEE PLANS" means all oral or written plans, arrangements,
agreements, programs, policies, practices or undertakings with respect to
some or all of the current or former directors, officers, employees,
independent contractors or agents of the Corporation, other than statutory
plans, which provide for or relate to:
1.1.42.1 bonus, profit sharing or deferred profit sharing, performance
compensation, deferred or incentive compensation, share compensation,
share purchase or share option purchase, share appreciation rights,
phantom stock, vacation or vacation pay, sick pay, employee loans, or
any other compensation in addition to salary; or
1.1.42.2 insured or self-insured benefits for or relating to income
continuation or other benefits during absence from work (including
short term disability, long term disability, maternity and parental
leave supplements and workers compensation), hospitalization, health,
welfare, legal costs or expenses, medical or dental treatments or
expenses, life insurance, accident, death or survivor's benefits,
supplementary employment insurance, day care tuition or professional
commitments or expenses or similar employment benefits;
1.1.43 "ESTIMATED CLAIM" means, at the relevant time, a Claim, other than a
Determined Claim, in the amount specified in accordance with section 6.4.2;
1.1.44 "ESTIMATED SIGNING BALANCE SHEET" means the consolidated balance
sheet of the Corporation and the Subsidiaries as at the date of this
Agreement, and the calculation of Vernalis Liabilities, prepared pursuant
to section 2.10;
1.1.45 "EXCHANGED OPTIONS" means, collectively, the options to acquire
Class D Preference shares and common shares in the capital of the
Corporation, as set forth opposite each Management Vendor's name in
Schedule 3.1.4, to be exchanged by the Management Vendors for Class 1
Preferred Share Options (as to a portion of their options to acquire Class
D Preference shares) and Class 4 Preferred Share Options (as to their
options to acquire common shares), respectively, pursuant to this
Agreement;
1.1.46 "FDA" means the Food and Drug Administration of the United States of
America;
1.1.47 "FINAL CLOSING BALANCE SHEET" means the consolidated balance sheet
of the Corporation and the Subsidiaries as at the Closing Date, and the
calculation of the Net Cash as at the Closing Date, prepared pursuant to
section 2.13;
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1.1.48 "FINAL PROCEEDS SCHEDULE" means the schedule setting out, as at the
Closing Date, the allocation of the Initial Consideration, Non-Vendor
Placing Shares, Vendor Placing Shares, net proceeds of Vendor Placing
Shares, each class of Purchaser Shares, each class of Purchaser Share
Options, Redemption Amounts based on the occurrence of Milestones and the
amounts set forth therein (prior to reduction and set-off in accordance
with sections 2.4.7 and 6.6 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 pursuant to section
2.14 or to other Persons in respect of Net Cash), a pro forma of which is
set out in Schedule 1.1.48 (the "PRO FORMA PROCEEDS SCHEDULE"), such
schedule in final form to be agreed between Vernalis and the Corporation in
accordance with section 2.15;
1.1.49 "FINAL SIGNING BALANCE SHEET" means the consolidated balance sheet
of the Corporation and the Subsidiaries as at the date of this Agreement,
and the calculation of Vernalis Liabilities, prepared pursuant to section
2.11;
1.1.50 "FROVATRIPTAN ANNOUNCEMENT" means the announcement by Vernalis of
the results of the pivotal efficacy study for its Frovatriptan MRM
prophylaxis development programme;
1.1.51 "GOVERNMENTAL CHARGES" means all taxes, withholdings, payroll taxes,
remittances (including contributions in respect of the Canada Pension Plan
and Employment Insurance benefits), levies, assessments, reassessments and
other charges together with all related penalties, interest and fines, due
and payable to any domestic or foreign government (federal, provincial,
municipal or otherwise) or to any regulatory authority, agency, commission
or board of any domestic or foreign government, or imposed by any court or
any other law, regulation or rulemaking entity having jurisdiction in
relevant circumstances;
1.1.52 "INITIAL CONSIDERATION" means, subject to the provisions of this
Agreement, the allotment and issue of the Non-Vendor Placing Shares to the
Vendors as set out in the Final Proceeds Schedule, together with the
allotment and issue of the Vendor Placing Shares as set out in the Final
Proceeds Schedule, which shall be placed with placees at an offer price of
L0.63 per Vendor Placing Share and shall produce net proceeds of L*** per
Vendor Placing Share (being the offer price per Vendor Placing Share in
Pounds Sterling, net of the Vendors' Commission per Vendor Placing Share);
1.1.53 "INSTITUTIONAL VENDORS" means the Vendors other than the Management
Vendors;
1.1.54 "INTELLECTUAL PROPERTY" means:
1.1.54.1 inventions, arts, processes, machines, articles of
manufacture, compositions of matter, business methods, developments
and improvements, whether or not patented or the subject of an
application for patent and whether or not patentable;
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1.1.54.2 all patents, pending patent applications and rights to file
applications for the inventions referred to in section 1.1.54.1 above,
including all rights of priority and rights in continuations,
continuations-in-part, divisions, reexaminations, reissues and other
derivative applications and patents;
1.1.54.3 regulated products and services, whether or not approved or
the subject on an application for regulatory approval and whether or
not approvable;
1.1.54.4 information that is not generally available to the public;
1.1.54.5 all other intellectual and industrial property, whether or
not registered or the subject of an application for registration and
whether or not registrable; and
1.1.54.6 all common law, statutory and contractual rights to the
property and rights referred to in sections 1.1.54.1 to 1.1.54.5
above;
1.1.55 "INTERIM EXPENDITURE" means such portion of the Interim Funding
Amount advanced by the Purchaser or Vernalis to the Corporation where the
proposed use of such funds indicated by the Corporation pursuant to section
5.3.2 was to fund Permitted Costs;
1.1.56 "INTERIM FUNDING AMOUNT" means the aggregate amount advanced by the
Purchaser or Vernalis to the Corporation pursuant to section 5.3.2 from and
including the date hereof to but excluding the Closing Date to fund the
Corporation's operations;
1.1.57 "LEASED PREMISES" means the 11,050 square feet of office space
located at 0000 Xxxxxx Xxxxx, Xxxxxxxxxxx, leased by the Corporation;
1.1.58 "LETTER OF INTENT" means the letter of intent from Vernalis to the
Corporation dated August 12, 2005, as amended on September 20, 2005,
October 14, 2005, October 31, 2005 and November 14, 2005;
1.1.59 "LICENCE AGREEMENTS" has the meaning attributed to such term in
section 3.2.30;
1.1.60 "LONDON STOCK EXCHANGE" means London Stock Exchange plc;
1.1.61 "MANAGEMENT VENDORS" means, collectively, Xxxxxxx Xxxxxxxxxx, Xxxx
xx Xxxxx and Xxxxx Xxxxxxxx;
1.1.62 "MATERIAL CONTRACT" has the meaning attributed to such term in
section 3.2.14;
1.1.63 "MILESTONE" has the meaning attributed to such term in section
2.4.2;
1.1.64 "MILESTONE CONSIDERATION" means the issue of the Class 1 Preferred
Share Options, the Class 2 Preferred Shares, the Class 3 Preferred Shares
and the Class 4
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Preferred Share Options to the Vendors as set out in the Final Proceeds
Schedule and in accordance with section 2.4.1;
1.1.65 "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 Official List on the 30 trading
days up to and including the trading day (the "FINAL TRADING DAY")
immediately prior to the occurrence of the relevant Milestone and converted
to the relevant Currency at the Conversion Rate on the Final Trading Day;
1.1.66 "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 2.4.5;
1.1.67 "NET CASH" means an amount equal to:
(i) the aggregate amount of cash, receivables and deposits (but not
prepaid expenses) of the Corporation and the Subsidiaries as at the
Closing Date plus the API Inventory Amount,
less
(ii) the aggregate amount of all liabilities, including any
liabilities arising in connection with the entering into of this
Agreement, the completion of the transactions contemplated hereby, any
withholding tax remittances, interest and penalties remaining unpaid
in respect of payments to Chiesi pursuant to the Chiesi Licence
Agreements (other than U.S.$ *** to be withheld in connection with its
right to acquire Class C Preference shares in the capital of the
Corporation), of the Corporation and the Subsidiaries as at the
Closing Date,
plus
(iii) the Vernalis Liabilities less such portion of the Interim
Funding Amount advanced by the Purchaser or Vernalis to the
Corporation where the proposed use of such funds indicated by the
Corporation pursuant to section 5.3.2 was to fund Vernalis
Liabilities,
to be set out in the Final Closing Balance Sheet and calculated in the
manner provided in Schedule 1.1.67;
1.1.68 "NON-VENDOR PLACING SHARES" means 2,630,847 Vernalis Shares to be
allotted and issued in accordance with section 2.3.1.1, in the proportions
set out in the Final Proceeds Schedule, but subject to adjustment and to
the priority allocation in respect of Chiesi in accordance with section
2.3.5;
1.1.69 "OFFICIAL LIST" means the Daily Official List of the London Stock
Exchange;
1.1.70 "PAIN PROJECT" means the Business which relates to CNP3381 for the
indication of diabetic neuropathic pain;
1.1.71 "XXXXXXXXX'X PROJECT" means the Business which relates to CNP1512
for the indication of Xxxxxxxxx'x disease;
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1.1.72 "PERMITTED COSTS" means any expenditure or commitment incurred or
committed to by the Corporation or the Subsidiaries in accordance with the
Agreed Pain Project Budget or the Agreed Xxxxxxxxx'x Project Budget or to
pay salaries of employees of the Corporation and overhead costs at the same
level as at the date of this Agreement, and approved in accordance with
section 5.3.2;
1.1.73 "PERMITS" has the meaning attributed to such term in section 3.2.25;
1.1.74 "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;
1.1.75 "PERSONAL INFORMATION" means any information about an identifiable
individual;
1.1.76 "PLACING AGREEMENT" means the placing and open offer agreement
substantially in the form attached as Schedule 1.1.76;
1.1.77 "POUNDS STERLING" or "L" means lawful currency of the United
Kingdom;
1.1.78 "PRIME RATE" means the annual rate of interest which the Royal Bank
of Canada establishes at its principal office in Toronto as the reference
rate of interest to determine interest rates it will charge at such time
for demand loans in Canadian dollars made to its customers in Canada and
which it refers to as its "prime rate of interest";
1.1.79 "PRIVACY LAWS" means all laws, including the Personal Information
Protection and Electronic Documents Act (Canada), regulations, by-laws and
ordinances that regulate the collection, use or disclosure of Personal
Information or information about entities other than identifiable
individuals in each jurisdiction in which the Corporation or the
Subsidiaries carries on the Business, and includes any guidelines or
directives of any governmental agency or regulatory authority to which the
Corporation or the Subsidiaries adheres or is subject in order to qualify
to carry on the Business in, or in connection with, any jurisdiction;
1.1.80 "PRO FORMA PROCEEDS SCHEDULE" has the meaning attributed to such
term in section 1.1.48;
1.1.81 "PURCHASE PRICE" has the meaning attributed to such term in section
2.2;
1.1.82 "PURCHASED SECURITIES" means, collectively, the Purchased Shares and
the Exchanged Options;
1.1.83 "PURCHASED SHARES" means, collectively, the Class A Preference
shares in the capital of the Corporation to be sold by the Institutional
Vendors to the Purchaser pursuant to this Agreement and certain Class D
Preference shares in the capital of the
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Corporation to be sold by the Management Vendors to the Purchaser pursuant
to this Agreement, as set forth opposite each Vendor's name in Schedule
3.1.4;
1.1.84 "PURCHASER OPTION AGREEMENTS" means the agreements substantially in
the form appended to the Purchaser Option Plan to be entered into among the
Purchaser, the Vendors' Representative and each Management Vendor in
respect of the grant of Purchaser Share Options;
1.1.85 "PURCHASER OPTION PLAN" means the option plan to be adopted by the
Purchaser, substantially in the form attached as Schedule 1.1.85;
1.1.86 "PURCHASER SHAREHOLDERS AGREEMENT" means the unanimous shareholder
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 1.1.86;
1.1.87 "PURCHASER SHARE OPTIONS" means, collectively, the Class 1 Preferred
Share Options and the Class 4 Preferred Share Options;
1.1.88 "PURCHASER SHARES" means, collectively, the Class 1 Preferred Shares
to be issued to the Management Vendors upon exercise of their Class 1
Preferred Share Options, the Class 2 Preferred Shares to be issued to the
Institutional Vendors and to MMV Financial Inc., the Class 3 Preferred
Shares to be issued to the Vendors and to other holders of common shares
and rights to acquire common shares in the capital of the Corporation, and
the Class 4 Preferred Shares to be issued to the Vendors and other holders
of rights to acquire common shares in the capital of the Corporation upon
exercise of their Class 4 Preferred Share Options, all with the rights,
privileges, restrictions and conditions set out in the share provisions
substantially in the form attached as Schedule 1.1.88;
1.1.89 "PURCHASER'S CLAIM" has the meaning attributed to such term in
section 6.4;
1.1.90 "PURCHASER'S COUNSEL" means the firm of Torys LLP or such other
counsel as the Purchaser may appoint with respect to this Agreement and the
matters contemplated hereby;
1.1.91 "REDEMPTION AMOUNT" means, in respect of any Redemption Date, the
aggregate Redemption Price payable in cash and/or Vernalis Shares owing to
the Vendors by the Purchaser upon the retraction or redemption of their
Purchaser Shares (including Purchaser Shares issued upon exercise of Class
1 Preferred Share Options and Class 4 Preferred Share Options) in
accordance with the share provisions attached to the Purchaser Shares, or
by Vernalis (or its designee or assignee) upon exercise of its call right
in accordance with section 2.4.4 and subject, in either case, to reduction
or set-off of any Vendor's entitlement thereto in accordance with sections
2.4.7 and 6.6 and the share provisions attached to the Purchaser Shares;
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1.1.92 "REDEMPTION DATE" means (i) 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 and (ii) the
Special Redemption Date;
1.1.93 "REDEMPTION PRICE" means the stated redemption price of each
Purchaser Share in respect of a Redemption Date of U.S.$1.00 each;
1.1.94 "RELEVANT PROPORTION" means, in respect of any Vendor, a percentage,
(i) the numerator of which is equal to the aggregate of: (x) that Vendor's
entitlement to Initial Consideration and (y) the aggregate Redemption Price
of the Purchaser Shares issued on the Closing Date to that Vendor and of
the Purchaser Shares issuable upon exercise of the Purchaser Share Options
granted on the Closing Date to that Vendor, as set forth opposite that
Vendor's name in the Final Proceeds Schedule and (ii) the denominator of
which is the aggregate of the amounts in (i) above for each Vendor;
1.1.95 "REPORT" means the customary final report produced for filing with
the FDA;
1.1.96 "SPECIAL REDEMPTION DATE" has the meaning attributed to such term in
section 2.14.1;
1.1.97 "SUBSCRIPTION AGREEMENTS" means the subscription agreements dated
the date hereof, entered into between Vernalis and certain placees
nominated by the Bank in connection with the Vendor Placing;
1.1.98 "SUBSIDIARIES" means 2037137 Ontario Inc. and 2060347 Ontario Inc.,
each incorporated under the laws of the Province of Ontario and each a
wholly-owned subsidiary of the Corporation;
1.1.99 "TAX REASSESSMENT PERIOD" has the meaning attributed to such term in
section 3.5;
1.1.100 "THIRD PARTY CLAIM" has the meaning attributed to such term in
section 6.4;
1.1.101 "TIME OF CLOSING" means 8:00 a.m., London time, on the Closing Date
or such other time on the Closing Date as may be agreed upon in writing
between the Vendors' Representative and Vernalis;
1.1.102 "UNAUDITED FINANCIAL STATEMENTS" means the unaudited consolidated
balance sheet of the Corporation and the Subsidiaries as at May 31, 2005
and the accompanying consolidated statements of loss and deficit and cash
flow, including the notes thereto, for the six months then ended;
1.1.103 "UNITED STATES DOLLARS", "U.S. DOLLARS" or "U.S.$" means lawful
currency of the United States of America;
1.1.104 "VENDOR PLACING" means the placing by the Bank as agent for
Vernalis pursuant to the Placing Agreement of the Vendor Placing Shares,
and of Vernalis
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Shares in connection with the purchase by the Purchaser from the Vendors
and Chiesi of their shares or rights to acquire shares in the capital of
the Corporation;
1.1.105 "VENDOR PLACING SHARES" means 24,284,984 Vernalis Shares to be
allotted and issued in accordance with section 2.3.1.2, the Placing
Agreement and the Subscription Agreements, in the proportions set out in
the Final Proceeds Schedule, but subject to adjustment and the priority
allocation in respect of Chiesi in accordance with section 2.3.5;
1.1.106 "VENDOR'S CLAIM" has the meaning attributed to such term in section
6.4;
1.1.107 "VENDORS' BUSINESS REPRESENTATIONS" means the representations and
warranties set forth in section 3.2;
1.1.108 "VENDORS' COMMISSION" means L*** per Vendor Placing Share, being
the blended average amount of fees and commissions per Vernalis Share
payable by Vernalis to the Bank in respect of all Vernalis Shares
(including the Vendor Placing Shares) placed pursuant to the Placing
Agreement;
1.1.109 "VENDORS' COUNSEL" means the firm of Xxxxxx Xxxxxx Xxxxxxx LLP, or
such other counsel as the Vendors may appoint with respect to this
Agreement and the matters contemplated hereby;
1.1.110 "VENDORS' PERSONAL COVENANTS" means the covenants set forth in
section 5.1;
1.1.111 "VENDORS' PERSONAL REPRESENTATIONS" means the representations and
warranties set forth in section 3.1;
1.1.112 "VENDORS' REPRESENTATIVE" has the meaning attributed to such term
in section 2.5;
1.1.113 "VENDORS' REPRESENTATIVE AGREEMENT" has the meaning attributed to
such term in section 2.5;
1.1.114 "VERNALIS LIABILITIES" means the aggregate liabilities as at the
date of this Agreement incurred or committed to by the Corporation and the
Subsidiaries in respect of the Pain Project and the Xxxxxxxxx'x Project
which are not outstanding for more than 60 days past their invoice date and
appended to the Estimated Signing Balance Sheet, subject to adjustment in
accordance with the Final Signing Balance Sheet; and
1.1.115 "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.
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1.2 SCHEDULES
The following are the schedules attached to this Agreement:
Schedule 1.1.3 - Agreed Pain Project Budget
Schedule 1.1.4 - Agreed Xxxxxxxxx'x Project Budget
Schedule 1.1.7 - API Inventory Amount
Schedule 1.1.20 - Form of Circular
Schedule 1.1.48 - Pro Forma Proceeds Schedule
Schedule 1.1.67 - Net Cash Calculation
Schedule 1.1.76 - Form of Placing Agreement
Schedule 1.1.85 - Form of Purchaser Option Plan
Schedule 1.1.88 - Form of Purchaser Shareholders Agreement
Schedule 1.1.88 - Form of Share Provisions for Purchaser Shares
Schedule 3.1.4 - Title To, and Right To, Sell Purchased Securities
Schedule 3.1.7 - Consents and Approvals
Schedule 3.2.5 - Capital of the Corporation
Schedule 3.2.7 - Obligations to Issue or Purchase Securities
Schedule 3.2.8 - Disclosure
Schedule 3.2.10 - Liabilities and Guarantees
Schedule 3.2.11 - Indebtedness
Schedule 3.2.12 - Unusual Transactions and Events
Schedule 3.2.14 - Certain Contracts In and Out of the Ordinary Course
Schedule 3.2.15 - Employment Matters
Schedule 3.2.16 - Employment Benefit Plan
Schedule 3.2.19 - Title to Assets
Schedule 3.2.21 - Environmental Matters
Schedule 3.2.24 - Insurance Policies
Schedule 3.2.25 - Corporation IP
Schedule 3.2.38 - Bank Accounts, Etc.
Schedule 3.4 - Finder's Fees
1.3 HEADINGS AND TABLE OF CONTENTS
The inclusion of headings and a table of contents in this Agreement is
for convenience of reference only and shall not affect the construction or
interpretation hereof.
1.4 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.
1.5 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
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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 1.5 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.
1.6 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
In this Agreement, except to the extent otherwise expressly provided,
references to "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" mean, generally
accepted accounting principles from time to time in Canada, including those
principles stated in the Handbook of the Canadian Institute of Chartered
Accountants, or any successor institute, consistently applied.
1.7 INVALIDITY OF PROVISIONS
Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision or part thereof by a court of competent jurisdiction shall not affect
the validity or enforceability of any other provision hereof. To the extent
permitted by Applicable Law, the parties waive any provision of law which
renders any provision of this Agreement invalid or unenforceable in any respect.
1.8 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter of this Agreement. This Agreement supersedes
all prior arrangements and understandings, whether written or oral, relating to
such subject matter in any way, except for the Confidentiality Agreement and the
obligations in paragraph 4 of the Letter of Intent. To the extent that there is
any inconsistency between the terms of the Confidentiality Agreement or
paragraph 4 of the Letter of Intent and this Agreement, the terms of this
Agreement shall prevail. 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 or the Confidentiality Agreement or paragraph 4 of the
Letter of Intent. No reliance is placed on any warranty, representation,
opinion, advice or
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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.
1.9 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.
1.10 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.
1.11 ATTORNMENT
The Vendors, 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.
1.12 KNOWLEDGE
In this Agreement, any reference to the knowledge of any party means
to the best knowledge, information and belief of the party after reviewing all
relevant records and making due inquiries regarding the relevant matter of all
relevant representatives of the party and, in the case of any reference to the
knowledge of any Vendor, means to the best knowledge, information and belief of
that Vendor and the Corporation, after that Vendor and the Corporation reviewing
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all relevant records and making due inquiries regarding the relevant matter of
all relevant representatives of that Vendor and the Corporation.
ARTICLE 2
PURCHASE AND SALE
2.1 AGREEMENT TO PURCHASE AND SELL
Subject to the terms of this Agreement, at the Time of Closing:
2.1.1 the Institutional Vendors and Management Vendors shall sell and the
Purchaser shall purchase all of the Purchased Shares as set forth opposite
their names in Schedule 3.1.4 for Initial Consideration and/or Milestone
Consideration as set forth opposite their names in the Final Proceeds
Schedule;
2.1.2 the Management Vendors shall exchange the Exchanged Options to
acquire Class D Preference shares in the capital of the Corporation as set
forth opposite their names in Schedule 3.1.4 for Class 1 Preferred Share
Options as set forth opposite their names in the Final Proceeds Schedule;
and
2.1.3 the Management Vendors shall exchange the Exchanged Options to
acquire common shares in the capital of the Corporation as set forth
opposite their names in Schedule 3.1.4 for Class 4 Preferred Share Options
as set forth opposite their names in the Final Proceeds Schedule.
The Purchaser shall not be obligated to purchase or exchange any of the
Purchased Securities in accordance with this Agreement unless the purchase or
exchange of all of the shares in the capital of the Corporation, including
shares in the capital of the Corporation issuable upon the exercise of warrants,
conversion rights, options and other rights or, at the option of the Purchaser,
rights to acquire shares of the Corporation, is completed simultaneously.
2.2 PURCHASE PRICE
The aggregate purchase price (the "PURCHASE PRICE") to be paid by the
Purchaser to the Vendors for the Purchased Shares and the Exchanged Options
shall be equal to the aggregate of the Initial Consideration and the Milestone
Consideration, subject to adjustment on the Special Redemption Date in
accordance with section 2.14.1.
2.3 SATISFACTION OF THE INITIAL CONSIDERATION
2.3.1 The Initial Consideration shall be satisfied:
2.3.1.1 on the Closing Date by the allotment and issue of the
Non-Vendor Placing Shares, credited as paid in full, and delivered by
Vernalis to each Vendor (or its nominee) as set out in the Final
Proceeds Schedule in uncertificated form to an account in CREST
designated by that Vendor; and
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2.3.1.2 on the Closing Date by the allotment and issue of the Vendor
Placing Shares, credited as paid in full, and delivered by Vernalis to
such Persons (other than the Vendors) as are nominated by the Bank or,
in certain circumstances, failing such nomination, to the Bank, with
the net proceeds thereof payable by Vernalis (in the case of Vendor
Placing Shares issued and allotted pursuant to the Subscription
Agreements) and by the Bank (in the case of the remaining Vendor
Placing Shares and in accordance with the Cash Realisation Agreement)
to each Vendor as set out in the Final Proceeds Schedule, but subject
to adjustment in accordance with section 2.3.5.
2.3.2 Subject to section 2.3.5, the proceeds payable by the Bank and/or
Vernalis to the relevant Vendors in accordance with section 2.3.1.2 shall
be L*** per Vendor Placing Share, being the proceeds per Vendor Placing
Share in Pounds Sterling, net of Vendors' Commission. Each of the Vendors
hereby confirms and authorizes the Purchaser and Vernalis (or the Bank, as
appropriate) to deduct and retain the Vendors' Commission pursuant to this
section 2.3.2.
2.3.3 The Purchaser shall cause Vernalis to deliver the Non-Vendor Placing
Shares to the Vendors in accordance with section 2.3.1.1 and the Vendor
Placing Shares to Persons nominated by the Bank, or to the Bank, as
applicable, in accordance with section 2.3.1.2 and the Subscription
Agreements.
2.3.4 Each Vendor hereby undertakes to enter into, execute and/or deliver,
at the Purchaser's request, any document contained or referred to in the
Placing Agreement which is required to be entered into, executed and/or
delivered by that Vendor (including the Cash Realisation Agreement or
similar agreement) in connection with the Vendor Placing.
2.3.5 To the extent that placees do not subscribe for all Vendor Placing
Shares and Chiesi Vendor Placing Shares, and where the Bank has no
obligation under the Placing Agreement to subscribe for such shares itself,
then in so far as Vernalis Shares are subscribed for by placees under the
Vendor Placing (whether under Subscription Agreements or in connection with
the Placing Agreement) or by the Bank under the Placing Agreement, they
shall be attributed (and therefore the net proceeds therefrom shall be due)
first, to Chiesi in respect of up to the number of Chiesi Vendor Placing
Shares not otherwise placed or subscribed for and, as to any balance, shall
be allocated proportionately among the Vendors based on the number of
Vendor Placing Shares set forth opposite their names in the Pro Forma
Proceeds Schedule, and any such Vendor Placing Shares not subscribed for
shall be deemed to be Non-Vendor Placing Shares and will be allotted and
issued to the relevant Vendor (or its respective nominee) in accordance
with section 2.3.1.1, and the net proceeds payable to that Vendor in
accordance with section 2.3.1.2 shall be reduced accordingly.
2.4 SATISFACTION OF MILESTONE CONSIDERATION
2.4.1 The Milestone Consideration shall be satisfied on the Closing Date
by:
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2.4.1.1 the issue of such number of Class 2 Preferred Shares and such
number of Class 3 Preferred Shares to each Institutional Vendor as is
set out opposite that Institutional Vendor's name in the Final
Proceeds Schedule, credited as paid in full, and delivered by the
Purchaser to the Vendors in certificated form; and
2.4.1.2 the grant of such number of Class 1 Preferred Share Options
and such number of Class 4 Preferred Share Options to each Management
Vendor as is set out opposite that Management Vendor's name in the
Final Proceeds Schedule.
The Purchaser Shares (including Purchaser Shares issued upon exercise of
Class 1 Preferred Share Options and Class 4 Preferred Share Options) shall
be redeemed by the Purchaser (and delivered by the relevant 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 2.4.4, purchased by
Vernalis (and delivered by the relevant 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 Vendors, the Purchaser and
Vernalis agrees to be bound by the share provisions attached to the
Purchaser Shares, subject to the terms of this Agreement.
2.4.2 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:
2.4.2.1 in respect of the Pain Project:
2.4.2.1.1 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;
2.4.2.1.2 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 to market and sell
in the USA a product comprising CNP3381 for the treatment of
diabetic neuropathic pain; and
2.4.2.1.3 U.S. $5,833,333, upon the issuance by the FDA of a
writtenn otification to Vernalis or its affiliates pursuant to
21 CFR 314.105(a) that the FDA approves CNP3381 for the treatment
of diabetic neuropathic
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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 Milestones referred to in sections
2.4.2.1.1 and 2.4.2.1.2 have not occurred prior to the FDA
approval contemplated in this section 2.4.2.1.3, those Milestones
shall be deemed to occur concurrently with the occurrence of the
Milestone contemplated in this section 2.4.2.1.3; and
2.4.2.2 in respect of the Xxxxxxxxx'x Project:
2.4.2.2.1 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);
2.4.2.2.2 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 Xxxxxxxxx'x
disease; and
2.4.2.2.3 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
Xxxxxxxxx'x 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.
2.4.3 Subject to section 2.4.4, 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.
2.4.4 Vernalis (or its designee or assignee) may, at its option, elect, by
notice to the Vendors' Representative at any time (i) on or before the
Special Redemption Date and (ii) 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
any Vendor or the Purchaser has 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 2.4.4 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
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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 2.4.4, the
retraction and redemption right of the Vendor or the Purchaser,
respectively, pursuant to the share provisions attached to the Purchaser
Shares in respect of such Redemption Date shall be cancelled.
Notwithstanding the foregoing, the Redemption Amount in respect of the
Special Redemption Date, if applicable, may only be satisfied in cash.
2.4.5 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 each Vendor (or its nominee), in uncertificated form to
an account in CREST designated by that Vendor, such number of Vernalis
Shares as at the Milestone Share Price shall be equal to that Vendor's
entitlement to a Redemption Amount divided by the Milestone Share Price
(rounded upwards to the nearest whole share), subject to any further
reduction as provided in section 2.4.7.
2.4.6 Any Redemption Amount to be satisfied in cash, subject to any further
reduction as provided in section 2.4.7, shall be paid on the relevant
Redemption Date to the Vendors' Representative, on behalf of the Vendors,
and the Vendors' Representative shall pay such Redemption Amount to the
Vendors in accordance with their 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 any Vendor directly any
amounts contemplated by this section 2.4.6.
2.4.7 A 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:
2.4.7.1 the amount of any Determined Claims for which that Vendor is
responsible under Article 6, in accordance with section 6.6.2, 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); and
2.4.7.2 the amount of any Estimated Claims for which that Vendor may
be responsible under Article 6 and outstanding 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).
2.4.8 In the event any Vendor's entitlement to a Redemption Amount is
reduced by the amount of any Estimated Claim as provided in section
2.4.7.2, upon such Claim becoming a Determined Claim, the Purchaser or
Vernalis, as applicable, shall, if and to
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the extent the amount of the Determined Claim for which such Vendor is
responsible is less than the Estimated Claim for which such Vendor is
responsible, satisfy the difference (up to the amount of the reduction made
pursuant to section 2.4.7.2) 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 2.4 shall apply mutatis
mutandis, with the Milestone Share Price, when calculating the number of
Vernalis Shares to be issued pursuant to this section 2.4.8, being that
used in respect of the relevant Redemption Date.
2.4.9 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 any Vendor, who is
located or resident in a jurisdiction on the Redemption Date or date for
payment pursuant to section 2.4.8 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.
2.4.10 In the event that a Vendor is a non-resident of Canada under the
Income Tax Act (Canada) on any Redemption Date or date for payment pursuant
to section 2.4.8, 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 2.4.8.
Notwithstanding the foregoing, neither the Purchaser nor Vernalis, as
applicable, shall be required to issue any Purchaser Shares or Vernalis
Shares to any 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 a Vendor any amount required
to be deducted or withheld under Applicable Law.
2.4.11 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 Closing Date 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 Vendors.
2.5 APPOINTMENT OF VENDORS' REPRESENTATIVE
Each of the Vendors hereby appoints VenGrowth 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 Agreement and in related documents in accordance with an
agreement (the "VENDORS' REPRESENTATIVE AGREEMENT") to be entered into among the
Vendors' Representative, the Vendors, and certain other Persons to become
shareholders or optionholders of the Purchaser (other than Vernalis).
-23-
In the event of any disagreement between any 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 Vendors, 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
Vendors, 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.
2.6 DEVELOPMENT OF THE PAIN PROJECT AND THE XXXXXXXXX'X PROJECT
Vernalis shall, or shall cause its affiliates to, from the Time of
Closing:
2.6.1 progress the development of the Pain Project and the Xxxxxxxxx'x
Project in accordance with the terms of the Chiesi Licence Agreements; and
2.6.2 use all commercially reasonable and diligent efforts, including
maintaining up-to-date development plans in line with the Corporation's
clinical strategy for the Pain Project and the Xxxxxxxxx'x Project, and
resources commonly associated with good business practice and standards in
the pharmaceutical industry to develop a product or compound of similar
market potential as CNP3381 and CNP1512 (and such process shall take into
account all relevant factors including safety, efficacy, the
competitiveness of alternative products and product candidates in the
marketplace, the patent and proprietary position of the product, the
likelihood of regulatory approval and the potential profitability of the
product).
2.7 LOCATION AND TIME OF THE CLOSING
The Closing shall take place at the Time of Closing at the offices of
Torys LLP in Xxxxxxx, Xxxxxxx.
2.8 DELIVERY OF SHARE CERTIFICATES
At the Time of Closing, the Vendors shall deliver to the Purchaser
share certificates representing the Purchased Shares duly endorsed in blank for
transfer or accompanied by duly signed powers of attorney for transfer in blank.
2.9 DELIVERY OF OPTION AGREEMENTS
At the Time of Closing, the Management Vendors, the Purchaser and the
Vendors' Representative shall enter into Purchaser Option Agreements in respect
of the grant of
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the Class 1 Preferred Share Options and the Class 4 Preferred Share Options, as
provided in this Agreement.
2.10 ESTIMATED SIGNING BALANCE SHEET
Not less than two Business Days before the date of this Agreement, the
Corporation shall prepare and deliver to the Purchaser a consolidated balance
sheet of the Corporation and the Subsidiaries as at the date of this Agreement,
which balance sheet shall be prepared in accordance with generally accepted
accounting principles in a manner consistent with that of the balance sheet
comprising the Audited Financial Statements and shall reflect a good faith
estimate by the Corporation of the consolidated balance sheet of the Corporation
and the Subsidiaries as at the date of this Agreement and shall set out the
Vernalis Liabilities.
2.11 FINAL SIGNING BALANCE SHEET
Not later than 30 days after the Closing Date, the Purchaser shall
cause a consolidated balance sheet of the Corporation and the Subsidiaries as at
the date of this Agreement to be prepared and delivered to the Vendors'
Representative, which balance sheet shall be prepared in accordance with
generally accepted accounting principles in a manner consistent with that of the
balance sheet comprising the Audited Financial Statements, and which shall
include a calculation of the Vernalis Liabilities (which balance sheet, together
with the calculation of Vernalis Liabilities as at the date of this Agreement,
is hereinafter referred to as the "FINAL SIGNING BALANCE SHEET"). The Purchaser
shall provide the Vendors' Representative with reasonable access to the
Corporation's financial records and working papers to assist in its review of
the Final Signing Balance Sheet.
If the Vendors' Representative notifies the Purchaser that it agrees
with the Final Signing Balance Sheet within 30 days after receipt thereof or
fails to deliver notice to the Purchaser of its disagreement therewith within
such 30 day period, the Final Signing Balance Sheet shall be conclusive and
binding on the Purchaser and the Vendors and the parties shall be deemed to have
agreed thereto, in the first case, on the date the Purchaser receives the notice
and, in the second case, on such 30th day. If the Vendors' Representative
notifies the Purchaser of its disagreement with the Final Signing Balance Sheet
within such 30 day period, then the Purchaser and the Vendors' Representative
shall attempt, in good faith, to resolve their differences with respect thereto
within 30 days after the Purchaser's receipt of the Vendors' Representative's
notice of disagreement. Any disagreement over the Final Signing Balance Sheet (a
"BALANCE SHEET DISPUTE") not resolved by the Purchaser and the Vendors'
Representative within such 30 day period shall be submitted to KPMG, Toronto, or
such other nationally recognized accounting firm as the Vendors' Representative
and the Purchaser may agree (the "ACCOUNTANTS"). The Accountants shall act as
experts, not as arbitrators, and the determination of the Accountants shall, in
the absence of manifest error, be final and binding on the Vendors and the
Purchaser. The fees and expenses of the Accountants, together with the costs,
including the legal expenses of the parties, shall be in the discretion of the
Accountants, which determination shall be final and binding on the Vendors and
the Purchaser.
The Final Signing Balance Sheet, amended to reflect the resolution of
each Balance Sheet Dispute as agreed in writing between the Vendors'
Representative and the
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Purchaser or as determined by the Accountants, as the case may be, shall
constitute the "FINAL SIGNING BALANCE SHEET" for the purposes of this Agreement.
2.12 ESTIMATED CLOSING BALANCE SHEET
Not less than two Business Days before the Closing Date, the
Corporation shall prepare and deliver to the Purchaser a consolidated balance
sheet of the Corporation and the Subsidiaries as at the Closing Date which
balance sheet shall be prepared in accordance with generally accepted accounting
principles in a manner consistent with that of the balance sheet comprising the
Audited Financial Statements and shall reflect a good faith estimate by the
Corporation of the consolidated balance sheet of the Corporation and the
Subsidiaries as at the Closing Date and which shall include a calculation of the
Net Cash as at the Closing Date.
2.13 FINAL CLOSING BALANCE SHEET
Not later than 30 days after the Closing Date, the Purchaser shall
cause a consolidated balance sheet of the Corporation and the Subsidiaries as at
the Closing Date to be prepared and delivered to the Vendors' Representative,
which balance sheet shall be prepared in accordance with generally accepted
accounting principles in a manner consistent with that of the balance sheet
comprising the Audited Financial Statements, and which shall include a
calculation of the Net Cash as at the Closing Date (which balance sheet,
together with the calculation of Net Cash as at the Closing Date, is hereinafter
referred to as the "FINAL CLOSING BALANCE SHEET"). The Purchaser shall provide
the Vendors' Representative with reasonable access to the Corporation's
financial records and working papers to assist in its review of the Final
Closing Balance Sheet.
If the Vendors' Representative notifies the Purchaser that it agrees
with the Final Closing Balance Sheet within 30 days after receipt thereof or
fails to deliver notice to the Purchaser of its disagreement therewith within
such 30 day period, the Final Closing Balance Sheet shall be conclusive and
binding on the Purchaser and the Vendors and the parties shall be deemed to have
agreed thereto, in the first case, on the date the Purchaser receives the notice
and, in the second case, on such 30th day. If the Vendors' Representative
notifies the Purchaser of its disagreement with the Final Closing Balance Sheet
within such 30 day period, then the Purchaser and the Vendors' Representative
shall attempt, in good faith, to resolve their differences with respect thereto
within 30 days after the Purchaser's receipt of the Vendors' Representative's
notice of disagreement. Any disagreement over the Final Closing Balance Sheet (a
"BALANCE SHEET DISPUTE") not resolved by the Purchaser and the Vendors'
Representative within such 30 day period shall be submitted KPMG, Toronto, or
such other nationally recognized accounting firm as the Vendors' Representative
and the Purchaser may agree, provided that if there is a Balance Sheet Dispute
pursuant to both sections 2.11 and 2.13 the same accounting firm shall be
employed (the "ACCOUNTANTS"). The Accountants shall act as experts, not as
arbitrators, and the determination of the Accountants shall, in the absence of
manifest error, be final and binding on the Vendors and the Purchaser. The fees
and expenses of the Accountants, together with the costs, including the legal
expenses of the parties, shall be in the discretion of the Accountants, which
determination shall be final and binding on the Vendors and the Purchaser.
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The Final Closing Balance Sheet, amended to reflect the resolution of
each Balance Sheet Dispute as agreed in writing between the Vendors'
Representative and the Purchaser or as determined by the Accountants, as the
case may be, shall constitute the "FINAL CLOSING BALANCE SHEET" for the purposes
of this Agreement.
2.14 NET CASH PAYMENT
On the 15th Business Day after the final determination of the Final
Closing Balance Sheet in accordance with section 2.13:
2.14.1 if the Net Cash as set out in the Final Closing Balance Sheet is a
positive number, the Purchaser shall issue to the Vendors on such date (the
"SPECIAL REDEMPTION DATE") such number of Class 3 Preferred Shares (in the
case of the Institutional Vendors) and Class 4 Preferred Shares (in the
case of the Management Vendors) with an aggregate Redemption Price equal to
the amount of such Net Cash, converted to U.S. Dollars at the Conversion
Rate on the Closing Date, multiplied by a fraction, (i) the numerator of
which is the aggregate of the number of Class 3 Preferred Shares owned by
the Vendors on the Special Redemption Date and the number of Class 4
Preferred Share Options held by the Vendors on the Special Redemption Date
and (ii) the denominator of which is the aggregate of the number of all
Class 3 Preferred Shares outstanding on the Special Redemption Date and the
number of all Class 4 Preferred Share Options outstanding on the Special
Redemption Date. Such Class 3 Preferred Shares and Class 4 Preferred
Shares, issuable to such Vendors, shall be credited as paid in full, and
delivered by the Purchaser to the Vendors' Representative, on behalf of the
Vendors, in certificated form, each Vendor being entitled to such number of
such Class 3 Preferred Shares or Class 4 Preferred Shares, as the case may
be (rounded upwards to the nearest whole share), based on its pro rata
holding of Class 3 Preferred Shares or Class 4 Preferred Share Options,
relative to all Institutional Vendors or Management Vendors, respectively;
and
2.14.2 if the Net Cash as set out in the Final Closing Balance Sheet is a
negative number, the Vendors which own Class 2 Preferred Shares on the
Special Redemption Date shall be deemed to subscribe in aggregate on the
Special Redemption Date at U.S. $*** per share for such number of Class 2
Preferred Shares with an aggregate Redemption Price equal to the amount of
such Net Cash (expressed as a positive number), together with interest
calculated thereon at the Prime Rate from and including the Closing Date to
but excluding the date of payment, converted to U.S. Dollars at the
Conversion Rate on the Closing Date, multiplied by a fraction, (i) the
numerator of which is the aggregate Redemption Price of the Class 2
Preferred Shares owned by the Vendors on the Special Redemption Date, and
(ii) the denominator of which is the aggregate Redemption Price of all
Class 2 Preferred Shares outstanding on the Special Redemption Date, and
the aggregate subscription price shall be paid by the Vendors'
Representative, on behalf of the Vendors, to the Purchaser. Subject to
payment in full of the aggregate subscription price by the Vendors'
Representative, such Class 2 Preferred Shares, issuable to such Vendors,
shall be credited as paid in full, and delivered by the Purchaser to the
Vendors' Representative, on behalf of the Vendors, in certificated form,
each Vendor being entitled to such number of such
-27-
Class 2 Preferred Shares (rounded upwards to the nearest whole share) based
on its pro rata holding of Class 2 Preferred Shares relative to all
Vendors. Each Vendor shall reimburse the Vendors' Representative for its
pro rata portion of such subscription price based on its holding of Class 2
Preferred Shares relative to all Vendors.
2.15 FINAL PROCEEDS SCHEDULE
Not less than two Business Days before the Closing Date, the
Corporation shall prepare and deliver to Vernalis the 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 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
Closing Date of the variable factors noted in the Pro Forma Proceeds Schedule
(other than those variables to be reflected in the Final Closing Balance Sheet).
Vernalis shall be entitled to review and comment upon the Final Proceeds
Schedule and the parties agree to make such amendments as Vernalis reasonably
requests in respect of the Final Proceeds Schedule to correct errors or
omissions. The Final Proceeds Schedule as agreed 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 the Initial
Consideration, Non-Vendor Placing Shares, Vendor Placing Shares, net proceeds of
Vendor Placing Shares, each class of Purchaser Shares, each class of Purchaser
Share Options, Redemption Amounts and other amounts set forth therein. The
Vendors acknowledge and agree that the Pro Forma Proceeds Schedule and the Final
Proceeds Schedule are intended only to set out the allocation of Initial
Consideration, the Non-Vendor Placing Shares, the Vendor Placing Shares, net
proceeds of Vendor Placing Shares, each class of Purchaser Shares, each class of
Purchaser Share Options, Redemption Amounts and other amounts set forth therein
(prior to reduction and set-off in accordance with sections 2.4.7 and 6.6 and
excluding the issue of any additional Class 2 Preferred Shares, Class 3
Preferred Shares and any Class 4 Preferred Shares issued pursuant to section
2.14.1 or to other Persons in respect of Net Cash), and, subject to section
2.14.1, nothing in this section 2.15 shall oblige the Purchaser or Vernalis to
pay, issue or allot (or procure the payment, issue or allotment of) additional
consideration to the Vendors. In the event that additional Class 2 Preferred
Shares, Class 3 Preferred Shares or Class 4 Preferred Shares are issued in
accordance with section 2.14, the Final Proceeds Schedule shall be updated by
the Purchaser and the Vendors' Representative accordingly.
2.16 RESALE RESTRICTIONS ON NON-VENDOR PLACING SHARES
The Non-Vendor Placing Shares allotted and issued to the Vendors shall
be entitled to be sold in accordance with applicable securities law
requirements, provided however in order to ensure the maintenance of an orderly
market in Vernalis Shares after the Time of Closing, each Vendor issued and
allotted in excess of 500,000 Non-Vendor Placing Shares covenants not to dispose
of those shares on or before the Frovatriptan Announcement except:
2.16.1 with the prior approval of Vernalis (such approval not to be
unreasonably withheld) and provided that such sale takes place through
Vernalis' designated brokers
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in London and that such brokers are able to sell such shares on
commercially reasonable terms and in accordance with applicable regulatory
requirements;
2.16.2 a sale of less than 10,000 Non-Vendor Placing Shares in any given
five day trading period by that Vendor;
2.16.3 a disposal pursuant to a court order or in acceptance of an offer by
Vernalis to buy back its own shares; or
2.16.4 to accept a general offer made for all of the outstanding Vernalis
Shares (other than Vernalis Shares held by the offeror and/or Persons
acting in concert with the offeror), or to execute an irrevocable
commitment to accept such a general offer, or a disposal or agreement to
dispose of shares to a Person who has made or announced his intention to
make, or has a bona fide intention to make, such an offer.
In the event that the Frovatriptan Announcement does not occur on or before
June 30, 2006, the Vendors shall be free to sell Non-Vendor Placing Shares
without reference to the restrictions set forth in this section 2.16.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 VENDORS' PERSONAL REPRESENTATIONS AND WARRANTIES
Each Vendor hereby severally, and not jointly, represents and warrants
to each of the Purchaser and Vernalis as follows with respect to itself only and
each Vendor acknowledges that each of the Purchaser and Vernalis is relying upon
the following representations and warranties in connection with the purchase of
the Purchased Securities (and the representation and warranty contained in
section 3.1.10 shall be deemed to be repeated on each Redemption Date, or date
of payment under section 2.4.8, unless the Purchaser and Vernalis have been
notified otherwise in writing at least 10 Business Days prior thereto):
3.1.1 INCORPORATION. In the case of a Vendor who is a corporation, it is
duly incorporated and validly existing under the laws of its jurisdiction
of incorporation.
3.1.2 CAPACITY AND DUE AUTHORIZATION. It has the corporate power (if a
corporation) and capacity to enter into, and to perform its obligations
under, this Agreement. In the case of a Vendor who is not a corporation, it
has the capacity to enter into, and to perform its obligations under, this
Agreement.
3.1.3 ENFORCEABILITY. This Agreement has been duly authorized (if a
corporation), 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 PURCHASED SECURITIES. It is the sole
registered and beneficial owner of the Purchased Securities set forth
opposite its name in
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Schedule 3.1.4 with good and marketable title thereto, free of all Charges.
Set forth opposite its name in Schedule 3.1.4 are all of its agreements,
options, warrants, conversion rights or other rights to acquire Corporation
Shares or other shares or securities of the Corporation. Except for the
Corporation Shareholders Agreement, there are no agreements or restrictions
which in any way limit or restrict the transfer to the Purchaser of its
Purchased Securities nor are there any shareholders agreements, pooling
agreements, voting trusts or other agreements or understandings with
respect to the voting of its Purchased Shares or shares issuable upon
exercise of its Exchanged Options or any of them. It waives all of its
rights under the Corporation Shareholders Agreement in respect of the
transactions contemplated in this Agreement and, at the Time of Closing,
the Corporation Shareholders Agreement shall be deemed to be terminated by
it without further action. At the Time of Closing it will have full legal
right, power and authority to sell the Purchased Shares to the Purchaser,
or exchange the Exchanged Options with the Purchaser, free of all Charges.
A correct and complete copy of the Corporation Shareholders Agreement has
been provided to Vernalis. Each of NDI and MedInnova severally represents
and warrants that it will not exercise the warrants to acquire Class A
Preference Shares in the capital of the Corporation set forth opposite its
name in Schedule 3.1.4 and severally agrees that its warrants shall be
cancelled on the Closing Date.
3.1.5 AMOUNTS OWING BY CORPORATION. At the Time of Closing, upon exercise
by it of all options, warrants, conversion rights or other rights to
acquire Corporation Shares or other shares of the Corporation, there shall
be no amounts owing to it by the Corporation.
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. Except as set forth in Schedule 3.1.7, 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 or exchange by it of any of its Purchased Securities
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 or 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, except on a confidential basis
to its accountants, legal advisers or other representatives.
3.1.9 TAX RESIDENCY. It is not a non-resident of Canada under the Income
Tax Act (Canada).
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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 VENDORS' BUSINESS REPRESENTATIONS AND WARRANTIES
Each Vendor hereby severally, and not jointly, represents and warrants
to the Purchaser and Vernalis as follows and each Vendor acknowledges that the
Purchaser and Vernalis are relying upon the following representations and
warranties in connection with the purchase or exchange of the Purchased
Securities:
3.2.1 INCORPORATION AND STATUS OF THE CORPORATION AND THE SUBSIDIARIES.
Each of the Corporation and the Subsidiaries is duly incorporated and
organized and is validly existing and up-to-date in the filing of all
corporate and similar returns under the laws of the Province of Ontario,
which is the only jurisdiction in which the nature of the Business or the
assets owned or leased by it makes such registration, licensing or
qualification necessary. The Corporation has provided to Vernalis a correct
and complete copy of the articles, by-laws, constating documents and other
organizational documents of the Corporation and the Subsidiaries, in each
case as amended to the date hereof.
3.2.2 CORPORATE POWER OF THE CORPORATION AND THE SUBSIDIARIES. Each of the
Corporation and the Subsidiaries has the corporate power and capacity to
own, lease or license its assets and to carry on the Business as the same
is presently conducted.
3.2.3 NO CONTRAVENTION. None of the entering into of this Agreement by the
Corporation, the sale or exchange of the Purchased Securities nor the
performance by the Corporation of any of its obligations under this
Agreement will contravene, breach or result in any default under the
articles, by-laws, constating documents or other organizational documents
of the Corporation or under any mortgage, lease, agreement, other legally
binding instrument, licence, permit, statute, regulation, order, judgment,
decree or law to which the Corporation is a party or by which it may be
bound.
3.2.4 APPROVALS AND CONSENTS. 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 of this Agreement by the Corporation, the sale of the Purchased
Shares or the performance by the Corporation of any of its obligations
under this Agreement.
3.2.5 CAPITAL OF THE CORPORATION. Schedule 3.2.5 sets out particulars of
the authorized and issued shares of the Corporation and the Subsidiaries,
the names of the Persons who are the registered and beneficial owners of
such shares and the number and class of shares held by such Persons. All
the shares indicated on such schedule as being issued and outstanding have
been validly issued and are outstanding as fully paid and non-assessable
shares.
3.2.6 SUBSIDIARIES. The Corporation has no direct or indirect interest in
any Person other than the Subsidiaries and GTTS XV Limited Partnership.
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3.2.7 NO OBLIGATIONS TO ISSUE OR PURCHASE SECURITIES. Except as set out in
Schedule 3.2.7, there are no agreements, options, warrants, conversion
rights or other rights pursuant to which the Corporation or any of the
Subsidiaries is, or may become, obligated to issue any shares or any
securities convertible or exchangeable, directly or indirectly, into any
shares of the Corporation or the Subsidiaries. Except as set out in
Schedule 3.2.7, the Corporation does not own or have any obligation to
acquire any shares in the capital of any Person or to acquire any other
business operations or real property or any interest therein.
3.2.8 DISCLOSURE. All statements of fact relating to the Corporation, the
Subsidiaries and the Vendors contained in the Circular are true and
accurate in all material respects and are not misleading and there are no
other facts known (or which on reasonable enquiry could be known) to the
Vendors the omission of which would make any statement relating to the
Corporation, the Subsidiaries and the Vendors in the Circular misleading.
Except as set out in Schedule 3.2.8, the disclosure regarding the
Corporation and the Subsidiaries contained in the Amended and Restated
Preliminary Prospectus of the Corporation dated June 13, 2005 constitutes
full, true and plain disclosure of all material facts with respect to the
Corporation and the Subsidiaries for purposes of Canadian securities laws.
3.2.9 FINANCIAL STATEMENTS. The Audited Financial Statements and the
Unaudited Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods indicated and fairly, completely and accurately present the
consolidated financial position of the Corporation and the results of its
operations as of the dates and throughout the periods indicated and there
has been no material adverse change in the financial position of the
Corporation from that reflected in the Audited Financial Statements.
3.2.10 LIABILITIES AND GUARANTEES. The Corporation and the Subsidiaries do
not have any outstanding liabilities, contingent or otherwise, and the
Corporation and the Subsidiaries are not a party to or bound by any
agreement of guarantee, support, indemnification, assumption, or
endorsement of, or any other similar commitment with respect to the
obligations, liabilities (contingent or otherwise) or indebtedness of any
Person, other than:
3.2.10.1 those set out in the Audited Financial Statements;
3.2.10.2 liabilities in respect of trade or business obligations
incurred after the Audited Statements Date in the ordinary course of
the Business, consistent with past practice, none of which has been
materially adverse to the nature, results of operations, assets or
financial condition of, or manner of conducting, the Business; or
3.2.10.3 set out on Schedule 3.2.10.
3.2.11 INDEBTEDNESS. Except as set out in the Audited Financial Statements
or the Unaudited Financial Statements, or as set out on Schedule 3.2.11,
the Corporation and
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the Subsidiaries do not have outstanding any bonds, debentures, notes,
mortgages or other indebtedness which mature more than one year after the
date of their original creation or issuance and the Corporation and the
Subsidiaries have not agreed to create or issue any bonds, debentures,
notes, mortgages or other indebtedness which will mature more than one year
after the date of their creation or issuance.
3.2.12 ABSENCE OF UNUSUAL TRANSACTIONS AND EVENTS. Except as set out on
Schedule 3.2.12, the Corporation and the Subsidiaries have not, since the
Audited Statements Date:
3.2.12.1 paid or satisfied any obligation or liability, absolute or
contingent, other than current liabilities or obligations disclosed in
the Audited Financial Statements and current liabilities or
obligations incurred since the Audited Statements Date in the ordinary
course of the Business, consistent with past practice;
3.2.12.2 waived or cancelled any rights or claims or made any gift,
other than donations made in the ordinary course of the Business,
consistent with past practice;
3.2.12.3 sold or otherwise disposed of any fixed or capital assets;
3.2.12.4 made any capital expenditures, in the case of any single
capital expenditure, in excess of Cdn.$10,000 and, in the case of all
capital expenditures, in excess of Cdn.$25,000 in the aggregate;
3.2.12.5 made or suffered any change or changes in its financial
condition, assets, liabilities or the Business which, singly or in the
aggregate, have materially adversely affected or could materially
adversely affect its financial condition, assets, liabilities or the
Business;
3.2.12.6 suffered or incurred any damage, destruction or loss, whether
or not covered by insurance, which has materially adversely affected
or could materially adversely affect its financial condition, assets
or the Business;
3.2.12.7 made any increase in the compensation payable or to become
payable to its directors, officers, employees, independent contractors
or agents, including, without limitation, any improvements to
severance or termination pay;
3.2.12.8 declared or paid any dividend or made any distribution,
whether in cash, stock or in specie, in respect of any of its shares
or repurchased, redeemed or otherwise acquired any of its securities;
or
3.2.12.9 authorized or agreed or otherwise become committed to do any
of the foregoing.
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3.2.13 NON-ARM'S LENGTH TRANSACTIONS.
3.2.13.1 Neither the Corporation nor the Subsidiaries has made any
payment or loan to, or borrowed any monies from or is otherwise
indebted to, any officer, director, employee, shareholder or any other
Person with whom the Corporation is not dealing at arm's length
(within the meaning of the Income Tax Act (Canada)) or any affiliate
of any of the foregoing, except as disclosed in the Audited Financial
Statements or the Unaudited Financial Statements and except for usual
compensation and expense reimbursement paid in the ordinary course of
the Business, consistent with past practice.
3.2.13.2 Except for contracts of employment, neither the Corporation
nor the Subsidiaries is a party to any contract or agreement with any
officer, director, employee, shareholder or any other Person with whom
the Corporation is not dealing at arm's length (within the meaning of
the Income Tax Act (Canada)) or any affiliate of any of the foregoing.
3.2.14 AS TO CERTAIN CONTRACTS IN AND OUT OF THE ORDINARY COURSE. Except as
set out in Schedule 3.2.14, neither the Corporation nor the Subsidiaries is
a party to or bound by any:
3.2.14.1 contract, agreement or commitment which expires or may
expire, if the same is renewed or extended at the unilateral option of
any other Person, more than one year after the date hereof;
3.2.14.2 contract, agreement or commitment for the purchase of
materials, supplies or services which requires payment of more than
Cdn.$10,000, in the case of any single contract, agreement or
commitment, or, in the case of all such contracts, agreements or
commitments, in excess of Cdn.$25,000 in the aggregate;
3.2.14.3 contract, agreement or commitment for the purchase or sale of
any equipment or fixed or capital assets;
3.2.14.4 management, consulting, agency or similar contract, agreement
or commitment;
3.2.14.5 licence or royalty agreement relating to Intellectual
Property;
3.2.14.6 contract, agreement or commitment to make any gift of any of
its property, other than donations made in the ordinary course of the
Business, consistent with past practice;
3.2.14.7 contract, agreement or commitment which materially adversely
affects or could materially adversely affect the Business or its
financial condition or any of its assets or is or could be materially
burdensome to it;
3.2.14.8 Material Contract (as defined below);
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3.2.14.9 any lease, agreement in the nature of a lease or agreement to
lease whether as lessor or lessee, and whether in respect of real
property or personal property, except for any lease or agreement in
the nature of a lease relating to personal property where the
aggregate annual payments under such lease or agreement and under any
related service or maintenance or similar contract do not exceed
Cdn.$10,000; or
3.2.14.10 material contract, agreement or commitment which was not
made in the ordinary course of the Business, consistent with past
practice.
For the purposes of the foregoing, if a particular contract, agreement or
commitment falls within more than one of the categories established by
sections 3.2.14.1 through 3.2.14.10, it need not be set out more than once
in Schedule 3.2.14.
For the purposes of this Agreement, a "MATERIAL CONTRACT" means any
contract, agreement or commitment made in the ordinary course of the
Business if it requires or may require the provision by the Corporation or
any Subsidiary to any Person of goods or services having a fair market
value in excess of Cdn.$10,000.
Correct and complete copies of all of the contracts, agreements and
commitments set out in Schedule 3.2.14, or, where such contracts are oral,
correct and complete written summaries of their terms, have been provided
to Vernalis.
3.2.15 EMPLOYMENT MATTERS. Except as set out in Schedule 3.2.15, the
Corporation and the Subsidiaries are neither a party to nor bound by any:
3.2.15.1 oral or written contract or commitment for the employment or
retainer of any individual, including, for greater certainty, any
contract or commitment with directors, officers, employees,
independent contractors or agents;
3.2.15.2 oral or written contract or commitment providing for change
of control payments, or other bonuses or benefits due on a change of
control, or any severance, termination or similar payments or
benefits; or
3.2.15.3 any collective agreement or other commitment with any trade
union or employee association, and no such union or association is
certified to represent the employees of the Corporation and there are
no pending applications or complaints before the Ontario Labour Board.
Correct and complete copies of all contracts and commitments set out in
Schedule 3.2.15, as amended as of the date hereof, or where oral, correct
and complete written summaries of their terms, have been provided to
Vernalis.
Schedule 3.2.15 indicates each employee's name and position, and indicates
without reference to an employee name the number of employees that are
inactive, the reason for the inactivity, the start of the inactivity and
the expected return to work date if any. Schedule 3.2.15 also indicates if
employees have vacation accrual in excess of their
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annual entitlements and the amount of that excess entitlement per employee,
without reference to employee names.
3.2.16 EMPLOYEE BENEFIT PLAN. Schedule 3.2.16 lists or identifies all
Employee Plans. The Employee Plans have been established under, and are
registered as required, maintained and administered in accordance with
Applicable Law relating to such plans and the terms and conditions of such
plans, and all filings, reports and disclosures with respect thereto
required by Applicable Law have been filed, made or distributed. All
obligations required by Applicable Law, the Employee Plans or by contract
to be performed in connection with the Employee Plans have been performed
and there are no outstanding defaults or violations by any party to any
Employee Plan nor any taxes, penalties or fees owing or eligible under any
Employee Plan. All obligations of the Corporation with respect to Employee
Plans are reflected in the Audited Financial Statements in accordance with
generally accepted accounting principles. True and complete copies of all
current Employee Plans, or where such Employee Plans are oral commitments,
written summaries of their terms, together with all related documents
including, if applicable, plan summaries, employee booklets and personnel
manuals have been provided to the Purchaser. No Employee Plan is required
by the terms thereof, Applicable Law or otherwise to be funded. All
employee data necessary to administer the Employee Plans is in the
possession and control of the Corporation and has been made available to
Vernalis and is complete and accurate.
No amendments or improvements have been made or promised respecting any
Employee Plan since the Audited Statements Date, other than those required
by Applicable Law. Except as set out on Schedule 3.2.16, no Employee Plan
provides for any payment or the acceleration of any right or benefit as a
consequence of the transaction contemplated by this Agreement.
The Corporation is not a party to, or bound by, and has no actual or
contingent liability in respect of any retirement or retirement savings
plans including, without limitation, any registered or unregistered pension
plan, pensions, supplemental pensions, registered retirement savings plans
or any retirement compensation arrangements. No Employee Plan provides
benefits beyond retirement or any other cessation of service to retirees or
any current or former directors, employees or consultants the Corporation,
or to their dependents or beneficiaries. No Employee Plan provides for
retroactive charges or premium increases.
3.2.17 CONSULTANTS. The consultants retained by the Corporation are
independent contractors under Applicable Law.
3.2.18 NO DEFAULT UNDER AGREEMENTS. Neither the Corporation nor the
Subsidiaries are in default or breach in any material respect of any
contract, agreement, lease or other instrument to which it is a party or by
which it may be bound (including the contracts, agreements, leases and
other instruments referred to in any Schedule to this Agreement) and there
exists no state of facts which after notice or the passage of time, or
both, would constitute such a default or breach, and all such
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contracts, agreements, leases and other instruments are now in good
standing and the Corporation and the Subsidiaries are entitled to all
benefits, rights and privileges thereunder.
3.2.19 TITLE TO ASSETS. The Corporation and the Subsidiaries are the
absolute beneficial owners of, and have good and marketable title, free of
all Charges, to all the assets used in connection with the Business except
as set out in Schedule 3.2.19.
3.2.20 REAL PROPERTY. The Corporation is not the legal or beneficial owner
of any real property, nor the lessor or lessee of any real property except
for the Leased Premises.
3.2.21 ENVIRONMENTAL MATTERS. The Corporation is in compliance with all
Applicable Laws with respect to the environment and the Business has been
operated in compliance with all such laws. Except as disclosed in Schedule
3.2.21, the Corporation does not research, develop, manufacture, use or
store any hazardous products relating to the Business on the Leased
Premises. The Corporation has not emitted, discharged, deposited or
released or caused or permitted to be emitted, discharged, deposited or
released, any hazardous materials on, in, or under the Leased Property.
3.2.22 ASSETS IN GOOD CONDITION. All the physical assets of the Corporation
are in good operating condition and in a state of good maintenance and
repair.
3.2.23 TAX, ETC., MATTERS. The Corporation and the Subsidiaries have filed
all tax returns required to be filed by them in all applicable
jurisdictions and have paid all Governmental Charges required to be paid by
them. All such tax returns were correct and complete and have been prepared
in compliance with Applicable Laws. Adequate provision has been made in the
Audited Financial Statements and the Unaudited Financial Statements for all
Governmental Charges, and all professional fees related thereto, payable by
the Corporation and the Subsidiaries in respect of all periods up to the
date of the balance sheet comprising part of the relevant financial
statements. All unpaid Governmental Charges of the Corporation and the
Subsidiaries in respect of periods ending on or before Closing, whether or
not due and payable as of the Closing, will be included as a liability in
the calculation of Net Cash. All refunds of investment tax credits that
were received, are shown as receivable in the Audited Financial Statements
or Unaudited Financial Statements or are included as a receivable in the
calculation of Net Cash were claimed in accordance with Applicable Law and
the Corporation and the Subsidiaries were entitled to such refunds under
Applicable Law. Canadian federal and provincial income tax assessments have
been issued to the Corporation and the Subsidiaries covering all past
periods up to and including the fiscal year ended November 30, 2004 and
such assessments, if any amounts were owing in respect thereof, have been
paid, and only the fiscal years subsequent to November 30, 2004 remain open
for reassessment of additional taxes, interest or penalties. There are no
proceedings (as defined in section 3.2.35) in progress, pending or
threatened against the Corporation and the Subsidiaries in respect of any
Governmental Charges and, in particular, there are no currently outstanding
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reassessments or written enquiries which have been issued to, or raised in
respect of, the Corporation and the Subsidiaries by any governmental
authority relating to any Governmental Charges. The Corporation and the
Subsidiaries have on a timely basis withheld or collected and remitted all
amounts required to be withheld or collected and remitted by it in respect
of any Governmental Charges. Correct and complete copies of all federal and
provincial tax returns, including schedules thereto, and all federal goods
and services tax returns filed by the Corporation and the Subsidiaries and
all written communications relating thereto have been provided to the
Purchaser.
3.2.24 INSURANCE. All material physical assets of the Corporation and the
Subsidiaries are covered by fire and other insurance with responsible
insurers against such risks and in such amounts as are reasonable for
prudent owners of comparable assets. Schedule 3.2.24 sets out particulars
of all the insurance policies held by the Corporation, including the name
of the insurer, the risks insured against and the amount of coverage. The
Corporation is not in default with respect to any of the provisions
contained in any such policies of insurance or has failed to give any
notice or pay any premium or present any claim under any such insurance
policy. Correct and complete copies of all of the insurance policies set
out in Schedule 3.2.24 have been provided to Vernalis.
3.2.25 CORPORATION IP. Except as set out on Schedule 3.2.25, all
Corporation Owned IP is owned by the Corporation free and clear of all
Charges, covenants, conditions, options to purchase and restrictions or
other adverse claims or interests of any kind or nature. Except as set out
on Schedule 3.2.25, to the knowledge of the Vendors, all Corporation
Licensed IP is free and clear of all Charges, covenants, conditions,
options to purchase and restrictions of other adverse claims or interest of
any kind or nature. Schedule 3.2.25 sets out an accurate and complete list
and description of all Corporation IP.
3.2.26 TITLE TO CORPORATION IP. To the extent that any Intellectual
Property was created by an employee of or consultant to the Corporation or
a Subsidiary, such Persons have each irrevocably assigned to the
Corporation in writing all rights to such Intellectual Property. Neither
the Corporation nor any of its Subsidiaries has received any notice or
claim challenging ownership of or rights by the Corporation or its
Subsidiaries to any of the Corporation IP or suggesting that any other
Person has any claim of legal or beneficial ownership or other claim or
interest with respect thereto (other than the licensor in the case of
Corporation Licensed IP), nor is there a reasonable basis for such a claim.
3.2.27 PROSECUTION. All fees payable in respect of the maintenance of
Corporation Owned IP have been paid and all registrations, and applications
for registration, of any Corporation Owned IP are in good standing. The
Corporation has prosecuted, and is prosecuting, such applications
diligently. To the knowledge of the Vendors, all fees payable in respect of
the maintenance of Corporation Licensed IP have been paid and all
applications for registration of any Corporation Licensed IP are in good
standing. To the knowledge of the Vendors, the licensors of the Corporation
Licensed IP have
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prosecuted, and are prosecuting, such applications diligently. The
knowledge of the Vendors, all registrations of Corporation Licensed IP are
in good standing.
3.2.28 VALIDITY AND ENFORCEABILITY OF CORPORATION IP. To the knowledge of
the Vendors, all rights to the Corporation IP are valid and enforceable.
Neither the Corporation nor its Subsidiaries has received any notice or
claim challenging or questioning the validity or enforceability of any
Corporation IP. There is no proceeding which is ongoing or, to the
knowledge of the Vendors, alleged (including any opposition, re-examination
or protest) which might result in the Corporation Owned IP being
invalidated, or revoked or the subject of a compulsory license. To the
knowledge of the Vendors, there is no proceeding which is ongoing or
alleged (including any opposition, re-examination or protest) which might
result in the Corporation Licensed IP being invalidated or revoked or the
subject of a compulsory licence.
3.2.29 NON-INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS. To the knowledge
of the Vendors, the conduct of the Business does not infringe any other
Person's rights to Intellectual Property. Neither the Corporation nor its
Subsidiaries is or has been a party to any action or proceeding, nor, to
the knowledge of the Vendors, has any action or proceeding been threatened,
that alleges that the conduct of the Business infringes any other Person's
rights to Intellectual Property. To the knowledge of the Vendors, no Person
has infringed or is infringing the right of the Corporation or any of its
Subsidiaries in or to any Corporation IP.
3.2.30 CORPORATION LICENSED IP. In the case of Corporation Licensed IP, the
Corporation has entered into valid and enforceable written agreements (the
"LICENCE AGREEMENTS") pursuant to which the Corporation has been granted
all licenses to develop, manufacture, import, export, use, reproduce,
sub-license, sell, offer for sale, or otherwise exploit the Corporation
Licensed IP to the extent required to operate all aspects of the Business.
All Licence Agreements, which includes the Chiesi Licence Agreements, are
in full force and effect and neither the Corporation nor any licensor is in
default of its obligations thereunder. Correct and complete copies of all
Licence Agreements have been provided to Vernalis.
3.2.31 LICENSES OF CORPORATION OWNED IP TO THIRD PERSONS. Except as granted
in the Exclusive Patent Licence Agreement between the Corporation and
2060347 Ontario Inc. dated December 22, 2004, neither the Corporation nor
its Subsidiaries is a party to any agreement involving the grant by the
Corporation or its Subsidiaries to any Person of any right to the
Corporation Owned IP.
3.2.32 CONFIDENTIALITY AGREEMENTS WITH DIRECTORS, OFFICERS, EMPLOYEES AND
CONTRACTORS. The Corporation has documented procedures in place to protect
the confidentiality of and all rights to the Corporation IP. All current
and former directors, officers, employees and independent contractors of
the Corporation and the Subsidiaries have entered into enforceable
confidentiality agreements with the Corporation in form adequate to protect
the Corporation IP.
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3.2.33 PERMITS AND REGISTRATIONS. Neither the Corporation nor any of the
Subsidiaries requires any permits, licences, approvals, consents,
authorizations, registrations, certificates and franchises to own its
respective properties and assets or to carry on the Business as presently
conducted by it. The Corporation is registered under Part IX of the Excise
Tax Act (Canada).
3.2.34 COMPLIANCE WITH LAWS. The Corporation and the Subsidiaries are
conducting the Business in compliance in all material respects with all
Applicable Laws of each jurisdiction in which the Business is carried on.
The Corporation and the Subsidiaries are in compliance in all material
respects with Privacy Laws in respect of the collection, use and disclosure
of Personal Information by the Corporation and the Subsidiaries.
3.2.35 LITIGATION AND OTHER PROCEEDINGS. There is no court, administrative,
regulatory or similar proceeding (whether civil, quasi-criminal or
criminal); arbitration or other dispute settlement procedure; investigation
or inquiry by any governmental, administrative, regulatory or similar body;
or any similar matter or proceeding (collectively, "proceedings") against
or involving the Corporation or the Subsidiaries, (whether in progress or,
to the knowledge of the Vendors, threatened), no event has occurred which
might give rise to any proceedings and there is no judgment, decree,
injunction, rule, award or order of any court, government department,
board, commission, agency, arbitrator or similar body outstanding against
the Corporation. No complaint, grievance, claim, work order or
investigation has been filed, made or commenced against the Corporation
pursuant to the Ontario Human Rights Code, the Occupational Health & Safety
Act, the Workplace Safety and Insurance Act (Ontario), the Employment
Standards Act or the Pay Equity Act, in each case of the Province of
Ontario, or any similar legislation of Canada, the Province of Ontario or
of any other jurisdiction.
3.2.36 CORPORATE RECORDS. The corporate records and minute books of the
Corporation and the Subsidiaries contain complete and accurate minutes of
all meetings of directors and committees thereof and shareholders held
since its date of incorporation, and all such meetings were duly called and
held. The share certificate books, register of shareholders, register of
transfers and register of directors of the Corporation and the Subsidiaries
are complete and accurate.
3.2.37 BOOKS OF ACCOUNT. The books and records of the Corporation and the
Subsidiaries fairly present and disclose the financial position of the
Corporation and the Subsidiaries, respectively, as at the relevant dates
and all material financial transactions of the Corporation and the
Subsidiaries have been accurately recorded in such books and records.
3.2.38 BANK ACCOUNTS, ETC. Schedule 3.2.38 is a correct and complete list
(including addresses and account numbers) of each bank, trust company or
similar institution in which the Corporation or its Subsidiaries has an
account or safety deposit box and the names of all Persons, including any
individual or firm holding a power of attorney, authorized to draw thereon
or to have access thereto.
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3.2.39 SUPPLIERS. The Vendors have no reason to believe that the benefits
of any relationship with any of the suppliers of the Corporation or the
Subsidiaries will not continue after the Closing Date in substantially the
same manner as prior to the date hereof, assuming the completion on the
Closing Date of the transaction contemplated hereby.
3.2.40 MATERIAL FACTS DISCLOSED. The Corporation and the Vendors have
disclosed to the Purchaser all facts known to it relating to the Business
and assets of the Corporation and its Subsidiaries which could reasonably
be expected to be material to an intending purchaser of the Purchased
Securities.
3.3 PURCHASER'S AND VERNALIS' REPRESENTATIONS AND WARRANTIES
The Purchaser and Vernalis each jointly and severally represents and
warrants to the Vendors as follows and acknowledges that the Vendors are relying
upon the following representations and warranties in connection with their sale
or exchange of the Purchased Securities:
3.3.1 INCORPORATION AND STATUS. 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.
3.3.2 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.
3.3.3 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.
3.3.4 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.
3.3.5 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 or Vernalis of this Agreement or 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.
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3.3.6 CIRCULAR. Subject to any supplementary prospectus that may be issued
after the date of this Agreement, all statements of fact relating to
Vernalis contained in the Circular are true and accurate in all material
respects and are not misleading and there are no other facts known (or
which on reasonable enquiry could be known) to Vernalis the omission of
which would make any statement relating to Vernalis in the Circular
misleading or which would be required to be disclosed to investors in
Vernalis Shares for the purpose of enabling such investors to make an
informed assessment of the assets and liabilities, financial position,
profits and losses and prospects of Vernalis.
3.3.7 SECURITIES LAWS. Vernalis is not in default in any material respect
under securities law requirements of the United Kingdom or the requirements
of the London Stock Exchange. The forms, reports, schedules, statements and
other documents filed by Vernalis under securities laws requirements of the
United Kingdom since December 31, 2004 did not, at the time of filing,
contain any misrepresentation and, at the time of filing, complied in all
material respects with all securities laws requirements of the United
Kingdom.
3.3.8 ISSUE OF PURCHASER SHARES AND VERNALIS SHARES. At the time of issue
of the Purchaser Shares or Vernalis Shares in accordance with the
provisions attached to the Purchaser Shares and the provisions of this
Agreement and the Purchaser Option Agreements, as applicable, such
Purchaser Shares or Vernalis Shares, as the case may be, shall be validly
issued and fully paid.
3.4 NO FINDER'S FEES
Each of the parties represents and warrants to the other that such
party has not taken, and agrees that it will not take, any action that would
cause the other party to become liable to any claim or demand for a brokerage
commission, finder's fee or other similar payment except for the obligations
incurred by the Corporation prior to the date hereof and set out in Schedule
3.4.
3.5 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
To the extent that they have not been fully performed at or prior to
the Time of Closing, the covenants, representations and warranties contained in
this Agreement and in all certificates and documents delivered pursuant to or
contemplated by this Agreement shall survive the Closing and shall continue for
the applicable limitation period provided, however, that:
3.5.1 the Vendors' Business Representations, except those set out in
section 3.2.23, and the Purchaser's and Vernalis' representations and
warranties set out in sections 3.3.6 and 3.3.7 shall each terminate at the
expiration of one year following the Closing;
3.5.2 the representations and warranties set out in section 3.2.23 shall,
subject to section 3.5.3, terminate at the expiration of the Tax
Reassessment Period;
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3.5.3 there shall be no termination of the representations and warranties
set out in section 3.2.23 to the extent that any misrepresentation has been
made or fraud has been committed in filing a return or in supplying
information for the purposes of any legislation imposing tax on the
Corporation; and
3.5.4 no claim for breach of representation or warranty shall be valid
unless the party against whom such claim is made has been given notice
thereof before the date on which the applicable representation or warranty
shall have terminated in accordance with the foregoing.
For the purposes of this Agreement, "TAX REASSESSMENT PERIOD" means
the period ending on the first date on which no assessment, reassessment or
other document assessing liability for tax, interest or penalties may be issued
to the Corporation in respect of any taxation year or other period ended prior
to the Closing Date, or within which the Closing Date occurs, pursuant to any
applicable tax legislation.
ARTICLE 4
CONDITIONS
4.1 MUTUAL CONDITIONS
The respective obligations of the Purchaser and the Vendors to
complete the purchase and sale and exchange of the Purchased Securities pursuant
to this Agreement are subject to the satisfaction of, at or prior to the Time of
Closing, each of the following conditions (which may only be waived by the
mutual consent of the Purchaser and the Vendors' Representative on behalf of the
Vendors, provided that the Admission Condition may not be waived):
4.1.1 SHAREHOLDER APPROVAL. Each of the resolutions set out in the notice
of EGM incorporated in the Circular shall have been passed at the EGM.
4.1.2 PLACING AGREEMENT. The Placing Agreement shall have become
unconditional in all respects except for those conditions of that agreement
relating to Admission and this Agreement becoming unconditional.
4.1.3 AGREEMENT TO ADMIT FOR LISTING. The United Kingdom Financial Services
Authority and the London Stock Exchange respectively shall have agreed to
the Admission of the Non-Vendor Placing Shares, the Vendor Placing Shares
and the Vernalis Shares to be allotted and issued on Closing to Chiesi in
connection with the purchase of its right to acquire Class C Preference
Shares in the capital of the Corporation to the Official List and to
trading on the London Stock Exchange, subject only to allotment.
4.1.4 ADMISSION CONDITION. The Admission Condition shall have been
satisfied.
4.1.5 UK TREASURY CONSENT. H.M. Treasury shall have confirmed in writing
that consent under section 765(1)(c) of the Income and Corporation Tax Act
1988 (United
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Kingdom) is given to the issue of the Purchaser Shares in connection with
the acquisition by the Purchaser of all of the shares, and rights to
acquire shares, in the capital of the Corporation.
4.1.6 VENDORS' REPRESENTATIVE AGREEMENT. All of the Persons to become
shareholders or optionholders of the Purchaser on Closing (other than
Vernalis), together with ALX Limited Partnership, shall have entered into
the Vendors' Representative Agreement.
4.1.7 NO MATERIAL ADVERSE CONDITION. There shall not be in force any order
or decree restraining or enjoining the consummation of the transactions
contemplated by this Agreement and there shall be no proceeding of a
judicial or administrative nature or otherwise, in progress or threatened
that relates to or results from the transactions contemplated by this
Agreement that would, if successful, result in an order or ruling that
would preclude completion of the transactions contemplated by this
Agreement in accordance with the terms hereof.
4.1.8 NO TERMINATION. This Agreement shall not have been terminated in
accordance with the provisions hereof.
4.2 CONDITIONS FOR THE BENEFIT OF THE PURCHASER
The obligation of the Purchaser to complete the purchase or exchange
of the Purchased Securities pursuant to this Agreement is subject to the
satisfaction of, or compliance with, at or prior to the Time of Closing, each of
the following conditions (each of which is acknowledged to be for the exclusive
benefit of the Purchaser and may only be waived by the Purchaser):
4.2.1 ACCURACY OF REPRESENTATIONS OF VENDORS AND COMPLIANCE WITH COVENANTS.
The representations and warranties of the Vendors made in or pursuant to
this Agreement shall be true and correct at the Time of Closing with the
same force and effect as if made at and as of the Time of Closing; the
covenants contained in this Agreement to be performed by the Vendors and/or
the Corporation at or prior to the Time of Closing shall have been
performed; and the Vendors and/or the Corporation shall not be in breach of
any agreement on their part contained in this Agreement. Vernalis and the
Purchaser shall have received a certificate confirming the foregoing from
each of the Vendors, signed in the case of the Vendors who are corporations
by senior officers or directors or other persons acceptable to the
Purchaser, in form and substance satisfactory to the Purchaser and
Purchaser's Counsel.
4.2.2 CLOSING DOCUMENTS AND PROCEEDINGS. All documents relating to the
authorization and completion of the transaction contemplated by this
Agreement and all actions and proceedings taken at or prior to the Time of
Closing in connection with the performance by the Vendors of their
obligations under this Agreement shall be satisfactory to the Purchaser and
to the Purchaser's Counsel, acting reasonably, and the Purchaser shall have
received copies of all such documents and evidence that all
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such actions and proceedings have been taken as it may reasonably request,
in form and substance satisfactory to the Purchaser and the Purchaser's
Counsel.
4.2.3 NO ACTION TO RESTRAIN. No action or proceeding shall be pending or
threatened by any Person to restrain or prohibit:
4.2.3.1 the purchase and sale or exchange of the Purchased Securities
hereunder; or
4.2.3.2 the Corporation from carrying on the Business as the Business
is being carried on at the date hereof.
4.2.4 CONSENTS AND APPROVALS. The consents and approvals listed in Schedule
3.1.7 shall have been delivered to the Purchaser, in form and substance
satisfactory to the Purchaser and the Purchaser's Counsel.
4.2.5 GTTS XV LP CALL OPTION. The Corporation shall have entered into
arrangements, on the Closing Date, satisfactory to the Purchaser, to:
4.2.5.1 exercise its call obligation to acquire all of the Class A
partnership units of GTTS XV LP from ALX Limited Partnership;
4.2.5.2 satisfy the cash component of its call obligation to acquire
all of the Class A partnership units of GTTS XV LP from ALX Limited
Partnership for $*** through the assignment of its $*** note
receivable from 1643979 Ontario Inc. to 2084753 Ontario Inc.;
4.2.5.3 terminate any other liabilities of the Corporation to ALX
Limited Partnership, GTTS XV LP or Iatra Management Services
Corporation; and
4.2.5.4 acquire from ALX Limited Partnership common shares or rights
to acquire common shares in the capital of the Corporation issued
pursuant to the call option agreement dated December 23, 2004, between
the Corporation and ALX Limited Partnership and based on a valuation
completed prior to the Closing Date.
4.2.6 EXERCISE OF RIGHTS. Prior to the Time of Closing, all warrants,
conversion rights, options and other rights to acquire, directly or
indirectly, Corporation Shares (other than the right of ALX Limited
partnership to acquire common shares in the capital of the Corporation)
shall have been exercised or cancelled, or exchanged into Exchange Options,
as provided in this Agreement.
4.2.7 PURCHASE OF OTHER SHARES. At the Time of Closing, all of the shares
in the capital of the Corporation, including all shares in the capital of
the Corporation issuable upon exercise of warrants, conversion rights,
options and other rights or, at the Purchaser's option, all rights to
acquire shares and other securities of the Corporation, owned by Persons
other than the Vendors (other than the right of ALX
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Limited Partnership to acquire common shares in the capital of the
Corporation), shall have been acquired by the Purchaser or exchanged into
Purchaser Share Options.
4.2.8 CORPORATION SHAREHOLDERS AGREEMENT. Prior to the Time of Closing, the
Corporation Shareholders Agreement shall have been terminated.
4.2.9 PURCHASER SHAREHOLDERS AGREEMENT. All of the Persons to become
shareholders or optionholders of the Purchaser on Closing, together with
ALX Limited Partnership, and the Purchaser, shall have entered into the
Purchaser Shareholders Agreement.
4.2.10 PURCHASER OPTION PLAN AND PURCHASER OPTION AGREEMENTS. The Purchaser
shall have adopted the Purchaser Option Plan and the Management Vendors,
the Purchaser and the Vendors' Representative shall have entered into the
Purchaser Option Agreements, as provided in this Agreement.
If any of the conditions contained in this section 4.2 shall not be
fulfilled or performed at or prior to the Time of Closing to the satisfaction of
the Purchaser (acting reasonably), the Purchaser may, by notice to the Vendors'
Representative, terminate this Agreement and the obligations of the Vendors,
Vernalis and the Purchaser under this Agreement, other than the obligations
contained in sections 1.11, 3.4, 7.1, 7.2 and 7.3. The Purchaser or Vernalis may
also bring an action in a court of law against any Vendor for damages suffered
by the Purchaser or Vernalis where the non-performance or non-fulfillment of a
condition is as a result of a breach of covenant, representation or warranty by
such Vendor. Any condition may be waived in whole or in part by the Purchaser
without prejudice to any claims the Purchaser or Vernalis may have for breach of
covenant, representation or warranty.
4.3 CONDITIONS FOR THE BENEFIT OF THE VENDORS
The obligation of the Vendors to complete the sale of the Purchased
Securities hereunder is subject to the satisfaction of, or compliance with, at
or prior to the Time of Closing each of the following conditions (each of which
is acknowledged to be for the exclusive benefit of the Vendors and may only be
waived by the Vendors' Representative on behalf of the Vendors):
4.3.1 ACCURACY OF REPRESENTATIONS OF PURCHASER AND COMPLIANCE WITH
COVENANTS. The representations and warranties of the Purchaser and Vernalis
made in or pursuant to this Agreement shall be true and correct at the Time
of Closing with the same force and effect as if made at and as of the Time
of Closing; the covenants contained in this Agreement to be performed by
the Purchaser and Vernalis at or prior to the Time of Closing shall have
been performed and the Purchaser and Vernalis shall not be in breach of any
agreement on its part contained in this Agreement. The Vendors shall have
received a certificate confirming the foregoing, signed for and on behalf
of the Purchaser and Vernalis by senior officers or directors of the
Purchaser and Vernalis or other persons acceptable to the Vendors, in form
and substance satisfactory to the Vendors' Representative, on behalf of the
Vendors, and the Vendors' Counsel.
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4.3.2 CLOSING DOCUMENTS AND PROCEEDINGS. All documents relating to the
authorization and completion of the transaction contemplated by this
Agreement and all actions and proceedings taken at or prior to the Time of
Closing in connection with the performance by the Purchaser and Vernalis of
their respective obligations under this Agreement shall be satisfactory to
the Vendors' Representative, on behalf of the Vendors, and to the Vendors'
Counsel, acting reasonably, and the Vendors' Representative, on behalf of
the Vendors, shall have received copies of all such documents and evidence
that all such actions and proceedings have been taken as it may reasonably
request, in form and substance satisfactory to the Vendors' Representative,
on behalf of the Vendors, and the Vendors' Counsel.
If any of the conditions contained in this section 4.3 shall not be
fulfilled or performed at or prior to the Time of Closing to the satisfaction of
the Vendors' Representative (acting reasonably), the Vendors' Representative, on
behalf of the Vendors, may, by notice to the Purchaser, terminate this Agreement
and the obligations of the Vendors, the Purchaser and Vernalis under this
Agreement, other than the obligations contained in sections 1.11, 3.4, 7.1, 7.2
and 7.3. The Vendors' Representative, on behalf of the Vendors, may also bring
an action in a court of law against the Purchaser and/or Vernalis for damages
suffered by the Vendors where the non-performance or non-fulfillment of a
condition is as a result of a breach of covenant, representation or warranty by
the Purchaser or Vernalis. Any condition may be waived in whole or in part by
the Vendors' Representative, on behalf of the Vendors, without prejudice to any
claims the Vendors may have for breach of covenant, representation or warranty.
4.4 MUTUAL RIGHT TO TERMINATE
If Closing does not occur by January 4, 2006, either the Purchaser or
the Vendors' Representative, on behalf of the Vendors, may, by giving notice to
the other, terminate this Agreement and the obligations of the Vendors, Vernalis
and the Purchaser hereunder other than those set out in sections 1.11, 3.4, 7.1,
7.2 and 7.3, provided, however, that before the Purchaser or the Vendors'
Representative gives notice to terminate, it shall have discussed with the other
party, acting reasonably, the possible amendment of this section to provide for
a later date.
ARTICLE 5
COVENANTS
5.1 VENDORS' PERSONAL COVENANTS
Each Vendor severally, and not jointly, covenants in respect of itself
only in favour of the Purchaser and Vernalis as follows:
5.1.1 EXERCISE OF RIGHTS. To exercise, prior to the Time of Closing, all
warrants, conversion rights, options and other rights to acquire, directly
or indirectly, Corporation Shares.
5.1.2 RELEASE OF CHARGES. To release, at the Time of Closing, the
Corporation from all Charges against the property, assets or undertaking,
of the Corporation
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granted in favour of that Vendor and to discharge all such Charges
forthwith thereafter.
5.1.3 PURCHASER SHAREHOLDERS AGREEMENT. To enter into, along with all other
Persons to become shareholders of the Purchaser at the Time of Closing, the
Purchaser Shareholders Agreement and hereby authorizes the Vendors'
Representative to execute the Purchaser Shareholders Agreement on its
behalf.
5.1.4 ACTIONS. To do or refrain from doing all acts and things in order to
ensure that the representations and warranties in sections 3.1 and 3.2
remain true and correct at the Time of Closing as if such representations
and warranties were made at and as of such date and to satisfy or cause to
be satisfied the conditions in section 4.2 and the covenants in section
5.2, which are within its control (including to the extent it is capable by
reason of its ownership and right to vote Corporation Shares).
5.1.5 WITHDRAWAL RIGHTS. To not exercise, or attempt to exercise, any right
or entitlement which may be applicable to, or enforceable by, it under
section 87(Q) of the Financial Services and Markets Act 2000 (United
Kingdom) (as amended). Each of the Vendors acknowledges that the issue of
Vernalis Shares to it under this Agreement is by way of a bilateral
contract and as such section 87(Q) does not entitle it to withdraw in the
event that Vernalis publishes a supplementary prospectus. Each Vendor
further severally, and not jointly, covenants in respect of itself only 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.
5.2 CORPORATION'S BUSINESS COVENANTS
The Corporation covenants in favour of the Purchaser and Vernalis as
follows:
5.2.1 ACCESS TO INFORMATION. To give, until the Time of Closing, to the
Purchaser and its accountants, legal advisers and representatives during
normal business hours full access to its premises, all its assets, books,
accounts, tax returns, contracts, commitments and records and to its
personnel and to furnish them with all such information relating to the
Business and its affairs and assets as the Purchaser and Vernalis may
reasonably request. No investigation made by the Purchaser, Vernalis or
their respective representatives shall affect the Purchaser's right or
Vernalis' right to rely on any representation or warranty made by the
Vendors in this Agreement or in any document contemplated by this Agreement
or derogate from the Vendors' acknowledgement of such reliance in sections
3.1 and 3.2.
5.2.2 CONDUCT OF BUSINESS. Except as expressly provided in this Agreement
or except with the prior written consent of the Purchaser and Vernalis,
prior to the Time of Closing to:
5.2.2.1 operate the Business only in the ordinary course, consistent
with past practice and, in the case of the Xxxxxxxxx'x Project and the
Pain Project, in accordance with the Agreed Xxxxxxxxx'x Project Budget
and the Agreed Pain
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Project Budget, respectively, to the extent consistent with such
operation, use reasonable efforts to preserve its business
organization, including the services of its officers and employees,
and its business relationships with customers, suppliers, licensors
and others having business dealings with it;
5.2.2.2 use reasonable endeavours to ensure that the Net Cash
calculation as at the Closing Date is a positive number;
5.2.2.3 maintain all its assets, whether owned or leased, in good
condition and repair and maintain insurance upon all its assets
comparable in amount, scope and coverage to that in effect on the date
of this Agreement; and
5.2.2.4 maintain its books, records and accounts in the ordinary
course on a basis consistent with past practice.
5.2.3 CORPORATE ACTION, RESIGNATIONS AND RELEASES. At or prior to the Time
of Closing, to take all necessary corporate action for the purpose of
approving the transfer or exchange of the Purchased Securities to or with
the Purchaser. At or prior to such time, to obtain the resignations of
those directors and officers of the Corporation designated in writing by
the Purchaser and mutual releases from such individuals of all claims that
other party may have against the other party (other than in respect of
unpaid salaries and accrued vacation pay), in form and substance
satisfactory to the Purchaser and the Purchaser's Counsel. If requested by
the Purchaser, the Vendors shall cause nominees of the Purchaser to be
elected or appointed directors of the Corporation to fill any vacancies.
5.2.4 OBTAINING OF CONSENTS AND APPROVALS. To use commercially reasonable
efforts to deliver, at or prior to the Time of Closing, the consents and
approvals referred to in section 4.2.4.
5.2.5 CIRCULAR. To furnish to Vernalis such information relating to the
Corporation, the Subsidiaries and the Vendors as may reasonably be
requested by Vernalis for inclusion in any communication by Vernalis prior
to or at the Time of Closing, including any supplementary Circular or
prospectus that Vernalis may be required to publish, which information will
be true and accurate in all material respects and not misleading and there
will be no other facts known (or which on reasonable enquiry could be
known) to the Vendors at the time of publication of any such communication
the omission of which would make any statement relating to the Corporation,
the Subsidiaries and the Vendors in such communication misleading.
5.2.6 NEGATIVE COVENANT. Except as expressly provided in this Agreement or
except with the prior written consent of the Purchaser, prior to the Time
of Closing to ensure that the Corporation does not:
5.2.6.1 amend its articles, by-laws, constating documents or other
organizational documents;
5.2.6.2 pay any dividends or otherwise make distributions to its
shareholders;
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5.2.6.3 amalgamate, merge or consolidate with, or acquire all or
substantially all the shares or assets of, any Person; or
5.2.6.4 transfer, lease, license, sell or otherwise dispose of any of
its assets, other than inventory in the ordinary course of the
Business, consistent with past practice.
5.2.7 ACTIONS. To do or refrain from doing all acts and things in order to
ensure that the representations and warranties in sections 3.1 and 3.2
remain true and correct at the Time of Closing as if such representations
and warranties were made at and as of such date and to satisfy or cause to
be satisfied the conditions in section 4.2 and the covenants in section
5.2, which are within its control.
5.3 PURCHASER'S COVENANTS
The Purchaser covenants in favour of the Vendors as follows:
5.3.1 PREPAYMENT OF MMV LOAN. To prepay on the Closing Date the principal
amount of the loan made by MMV Financial Inc. to the Corporation pursuant
to the credit agreement between the Corporation and MMV Financial Inc.
dated February 25, 2005 which, as at the date hereof, is in the principal
amount of U.S.$2,053,401 (subject to further repayment of principal after
the date hereof) (together with interest accrued thereon to but excluding
the Closing Date) and the Make-Whole Payment (as defined therein)
calculated to but excluding the Closing Date.
5.3.2 FUNDING. To advance, or cause Vernalis to advance, to the Corporation
up to U.S.$ 250,000 per week to fund Permitted Costs or Vernalis
Liabilities, provided that no advance shall be made to the Corporation in
any week until the Corporation has provided to Vernalis details of the
proposed use of funds and Vernalis has approved such use, acting
reasonably. In the event that this Agreement is terminated in accordance
with the provisions hereof and the Licence Fee (as defined in the Letter of
Intent) is payable by Vernalis to the Corporation, the aggregate amount
advanced by the Purchaser and Vernalis to the Corporation pursuant to this
section 5.3.2 from and including the date hereof to but excluding the date
of termination of this Agreement shall be deemed to be a prepayment of the
Licence Fee.
5.4 VERNALIS' COVENANTS
Vernalis covenants in favour of the Vendors as follows:
5.4.1 SHAREHOLDER APPROVAL. To use all reasonable endeavours to (i) obtain
the approval of the shareholders of Vernalis at the EGM and (ii) convene
the EGM by December 16, 2005.
5.4.2 PLACING AGREEMENT. To use all reasonable endeavours to comply with
its obligations under the Placing Agreement.
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5.4.3 REPORTING. To report, after the Time of Closing, at least every six
months in its annual and interim reports to shareholders on the progress of
the Pain Project and the Xxxxxxxxx'x Project.
5.4.4 PURCHASER'S OBLIGATIONS. To cause the Purchaser to perform its
obligations under this Agreement and the share provisions attached to the
Purchaser Shares.
5.4.5 PURCHASER'S CORPORATE EXISTENCE. Until the earlier of (i) the tenth
anniversary of the Closing Date 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 maintain or
cause to be maintained the corporate existence of the Purchaser and to
continue to be its holding body corporate (within the meaning of the
Business Corporations Act (Ontario)) except:
5.4.5.1 Vernalis or the Purchaser may effect an exchange of the
then-outstanding Purchaser Shares and Purchaser Share Options for
comparable securities or other consideration which maintains the
equivalent value of the Purchaser Shares and the Purchaser Share
Options as at the Closing Date; and
5.4.5.2 nothing herein shall be construed as restricting the
continuance, amalgamation, merger or reorganization of Vernalis or any
affiliate of Vernalis, including the Purchaser, so long as such action
does not adversely affect the Purchaser Shares and Purchaser Share
Options.
5.4.6 ACTIONS. To do or refrain from doing all acts and things in order to
ensure that the representations and warranties in section 3.3 remain true
and correct at the Time of Closing as if such representations and
warranties were made at and as of such date and to satisfy or cause to be
satisfied the conditions in section 4.3 and the covenants in sections 5.3
and 5.4, which are in its control.
5.5 COOPERATION
The parties shall cooperate fully in good faith with each other and
their respective legal advisers, accountants and other representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION FOR VENDORS' PERSONAL REPRESENTATIONS AND VENDORS' PERSONAL
COVENANTS
Each Vendor shall severally, but not jointly, indemnify and save the
Purchaser and Vernalis harmless for and from:
6.1.1 any loss, damages or deficiencies suffered by the Purchaser or
Vernalis or by the Corporation as a result of any breach of a Vendors'
Personal Representation or a
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Vendors' Personal Covenant on the part of that Vendor (other than punitive
damages or loss of profits); and
6.1.2 all claims, demands, costs and expenses, including reasonable legal
fees, in respect of the foregoing.
6.2 INDEMNIFICATION FOR VENDORS' BUSINESS REPRESENTATIONS AND OTHER CLAIMS
Each Vendor shall severally, but not jointly, indemnify and save the
Purchaser and Vernalis harmless for and from:
6.2.1 all debts and liabilities of the Corporation, including liabilities
for any Governmental Charges, existing as at the date of this Agreement and
not disclosed on or included in the Final Closing Balance Sheet or incurred
in breach of the provisions of this Agreement;
6.2.2 all contingent liabilities which the Corporation becomes obligated to
pay and which exist at the Time of Closing whether or not the Vendors or
the Corporation has notice thereof or of the facts or circumstances which
give rise thereto;
6.2.3 any assessment or reassessment for Governmental Charges in respect of
any taxation year or other period ended prior to the Closing Date, or any
portion of a taxation year or other period up to and including the Closing
Date, for which no adequate reserve has been provided and disclosed in the
Final Closing Balance Sheet;
6.2.4 any loss, damages or deficiencies suffered by the Purchaser, Vernalis
or by the Corporation as a result of any breach of representation, warranty
or covenant on the part of the Vendors or the Corporation contained in this
Agreement or in any certificate or document delivered pursuant to or
contemplated by this Agreement, other than the Vendors' Personal
Representations or the Vendors' Personal Covenants (other than punitive
damages or loss of profits); and
6.2.5 all claims, demands, costs and expenses, including reasonable legal
fees, in respect of the foregoing.
6.3 INDEMNIFICATION FOR PURCHASER'S AND VERNALIS' REPRESENTATIONS
The Purchaser and Vernalis shall jointly and severally indemnify and
save each of the Vendors harmless for and from:
6.3.1 any loss, damages or deficiencies suffered by the Vendors as a result
of any breach of representation, warranty or covenant on the part of the
Purchaser or Vernalis contained in this Agreement or in any certificate or
document delivered pursuant to or contemplated by this Agreement (other
than punitive damages and loss of profits); and
6.3.2 all claims, demands, costs and expenses, including reasonable legal
fees, in respect of the foregoing.
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6.4 NOTICE OF CLAIM
The party making a claim for indemnification pursuant to section 6.1,
section 6.2 or section 6.3 (a "CLAIM", which term shall include more than one
Claim) shall promptly give notice to the party against whom the Claim is made.
Any claim by a Vendor (a "VENDOR'S CLAIM") must be made on its behalf by the
Vendors' Representative, no claim for indemnification may be made in respect of
any one matter more than once, whether or not by the same Vendor, nor may the
claim be made against the Purchaser and Vernalis in separate actions. In the
case of a Claim by the Purchaser or Vernalis (a "PURCHASER'S CLAIM"), such
notice shall specify whether the Claim arises as a result of a claim by a Person
against the Corporation (a "THIRD PARTY CLAIM") or whether the Claim does not so
arise, and shall also specify with reasonable particularity (to the extent that
the information is available):
6.4.1 the factual basis for the Claim; and
6.4.2 the amount of the Claim, or, if an amount is not then determinable,
an approximate and reasonable estimate of the likely amount of the Claim.
6.5 LIMITATION OF INDEMNITY
6.5.1 Each Vendor's indemnification obligations pursuant to section 6.2
shall be limited to an amount equal to the Vendor's Relevant Proportion of
a Claim.
6.5.2 Notwithstanding section 6.5.1, the maximum aggregate liability of
each Vendor for its indemnification obligations pursuant to section 6.2
shall be an amount equal to that Vendor's entitlement to Redemption Amounts
payable or which may become payable on or after the time the relevant Claim
is made.
6.5.3 The maximum aggregate liability of the Purchaser and Vernalis for
their indemnification obligations pursuant to section 6.3 (other than in
respect of the representations and warranties of the Purchaser and Vernalis
in sections 3.3.1 to 3.3.5) to any Vendor shall be an amount equal to the
aggregate of the Redemption Amounts payable or which may become payable to
that Vendor on or after the time the relevant Claim is made.
6.6 SATISFACTION OF CLAIMS
6.6.1 Where there is an amount owing by the Purchaser in respect of any
Determined Claim in respect of section 6.3, or by a Vendor in respect of
any Determined Claim in respect of section 6.1, such Determined Claim shall
be satisfied, unless section 6.6.2 applies, by payment in cash.
6.6.2 Where there is an amount owing by a Vendor in respect of any
Determined Claim, such Claim will be satisfied as follows if such Claim is
in respect of that Vendor's indemnification obligations pursuant to section
6.2 and may, at the Purchaser's or Vernalis' option, as applicable, be
satisfied as follows if such Claim is in respect of section 6.1, in either
case in the following order of priority:
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6.6.2.1 first, to the extent a Milestone has occurred in respect of
which the Purchaser or Vernalis, as applicable, has elected to pay all
or part of the Redemption Amount in cash and such payment has not yet
been made, from the Redemption Amount owing to that Vendor in respect
of the relevant Milestone to the extent necessary to satisfy the
Claim;
6.6.2.2 second, to the extent a Milestone has occurred in respect of
which the Purchaser or Vernalis, as applicable, has elected to pay all
or part of the Redemption Amount in Milestone Shares and such
Milestone Shares have not yet been issued and allotted, by reduction
of the number of Milestone Shares issuable to that Vendor in respect
of the Redemption Amount owing to that Vendor in respect of the
relevant Milestone to the extent necessary to satisfy the Claim (using
the Milestone Share Price as the value of the Milestone Shares when
calculating the number of Milestone Shares to be deducted); and
6.6.2.3 last, to the extent that the Claim is still not fully
satisfied, any excess amount together with that Vendor's
indemnification obligations in respect of any future Claims may be
deducted by the Purchaser or Vernalis from future Redemption Amounts
owing to that Vendor in accordance with sections 6.6.2.1 and 6.6.2.2,
and any excess amount still remaining in respect of section 6.1 shall
be satisfied by payment in cash.
6.7 NO INDEMNIFICATION BY CORPORATION
Each of the Vendors covenants severally, and not jointly, in favour of
the Purchaser and Vernalis that such Vendor will not assert against the
Corporation any right of indemnification that such Vendor may have against the
Corporation in connection with any Claim brought against such Vendor.
Notwithstanding the foregoing, a Vendor may assert any right of indemnification
that such Vendor may have against the Corporation for legal costs incurred by
such Vendor in defending a Third Party Claim where a court of competent
jurisdiction has determined that such Vendor has not breached a representation,
warranty or covenant contained in this Agreement or in any certificate or
document delivered pursuant to this Agreement.
6.8 PROCEDURE FOR INDEMNIFICATION
6.8.1 PURCHASER'S CLAIMS. With respect to Purchaser's Claims, following
receipt of notice from the Purchaser or Vernalis of a Claim, the Vendors'
Representative, on behalf of the Vendors, shall have 30 Business Days to
make such investigation of the Claim as the Vendors' Representative, on
behalf of the Vendors, considers necessary or desirable. For the purpose of
such investigation, the Purchaser shall make available to the Vendors'
Representative the information relied upon by the Purchaser or Vernalis to
substantiate the Claim. If the Purchaser and the Vendors' Representative
agree at or prior to the expiration of such 30 Business Day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the full agreed upon amount of the Claim shall be satisfied subject
to, and in accordance with, sections 6.5 and 6.6. If the Purchaser and the
Vendors' Representative do not agree
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within such period (or any mutually agreed upon extension thereof), the
Purchaser and the Vendors agree that the Purchaser or Vernalis shall be
entitled to bring an action in a court of law to recover the full amount of
the Claim and any costs incidental to the action.
6.8.2 VENDOR'S CLAIMS. With respect to Vendor's Claims, following receipt
of notice from the Vendors' Representative, on behalf of the Vendor, of a
Claim, the Purchaser and Vernalis shall have 30 Business Days to make such
investigation of the Claim as they consider necessary or desirable. For the
purpose of such investigation, the Vendors' Representative shall make
available to the Purchaser and Vernalis and their authorized
representatives the information relied upon by the Vendors' Representative,
on behalf of the Vendors, to substantiate the Claim. If the Purchaser or
Vernalis and the Vendors' Representative agree at or prior to the
expiration of such 30 Business Day period (or any mutually agreed upon
extension thereof) to the validity and amount of such Claim, the full
agreed upon amount of the Claim shall be satisfied subject to, and in
accordance with section 6.5. If the Purchaser and the Vendors'
Representative, on behalf of the Vendors, do not agree within such period
(or any mutually agreed upon extension thereof), the Purchaser, Vernalis
and the Vendors agree that the Vendors' Representative, on behalf of the
Vendors, shall be entitled to bring an action in a court of law to recover
the full amount of the Claim and any costs incidental to the action.
6.8.3 THIRD PARTY CLAIMS
6.8.3.1 With respect to any Third Party Claim, the Vendors'
Representative, on behalf of the Vendors, shall have the right, so
long as any Redemption Amounts are payable or may become payable, at
the expense of the Vendors, to participate in or assume control of the
negotiation, settlement or defence of such Third Party Claim, provided
that the Vendors' Representative, on behalf of the Vendors, agrees to
reimburse the Purchaser and Vernalis for all of their out-of-pocket
expenses as a result of such participation or assumption and provides
a satisfactory indemnity to the Purchaser and Vernalis for such costs.
If the Vendors' Representative, on behalf of the Vendors, elects to
assume such control, the Purchaser and Vernalis shall cooperate with
the Vendors' Representative, shall have the right to participate in
the negotiation, settlement or defence of such Third Party Claim at
its own expense and shall have the right to disagree on reasonable
grounds with the selection and retention of counsel, in which case
counsel satisfactory to the Vendors' Representative and the Purchaser
shall be retained by the Vendors.
6.8.3.2 If the Vendors' Representative, on behalf of the Vendors,
having elected to assume control as contemplated in section 6.8.3.1,
thereafter fails to defend any such Third Party Claim within a
reasonable time, the Purchaser or Vernalis shall be entitled to assume
such control and the Vendors shall be bound by the results obtained by
the Purchaser or Vernalis with respect to such Third Party Claim.
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6.9 ADDITIONAL RULES AND PROCEDURES
The obligation of one Party to indemnify other Parties in respect of
Claims shall also be subject to the following:
6.9.1 Any Claim arising as a result of a breach of a representation or
warranty referred to in section 6.1, 6.2 or 6.3 shall be made not later
than the date on which, pursuant to section 3.5, such representation or
warranty terminated.
6.9.2 The Vendors' obligation to indemnify the Purchaser and Vernalis in
accordance with section 6.2, and the Purchaser's obligation to indemnify
the Vendors in accordance with section 6.3 (other than in respect of a
breach of a representation or warranty contained in sections 3.3.1 to
3.3.5) shall only apply once the Claims, in the aggregate, exceed Cdn.$
***, in which case, the full amount of all such Claims shall be
recoverable.
6.9.3 Except in the circumstance contemplated by section 6.8.3.2 and
whether or not the Vendors' Representative, on behalf of the Vendors,
assumes control of the negotiation, settlement or defence of any Third
Party Claim, and so long as any Redemption Amounts are payable or may
become payable, the Purchaser shall not negotiate, settle, compromise or
pay any Third Party Claim except with the prior written consent of the
Vendors' Representative, on behalf of the Vendors (which consent shall not
be unreasonably withheld).
6.9.4 So long as any Redemption Amounts are payable or may become payable,
the Purchaser shall not permit any right of appeal in respect of any Third
Party Claim to terminate without giving the Vendors' Representative, on
behalf of the Vendors, notice thereof and an opportunity to contest such
Third Party Claim.
6.9.5 The Purchaser and Vernalis, and the Vendors' Representative, shall
cooperate fully with each other with respect to Third Party Claims, shall
keep each other fully advised with respect thereto (including supplying
copies of all relevant documentation promptly as it becomes available) and
shall each designate a senior officer who will keep informed about and be
prepared to discuss the Third Party Claim with his counterpart and with
counsel at all reasonable times.
6.9.6 Notwithstanding section 6.8.3, the Vendors' Representative, on behalf
of the Vendors, shall not settle any Third Party Claim or conduct any
related legal or administrative proceeding in a manner which would, in the
opinion of the Purchaser or Vernalis, acting reasonably, have an adverse
impact on the Purchaser or Vernalis.
6.10 INDEMNIFICATION CLAIMS
The parties agree that Article 6 sets out the sole and exclusive
manner by which:
6.10.1 the Purchaser or Vernalis may seek monetary compensation from the
Vendors for any matter in respect of which the Purchaser or Vernalis may
make a Claim under
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section 6.1 or 6.2, including, for greater certainty, any matter that could
be made a Claim under that section but for section 6.9.2; and
6.10.2 the Vendors may seek monetary compensation from the Purchaser or
Vernalis for any matter in respect of which the Vendors may make a Claim
under section 6.3.
ARTICLE 7
GENERAL MATTERS
7.1 CONFIDENTIALITY
7.1.1 No Vendor shall, 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.
7.1.2 No Vendor shall directly or indirectly use for its own purposes or
disclose 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.
7.2 PUBLIC NOTICES
No press release or other public announcement concerning the
transaction contemplated by this Agreement shall be made by the Vendors or the
Corporation without the prior written consent of Vernalis, or made by the
Purchaser or Vernalis without the prior written consent of the Corporation (such
consent not to be unreasonably withheld and, in the case of any press release or
other public announcement by the Vendors, other than VenGrowth, such consent to
have been obtained prior to the date of this Agreement), provided, however, that
a party may, without such consent, make such disclosure if the same is required
by any stock exchange on which any of the securities of that party are listed or
by any regulatory authority having jurisdiction over that party, and if such
disclosure is required, that party shall use reasonable efforts to give prior
oral or written notice to the other party, and if such prior notice is not
possible, to give such notice immediately following the making of such
disclosure.
7.3 EXPENSES
Each of the Vendors, 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 transaction
contemplated hereby except as provided in sections 2.11 and 2.13.
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7.4 ASSIGNMENT
Except as provided in this section, no party may assign its rights or
benefits under this Agreement, nor may a Vendor transfer its Purchaser Shares
except (i) to Vernalis or an affiliate of Vernalis, or (ii) by will or the laws
of descent and distribution. The Purchaser or Vernalis may, at any time after
the Time 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.
7.5 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 7.5. 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 7.5. Notices and other communications shall be addressed as follows:
(a) if to the Vendors:
c/o The VenGrowth Advanced Life Sciences Fund Inc. (as Vendors'
Representative)
000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xx. Xxx Xxxxxxxxx/Xxxx Xxxxx
Telecopier number: 000-000-0000
with a copy to the Vendors' Counsel at:
Xxxxxx Xxxxxx Gervais LLP
00 Xxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxx
Telecopier number: 000-000-0000
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(b) if to the Corporation:
Cita Neuropharmaceuticals Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxxxxxxxx
Telecopier number: (000) 000-0000
(c) if to the Purchaser or Vernalis:
Vernalis plc
Xxxxxxx Xxxxx
000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx
RG 41 5UA
Attention: Xxxx Xxxxxx
Telecopier number: + 44 118 989 9300
with a copy to the Purchaser's Counsel at:
Xxxxx XXX
Xxxxx 0000, 00 Xxxxxxxxxx Xxxxxx West
Box 270, TD Centre
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxxx X. Xxxxxx-Xxxxxx
Telecopier number: (000) 000-0000
and
Xxxxx & Xxxxx LLP
Xxx Xxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: Xxxx Xxxxxxx
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 7.5.
7.6 TIME OF ESSENCE
Time is of the essence of this Agreement.
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7.7 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.
7.8 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.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement.
THE VENGROWTH ADVANCED LIFE
SCIENCES FUND INC.
by:
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Name:
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Title:
---------------------------------
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MEDINNOVA PARTNERS INC.
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
NEUROSCIENCE DEVELOPMENT INC.
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Signature Page for Principal Purchase Agreement
WORKING VENTURES CMDF QUEEN'S
SCIENTIFIC BREAKTHROUGH FUND INC.
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
XXXXXXX XXXXXXXXXX
----------------------------------------
XXXX XX XXXXX
----------------------------------------
XXXXX XXXXXXXX
CITA NEUROPHARMACEUTICALS INC.
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Signature Page for Principal Purchase Agreement
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 and to exercise such rights
and powers on behalf of the Vendors as are provided in this Agreement.
THE VENGROWTH ADVANCED LIFE
SCIENCES FUND INC., as Vendors'
Representative
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
by:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Signature Page for Principal Purchase Agreement
