o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230 .425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

(i)

$10 million (exclusive of VAT) at the time of the consummation of the Acquisition (the “Initial Consideration”) subject to a working capital adjustment whereby the Initial Consideration shall be reduced or increased by an amount equal to the shortfall or excess over $100,000; plus

(ii)

an additional $10 million (exclusive of VAT) payable upon the earlier to occur of (a) the completion of a financing transaction in which PharmAthene receives gross proceeds of not less than $15 million and (b) the first anniversary of the consummation of the Acquisition which payment is to be secured by a letter of credit; plus

(iii)

additional contingent amounts payable upon the occurrence of certain events (the “Milestone Consideration”) as follows:

Item 8.01

Other Events.

Item 9.01

Financial Statements and Exhibits

NO.

DESCRIPTION

2.1

Sale and Purchase Agreement, dated March 20, 2008, by and among, PharmAthene, Inc., PharmAthene UK Limited and PharmAthene US Corporation and Avecia Investments Limited, Avecia Biologics Limited and Avecia Biologics, Inc.*

10.1

Consent and First Loan Modification Agreement, dated March 20, 2008, by and among PharmAthene US Corporation, Silicon Valley Bank and Oxford Finance Corporation

99.1

Press Release, dated March 20, 2008, announcing the execution of the Sale and Purchase Agreement.

PHARMATHENE, INC.

(registrant)

Dated: March 25, 2008

By:

/s/ David Wright

David Wright

President and Chief Executive Officer

NO.

DESCRIPTION

2.1

Sale and Purchase Agreement, dated March 20, 2008, by and among, PharmAthene, Inc., PharmAthene UK Limited and PharmAthene US Corporation and Avecia Investments Limited, Avecia Biologics Limited and Avecia Biologics, Inc.*

10.1

Consent and First Loan Modification Agreement, dated March 20, 2008, by and among PharmAthene US Corporation, Silicon Valley Bank and Oxford Finance Corporation

99.1

Press Release, dated March 20, 2008, announcing the execution of the Sale and Purchase Agreement.

1.

DEFINITIONS AND INTERPRETATION/SCHEDULES

1

2.

AGREEMENT TO SELL AND PURCHASE/ASSUMPTION OF LIABILITIES

2

3.

OBLIGATIONS AT SIGNING

3

4.

CONDITIONS PRECEDENT/TERMINATION RIGHTS

4

5.

CONSIDERATION

8

6.

GAP PERIOD UNDERTAKINGS

11

7.

COMPLETION/STATUS OF US LOCAL AGREEMENT

13

8.

WARRANTIES AND LIMITATIONS

15

9.

CLAIMS PROCEDURE

18

10.

PROTECTION OF GOODWILL

21

11.

CONTRACTS

22

12.

EMPLOYEES

24

13.

POST-COMPLETION OBLIGATIONS

24

14.

GUARANTEES

29

15.

VAT

30

16.

THIRD PARTY RIGHTS

31

17.

COSTS

31

18.

ANNOUNCEMENTS/CONFIDENTIALITY

32

19.

GENERAL

34

20.

GOVERNING LAW AND DISPUTES

39

SCHEDULE 1 — VENDORS, LOCAL PURCHASERS AND TARGET BUSINESS

40

SCHEDULE 2 — PURCHASE PRICE ADJUSTMENT

41

SCHEDULE 3 — MILESTONE CONSIDERATION

46

SCHEDULE 4 — WARRANTIES

50

SCHEDULE 5 — LIMITATIONS

74

SCHEDULE 6 — EMPLOYMENT MATTERS

77

SCHEDULE 7 — COMPLETION

82

SCHEDULE 8 — PROPERTY TRANSFER PROVISIONS

83

SCHEDULE 9 — DEFINITIONS AND INTERPRETATION

89

AF1

Financial Information

AF1A

Accounts

AF1B

Creditor Analysis

AF2

Employee List

AF3

Intellectual Property List

AF4

Transferring Assets

4A

Transferring Billingham Assets

4B

Transferring Milford Assets

4C

Transferring Haverton Hill Assets

AF5

Provisional Allocation

AF6

Transitional Services

6A

UK Transitional Services Agreement

6B

US Transitional Services Agreement

6C

Billingham Laboratory Agreement

6D

QC Laboratory Stability Services Agreement

AF7

Ongoing Services/Supplies

7A

UK Master Services Agreement (including agreed Project Plans)

7B

US Master Services Agreement (including agreed Project Plans)

7C

Supply Agreement

AF8

US Local Agreement

AF9

Intellectual Property Assignments:

9A

Assignment of Patents

9B

Assignment of Trade Marks

9C

Assignment of Domain Names

AF10

Letter of Credit

AF11

Government Related Subcontract Agreement

AF12

Form of Assignment of Lease

AF13

Data Room index of documents

(1)

AVECIA INVESTMENTS LIMITED a company incorporated in England and Wales (company number 3768296) whose registered office is at Hexagon Tower, Blackley, Manchester M9 8ZS (the “Principal Vendor”);

(2)

THE COMPANIES identified as Business Vendors in Schedule 1 (the “Business Vendors”);

(3)

AVECIA LIMITED a company incorporated in England and Wales (company number 3730853) whose registered office is at Hexagon Tower, Blackley, Manchester M9 8ZS (“Avecia Limited”);

(4)

THE COMPANIES identified as Local Purchasers in Schedule 1 (the “Local Purchasers”); and

(5)

PHARMATHENE, INC. a company incorporated under the laws of the State of Delaware whose principal place of business is at One Park Place, Suite 450101, Annapolis, MD 21401, USA (the “Purchaser”),

(A)

The Business Vendors carry on the Business (as defined below) and/or own assets relevant to the Business.

(B)

The Principal Vendor is an indirect parent company of the Business Vendors.

(C)

The Business Vendors have agreed to sell and the Local Purchasers have agreed to purchase the Target Business (by way of acquisition of the Business Assets and the assumption of the Business Liabilities) as a going concern and the Business Assets on and subject to the terms and conditions set out in this Agreement.

(D)

The Principal Vendor has agreed to provide warranties, covenants, indemnities and undertakings and to guarantee the obligations of the Business Vendors on and subject to the terms and conditions set out in this Agreement.

(E)

The Purchaser has agreed to undertake certain obligations and to guarantee the obligations of the Local Purchasers on and subject to the terms and conditions set out in this Agreement.

1.

DEFINITIONS AND INTERPRETATION/SCHEDULES

1.1.

Words and expressions in this Agreement shall be given the meanings ascribed to them and shall be interpreted in accordance with Schedule 9.

1.2.

The Schedules form part of and shall be construed as one with this Agreement.

2.

AGREEMENT TO SELL AND PURCHASE/ASSUMPTION OF LIABILITIES

2.1.

On the terms of this Agreement and subject to the Conditions Precedent, on the date specified in Clause 7.1, the Business Vendors shall sell and the Local Purchasers shall purchase the entire right, title and interest of the Business Vendors in and to the Target Business and the Business Assets as a going concern, in each case with the benefit of the warranties and undertakings contained in this Agreement and together with all rights and advantages attaching thereto at Completion. The Principal Vendor covenants with the Purchaser and the Local Purchasers that the Business Vendors have the right to sell and transfer to the Purchaser or the Local Purchasers, as the case may be, the full legal and beneficial interest in the Business Assets (subject to any restrictions on assignment of the Contracts) to be sold by them on the terms set out in this Agreement. The Business Assets shall be sold free from all Encumbrances and from claims by third parties (other than (in relation to Business Assets other than the Lease) liens arising by operation of law in the ordinary course of business). The Purchaser and the Local Purchasers shall acquire no interest under this Agreement in the Excluded Assets.

2.2.

The Purchaser or a Local Purchaser shall with effect from the Effective Time assume all of the Business Liabilities.

2.3.

The Principal Vendor agrees with the Purchaser (for itself and in trust for each member of the Purchaser’s Group) that the Principal Vendor shall, or shall procure that another Vendor shall, indemnify and keep indemnified the Purchaser and each member of the Purchaser’s Group against all Losses suffered or incurred:

2.3.1.

in respect of any Excluded Liability and any Liability of the Target Business or any member of the Vendors’ Group which is not a Business Liability and which is not otherwise expressly assumed by the Purchaser under this Agreement;

2.3.2.

by reason of the Purchaser or a Local Purchaser taking any reasonable action to avoid, resist or defend itself against any Liability referred to in Clause 2.3.1; and

2.3.3.

subject to the terms of Schedule 5 and without prejudice to any other remedy available to the Purchaser, which the Purchaser or any member of the Purchaser’s Group may suffer by reason of a breach by any of the Vendors of any covenant or Warranty contained in this Agreement.

For the avoidance of doubt, nothing contained in the Disclosure Letter shall limit, reduce or extinguish the liability of the Vendors under Clause 2.3.1 or 2.3.2

2.4.

The Purchaser agrees with the Vendors (for themselves and in trust for each member of the Vendors’ Group) that the Purchaser shall, or shall procure that a Local Purchaser shall, indemnify and keep indemnified the Vendors and each member of the Vendors’ Group against all Losses suffered or incurred:

2.4.1.

in respect of any Business Liabilities and any Liability (other than any Excluded Liability) incurred by the Purchaser’s Group in carrying on the Target Business after Completion; and

2.4.2.

by reason of the Vendors taking any reasonable action to avoid, resist or defend themselves against any Liability referred to in Clause 2.4.1; and

2.4.3.

without prejudice to any other remedy available to the Vendors, which the Vendors may suffer by reason of a breach by the Purchaser of any the warranties contained in Clause 8.9 or any covenant contained in this Agreement.

The aggregate liability of the Purchaser in respect of this Clause 2.4 (other than in respect of (i) any Business Liabilities taken into account in the determination of Completion Working Capital, (ii) Liabilities incurred by the Purchaser’s Group in carrying on the Target Business after Completion and (iii) Liabilities in respect of the performance of obligations under the Contracts falling due for performance after Completion) shall be limited to and shall not exceed US$7.5 million.

2.5.

Title to those Business Assets transferred at Completion shall pass to the Purchaser or the Local Purchasers, as the case may be, on Completion and title to those Business Assets transferred after Completion shall pass to the Purchaser or the Local Purchasers, as the case may be, at the time such Business Assets are transferred, provided that where any Business Assets are capable of passing by delivery, the Principal Vendor shall deliver (or procure the delivery of) them to the Purchaser and title to those Business Assets shall pass by and upon such delivery.

2.6.

The Business Assets shall be at the risk of the Purchaser with effect from the Effective Time.

2.7.

Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994 shall not apply for the purposes of this Clause 2.

3.

OBLIGATIONS AT SIGNING

3.1.

the Principal Vendor shall deliver to the Purchaser copies of the minutes of a duly held board meeting of each of the Vendors and Avecia Limited authorising the execution by it of this Agreement and any other document required to be executed by such entity (such copy of minutes being certified as correct by the secretary of the relevant Vendor); and

3.2.

the Purchaser shall deliver to the Principal Vendor a copy of the minutes of a duly held board meeting of the Purchaser and each Local Purchaser authorising the execution by it of this Agreement and any other document required to be executed by the Purchaser or such Local Purchaser (such copy of minutes being certified as correct by the secretary of the Purchaser or relevant Local Purchaser).

4.

CONDITIONS PRECEDENT/TERMINATION RIGHTS

Conditions

4.1.

Completion is conditional upon satisfaction (or waiver by the Purchaser and the Principal Vendor together) of the following conditions, or their satisfaction subject only to Completion:

4.1.1.

the Purchaser and the Principal Vendor being satisfied (acting reasonably) that the Vendors and the Purchaser respectively have fulfilled their legal obligations to inform and consult employee representatives about the sale and purchase of the Target Business;

4.1.2.

there being so far as the Purchaser and the Principal Vendor are aware no applicable law or order prohibiting the Completion of the purchase and sale of the Target Business and the Business Assets;

4.1.3.

no action, suit or proceedings being pending before any court or threatened by any governmental authority which seeks to restrain, prohibit or otherwise challenge the sale of the Target Business or any of the Business Assets pursuant to this Agreement;

4.1.4.

no Material Breach of Undertaking, Material Breach of Warranty or Material Adverse Change having occurred, subject to the provisions of Clauses 4.5 to 4.12 (inclusive);

4.1.5.

the receipt of all consents, approvals and material permits for the transfer by novation of the Dstl Contracts from Avecia Limited or the UK Vendor, as the case may be, to the Purchaser or a Local Purchaser in each case in form and substance satisfactory to the Purchaser and the Principal Vendor, each acting reasonably;

4.1.6.

the receipt of all consents, approvals and material permits for the entry into of the Government Related Subcontract Agreement in respect of the NIH Contracts in each case in form and substance satisfactory to the Purchaser and the Principal Vendor, each acting reasonably;

4.1.7.

the receipt of all consents, approvals and material permits for either (i) the transfer (whether by novation or assignment) of the Challenge Grant to the Purchaser or a Local Purchaser or (ii) the sub-contracting of the Challenge Grant to the Purchaser or a Local Purchaser in each case in form and substance satisfactory to the Purchaser and the Principal Vendor, each acting reasonably;

4.1.8.

no Vendor nor any Associated Company shall have received a materially adverse determination by a contracting officer or other representative of the US Government or any other relevant governmental entity with jurisdiction over the assignment or novation of any NIH Contract that such NIH Contract cannot be assigned or novated to the Purchaser.

4.2.

The parties hereby undertake at their own expense to use all reasonable endeavours (so far as it lies within their respective powers) to ensure the satisfaction of the Conditions Precedent as soon as practicable and in any event prior to the Long Stop Date.  The parties shall each bear their own respective filing fees and other costs incurred in relation to any filing required to be made in any jurisdiction in connection with the acquisition of the Target Business by the Purchaser’s Group.  Without prejudice to the foregoing, it is agreed that the Purchaser and the Principal Vendor shall promptly notify each other of all requests and enquiries from any government, governmental, supranational or trade agency, court or regulatory body and those requests and enquiries shall be dealt with by the Principal Vendor and the Purchaser in consultation with each other and the Principal Vendor and the Purchaser shall promptly co-operate with and provide all necessary information and assistance reasonably required by such government, agency, court or body upon being requested to do so by the other.

4.3.

The Purchaser and the Principal Vendor shall promptly give notice to the other of the satisfaction of the Conditions Precedent in Clauses 4.1.1, 4.1.5, 4.1.6 and 4.1.7 within two Business Days of becoming aware of the same.  Each of the Purchaser and the Principal Vendor shall promptly notify the other of (and furnish to it any information it may reasonably request with respect to) any event or condition or the existence to the Purchaser’s or the Principal Vendor’s awareness, as applicable, of any fact that would cause any of the Conditions Precedent not to be fulfilled.

4.4.

If the conditions in Clause 4.1 are not satisfied or waived on or before the Long Stop Date, either the Purchaser or the Principal Vendor may by notice in writing to the other terminate this Agreement in which case, save as expressly provided otherwise herein, this Agreement shall lapse and no party shall have any claim against any other under it, other than any claim arising from breach of the undertakings contained in Clauses 4.2.

4.5.

If at any time after the date of this Agreement and before Completion:

4.5.1.

a Material Breach of Undertaking;

4.5.2.

a Material Breach of Warranty; or

4.5.3.

a Material Adverse Change

occurs, the Purchaser shall be entitled, subject to the provisions of Clauses 4.6 to 4.12, to terminate this Agreement before Completion by notice in writing to the Principal Vendor, without any liability whatsoever on the part of the

Purchaser.  If the Purchaser duly exercises its right of termination hereunder it shall have no claim against any Vendor other than as set out in Clause 4.12.

4.6.

If the Purchaser wishes to terminate this Agreement in accordance with Clause 4.5 it shall forthwith give notice of its intention to do so to the Principal Vendor (a “Termination Notice”).  The Termination Notice shall be delivered by hand to the Principal Vendor’s Company Secretary at Hexagon Tower, Blackley, Manchester M9 8ZS together with a copy delivered to the Vendors’ Solicitors (for the attention of Peter Uri) at the address and in any manner specified in this Agreement.

4.7.

If the Purchaser serves a Termination Notice in accordance with Clause 4.6 alleging that a Material Breach of Undertaking, Material Breach of Warranty or Material Adverse Change has occurred, the Principal Vendor may contest the validity of the Purchaser’s right to terminate by giving notice in writing to the Purchaser not later than 5 pm New York local time on the date being three Business Days after the date of receipt of the Termination Notice.

4.8.

If the Principal Vendor gives valid notice to the Purchaser under Clause 4.7, in respect of an alleged Material Breach of Undertaking or Material Breach of Warranty then the parties shall seek the advice of a leading commercial Queens Counsel (the “Legal Expert”).  If the parties cannot agree on the Legal Expert within two Business Days of the valid service by the Principal Vendor of a notice under Clause 4.7, the Legal Expert shall be chosen by lot.  The Legal Expert shall give due weight to any representations put forward by either party received by him and shall as a matter of urgency (and in any event no later than three Business Days after the date of appointment) advise the parties in writing if in his opinion, on the basis of the information available, a Material Breach of Undertaking or Material Breach of Warranty has occurred.  If the Legal Expert’s opinion is that a Material Breach of Undertaking or Material Breach of Warranty has occurred or if no opinion is issued by the Legal Expert on or before the Long Stop Date then the Purchaser shall not be obliged to proceed to complete this Agreement.  If the Legal Expert opines on or before the Long Stop Date that no such Material Breach of Undertaking or Material Breach of Warranty has occurred, then in the absence of any subsequent allegation or finding of Material Breach of Undertaking or Material Breach of Warranty, the parties shall complete this Agreement in accordance with its terms.

4.9.

If the Principal Vendor gives valid notice to the Purchaser under Clause 4.7 in respect of an alleged Material Adverse Change, then the parties shall seek the advice of a senior investment banker in London of an investment bank of international standing (the “IB Expert”).  If the parties cannot agree on the IB Expert within two Business Days of the valid service by the Principal Vendor of a notice under Clause 4.7, the IB Expert shall be chosen by lot.  The IB Expert shall give due weight to any representations put forward by either party received by him and shall as a matter of urgency (and in any event no later than three Business Days after the date of appointment) advise the parties in writing if in his opinion a Material Adverse Change has occurred.  If the IB Expert’s opinion is that a Material Adverse Change has occurred or if no opinion is issued by the IB Expert on or before the Long Stop Date, then

the Purchaser shall not be obliged to proceed to complete this Agreement.  If the IB Expert opines on or before the Long Stop Date that no such Material Adverse Change has occurred then in the absence of any subsequent allegation or finding of Material Adverse Change, the parties shall complete this Agreement in accordance with its terms.

4.10.

In giving advice in accordance with Clauses 4.8 or 4.9, the Legal Expert or the IB Expert (as the case may be) shall act as an expert and not as an arbitrator.  His or her fees shall be payable by the Purchaser and the Principal Vendor equally.

4.11.

If the Purchaser serves a Termination Notice and the validity of such Termination Notice has not been resolved on or before the date falling five Business Days before the date on which Completion would otherwise be due to occur under this Agreement, then the date on which Completion shall occur shall be the date falling five Business Days after such validity has been resolved.  This Clause is subject to Clauses 4.8 and 4.9 where the Legal Expert or the IB Expert, as the case may be, has not issued an opinion on or before the Long Stop Date.

4.12.

Subject to Clause 4.13, if the Purchaser validly terminates this Agreement in accordance with Clause 4.5 in respect of a Material Breach of Warranty (but not a Material Breach of Undertaking or a Material Adverse Change), then the Principal Vendor shall pay to the Purchaser an amount equal to all reasonable professional fees and out-of-pocket expenses (but excluding any financing arrangement or commitment fees) together with any amounts in respect of irrecoverable VAT on such fees and expenses incurred by each member of the Purchaser’s Group directly in connection with the transactions contemplated by this Agreement up to a maximum of US$1,000,000.

4.13.

The provisions of Clause 4.12 shall not apply to limit the liability of the Principal Vendor to pay the fees and expenses of the Purchaser incurred in connection with the transactions contemplated by this Agreement:

4.13.1.

in the event of any Material Breach of Undertaking or any act of wilful default or bad faith on the part of the Principal Vendor or any of its officers, employees or advisers which results in Completion not occurring; or

4.13.2.

the failure by the Principal Vendor to proceed to Completion following satisfaction of the Conditions Precedent in accordance with Clause 7.

4.14.

If this Agreement terminates pursuant to this Clause 4, each party’s further rights and obligations shall cease immediately on termination (save for Clauses 1 (Definitions and Interpretation/Schedules), 14 (Guarantees),, 17 (Costs), 18 (Announcements/Confidentiality) and 20 (Governing Law and Disputes), which will continue in full force and effect) but termination does not affect a party’s accrued rights and obligations at the date of termination.

4.15.

The Purchaser may elect to proceed to Completion notwithstanding the existence of a Material Breach of Warranty or a Material Breach of

Undertaking, without prejudice to any other remedy it may have under this Agreement including without limitation, its rights under Clause 2.3.

5.

CONSIDERATION

Purchase Price

5.1.

Subject to adjustment pursuant to Clauses 5.5 and 5.6, the aggregate consideration for the purchase of the Business Assets and the Target Business shall (in addition to the assumption of the Business Liabilities) be:

5.1.1.

the payment of the Initial Consideration;

5.1.2.

the payment of the Deferred Consideration;

5.1.3.

the payment of the Milestone Consideration; and

5.1.4.

the payment of the Manufacturing IP Consideration.

5.2.

On Completion the Purchaser shall pay the Initial Consideration to the Principal Vendor in accordance with the provisions of Schedule 7.

5.3.

The Principal Vendor is authorised to receive the Purchase Price on behalf of the other Vendors and payment to the Principal Vendor (or as it may direct) shall constitute an absolute discharge for the Purchaser.

5.4.

The provisions of Schedule 2 shall apply in relation to the preparation and agreement (or determination) of the Completion Working Capital Statement.

5.5.

If the Completion Working Capital is less than the Base Working Capital, the Principal Vendor shall on the Settlement Date pay to the Purchaser by way of reduction in the Purchase Price an amount equal to such shortfall, together with an amount equivalent to interest on such sum at the Interest Rate from (and including) the Completion Date to (but excluding) the date of payment.

5.6.

If the Completion Working Capital exceeds the Base Working Capital, the Purchaser shall, on the Settlement Date pay to the Principal Vendor by way of increase in the Purchase Price an amount equal to such excess, together with an amount equivalent to interest on such sum at the Interest Rate from (and including) the Completion Date to (but excluding) the date of payment.

5.7.

The Purchaser shall or shall procure the payment to the Principal Vendor of the Deferred Consideration to the Principal Vendor’s Bank Account on the earlier to occur of:

5.7.1.

the Purchaser or another member of the Purchaser’s Group completing a fund raising or financing transaction in which the Purchaser or such other member receives gross proceeds of not less than US$15 million); and

5.7.2.

the date falling 12 months after the Completion Date.

5.8.

The Purchaser undertakes (i) to use all reasonable endeavours to complete a fund raising or financing transaction as described in Clause 5.7.1 as soon as reasonably practicable and (ii) to keep the Principal Vendor regularly informed as to what steps it is taking in that regard and any other material developments in relation thereto.

5.9.

The provisions of Schedule 3 shall apply in relation to:

5.9.1.

certain obligations on the Purchaser and protections for the Vendors which apply after the date of this Agreement; and

5.9.2.

the calculation of how much (if any) Milestone Consideration is payable and when payment of it is due.

5.10.

These Clauses 5.10 and 5.11 apply if any member of the Purchaser’s Group sources Drug Substance that is to be purchased under a Master Services Agreement or the Supply Agreement from a supplier other than the UK Vendor (including sourcing internally or from other members of the Purchaser’s Group).  Where such Clauses apply, the Purchaser shall (subject to Clauses 5.12 and 5.13) pay to the Principal Vendor further amounts by way of additional consideration for the Target Business and the Business Assets calculated in accordance with Clause 5.11.

5.11.

The amount payable to the Principal Vendor (the “Manufacturing IP Consideration”) will be a percentage of the amount that would have been payable to the UK Vendor had the relevant Drug Substance been produced under the Master Services Agreement or the Supply Agreement.  Such percentage will be determined as follows:

5.11.1.

3.75% in the event that (i) a national government or agency thereof after award of a contract, specifies that production of Drug Substance must be sourced from a supplier other than the UK Vendor or (ii) if and to the extent that the UK Vendor is unable to fulfil the Purchaser’s or the relevant member of the Purchaser’s Group’s demand for Drug Substance; and

5.11.2.

7.5% in the event that the Purchaser or the relevant member of the Purchaser’s Group elects to source Drug Substance from any supplier other than the UK Vendor other than in the circumstances described in Clause 5.11.1.

5.12.

No Manufacturing IP Consideration will be payable if the Purchaser or a member of the Purchaser’s Group sources Drug Substance as a result of the termination of a Master Services Agreement (or the applicable project plan under the Master Services Agreement) as a result of the UK Vendor’s unremedied breach of section 3.2(a) of the Master Services Agreement or

termination of the Supply Agreement under the corresponding sections of the Supply Agreement.

5.15.

All payments under this Clause shall (unless the parties agree otherwise or the recipient notifies by at least five Business Days’ prior notice a suitable alternative bank account) be paid by electronic transfer of cleared funds for same day value to:

5.13.

The Manufacturing IP Consideration shall be payable only if the production of Drug Substance employs Manufacturing IP included in the Business Assets transferred to the Purchaser or a Local Purchaser under this Agreement.

5.14.

The obligation to pay the Manufacturing IP Consideration shall begin on the first purchase by a member of the Purchaser’s Group of Drug Substance (or the production of Drug Substance by a member of the Purchaser’s Group) and shall end ten (10) years thereafter.

5.15.

All payments under this Clause shall (unless the parties agree otherwise or the recipient notifies by at least five Business Days’ prior notice a suitable alternative bank account) be paid by electronic transfer of cleared funds for same day value to:

5.15.1.

in the case of the Principal Vendor, the Principal Vendor’s Bank Account; and

5.15.2.

in the case of the Purchaser, the bank account of the Purchaser notified by the Purchaser to the Principal Vendor at least five Business Days before the first payment is to be made to the Purchaser.

5.16.

The parties have agreed a provisional allocation of the Purchase Price which is as shown by the Provisional Allocation. As soon as practicable after the adjustments required to be made under Clause 5.5 or 5.6 have been determined, the Principal Vendor and the Purchaser shall seek to agree a revised allocation of the Purchase Price by allocating each adjustment to the Business Assets to which it most closely relates unless otherwise required by law. If they are unable to do so within 30 days of the Settlement Date, either party may refer the matter for determination to an independent expert and the provisions of paragraphs 5 to 11 of Part 2 of Schedule 2 shall (with such modifications as may be necessary) apply to such determination. The parties agree to adopt the allocation agreed by them or determined by the independent expert for all Taxation purposes including, without limitation, for filing all documents and statements required under Section 1060 of the Code, and shall within 30 days of such agreement or determination execute a document between them adopting such allocation.

5.17.

The parties agree that any changes, pursuant to Clause 5.16 above, to be made to the provisional allocation set out in the Provisional Allocation:

5.17.1.

will reflect only the underlying differences between the Completion Working Capital as compared with the Base Working Capital; and

5.17.2.

will adopt the same methodology and practices as were used in preparing such provisional allocation.

5.18.

Any Milestone Consideration or Manufacturing IP Consideration which becomes payable shall be allocated as being additional consideration for the Goodwill sold by the UK Vendor to the extent consistent with the Code and other applicable Tax laws.

5.19.

If any further payment (other than interest under Clause 19.17) is made by a party to another party under this Agreement (whether as damages for breach or under an indemnity or covenant to pay), such payment shall so far as possible be made by way of further adjustment to the Purchase Price and such further adjustment shall be allocated as the parties may agree (or as determined by an independent expert) on the same basis as is set out in Clause 5.16 and Clause 5.17.

6.

GAP PERIOD UNDERTAKINGS

6.1.

Pending Completion, the Principal Vendor and the Business Vendors shall, subject to their right (acting reasonably) to refuse access on the grounds that access:

6.1.1.

would be contrary to any applicable laws or regulations;

6.1.2.

would cause undue disruption to the Target Business or its management; or

6.1.3.

would in the reasonable opinion of the management of the Target Business involve issues of commercial sensitivity and confidentiality such that access could, if Completion did not take place, materially damage the value or competitiveness of the Target Business,

allow the Purchaser, its agents and representatives such access during normal working hours to the books and  records of or relating in whole or in part to the Target Business as the Purchaser may reasonably request (upon reasonable notice in writing to the Principal Vendor at such times and at such locations as the Purchaser may reasonably request) in order to ensure the transfer of the management and operation of the Target Business in a smooth and timely manner on and with effect from the Completion Date without undue or unnecessary interference or interruption.

6.2.

During the period from the date of this Agreement to Completion the Principal Vendor and the Business Vendors shall in relation to the Target Business and the Business Assets (unless the Purchaser otherwise agrees, such agreement not to be unreasonably withheld or delayed):

6.2.1.

carry on the Target Business as a going concern in the ordinary and usual course consistent with past practice in accordance with all applicable legal and administrative requirements and with a view to keeping intact the Target Business, keeping available the services of the Senior Employees and preserving the relationship of the Target Business with customers, suppliers and others with whom the Target Business deals, in each case subject to any restrictions on so doing imposed by this Agreement;

6.2.2.

not adopt or amend in any respect any Employee Benefit Arrangement (or any arrangement that would be an Employee Benefit Arrangement if adopted) except as required by applicable law;

6.2.3.

not amend (or renew on different terms) any collective bargaining agreement or trade union recognition agreement except in each case as required by applicable law;

6.2.4.

not grant to any Employee any increase in remuneration or benefits except (i) in the ordinary course of business consistent with past practice or (ii) for increases for which the Vendors’ Group will be solely liable;

6.2.5.

not dismiss or give notice of termination to any Senior Employee (unless circumstances exist justifying summary dismissal);

6.2.6.

not employ any person with a basic annual salary in excess of US$75,000;

6.2.7.

not enter into any agreement or commitment involving any capital expenditure above US$100,000 (exclusive of VAT) per item;

6.2.8.

not incur, enter into or permit, allow or suffer the creation of any Encumbrances over the Business Assets except (in relation to Business Assets other than the Lease) liens arising by operation of law in the ordinary course of business;

6.2.9.

not enter into or terminate prematurely or vary the terms of any Material Contract;

6.2.10.

not make payments or transfer assets (in each case other than in the ordinary course of trading on arm’s length commercial terms) to any other member of the Vendors’ Group;

6.2.11.

not acquire or dispose of any business or activity or discontinue or cease to operate all or any part of the Target Business;

6.2.12.

not sell, lease, assign, license or otherwise dispose of (i) any fixed assets of the Target Business for any reason, or (ii) except in the ordinary course of business any part of the Target Business or any Business Asset (or any interest therein);

6.2.13.

maintain in full force and effect the current insurance policies applicable to the Business Assets and the Target Business and not vary or permit to lapse or fail to renew such policies; and

6.2.14.

not grant any licences (other than licences on arm’s length commercial terms consistent with past practice and in the ordinary course of trading) or other rights to modify the Business IP;

6.2.15.

not enter into any lease, hire purchase or other agreements or arrangements for payment on deferred terms other than with existing trade creditors in the ordinary course of business;

6.2.16.

not commence, settle or defend any litigation or arbitration proceedings;

6.2.17.

not, in relation to the Haverton Hill Site:

(a)

agree any revised rent for such property or implement any rent review;

(b)

vary the terms of the Lease; or

(c)

commit any breach of covenant, which would render the Lease liable for forfeiture;

6.2.18.

not commit or agree to take any of the actions prohibited by or any action inconsistent with this Clause 6.2;

6.2.19.

in the event that any member of the Vendors’ Group becomes involved in any dispute with any Tax Authority concerning any matters likely to affect the Business Assets in any way, notify the Purchaser as soon as reasonably practicable and, in any event, within two (2) Business Days of such member of the Vendors’ Group becoming aware of such dispute; and

6.2.20.

not, and shall procure that no relevant associate (for the purposes of paragraph 3(7) of Schedule 10 of VATA 1994) shall elect to waive exemption for VAT purposes pursuant to paragraph 2 of Schedule 10 to VATA 1994 in relation to the Property.

6.3.

As soon as practicable after the date hereof, the Principal Vendor and the Purchaser shall establish a steering committee to review the operations of the Target Business and to provide consultation and advice regarding the management of the Target Business. Such steering committee shall:

6.3.1.

be comprised of two representatives of the Purchaser and two representatives of the Principal Vendor; and

6.3.2.

meet at least once a week (in person or by telephone).

7.

COMPLETION/STATUS OF US LOCAL AGREEMENT

7.1.

Subject to Clause 4 and subject as hereinafter provided, Completion shall take place at the offices of the Vendors’ Solicitors on the fifth Business Day after the CP Satisfaction Date or, at such other place or time as may be agreed in writing between the Purchaser and the Principal Vendor.

7.2.

On Completion, the parties will comply with their respective obligations set out in Schedule 7.  Neither party (treating for this purpose the Vendors as a single party and the Purchaser and the Local Purchasers as a single party)

7.3.1.

to elect to terminate this Agreement;

7.3.2.

to effect Completion so far as practicable having regard to the defaults which have occurred; or

7.3.3.

to fix a new date for Completion (such date being neither less than 3 nor more than 10 Business Days after the agreed date for Completion) in which case the provisions of Schedule 7 shall apply to Completion as so deferred but provided such deferral may only occur once unless otherwise agreed in writing between the Principal Vendor and the Purchaser.

entitled to claim after Completion in respect of any breach of Warranty of which it becomes aware between the date of this Agreement and Completion.

8.5.

Where a Warranty is expressed to be given “so far as the Principal Vendor is aware”, or is otherwise limited by words to that effect, the Principal Vendor shall be deemed to have knowledge only of the matters within the actual awareness of the following individuals (and whose awareness shall in turn be deemed to be limited to the area of responsibility shown opposite his or her name below) provided that such knowledge, information, belief or awareness shall be deemed to have been acquired after reasonable and appropriate enquiries by the individuals in respect of the relevant subject matter of such Warranties:

Name

Position

Area of Responsibility

Kevin Price

Senior Vice-President

All

Philip Speakman

Vice-President

All

Iain Baird

Vice-President Manufacturing and Supply Chain

C, E

Matthew Deuchars

Chief Scientific Officer

E

David Theakston

Head of Regulatory

E

Clare Edwards

Head of Quality

E

Martin Meeson

Finance Director (UK Vendor)

A

Andrew Cree

General Counsel (Principal Vendor)

B, C

Key to letter codes used in table above:

A

Finance, accounting and taxation matters

B

Legal and insurance matters

C

Trading, competition and contractual matters

D

Employee matters

E

Operational, environmental and regulatory matters

F

Intellectual Property

8.6.

Save in the case of fraud, the Principal Vendor undertakes not to make any claim against any Employee on whom it may have relied before entering into this Agreement or the documents to be entered into pursuant to this Agreement or in the preparation of the Disclosure Letter (but this shall not preclude the Principal Vendor from claiming against any other Vendor under any right of contribution or indemnity to which it may be entitled).

8.7.

No right to damages or compensation shall arise in favour of the Purchaser in consequence only of an event occurring or matter arising after the signing of this Agreement and before the date of Completion, constituting a breach or

non-fulfilment of any of the Repeated Warranties if the event in question could not have been avoided or prevented by the Principal Vendor or the other Vendors.

8.8.

The Principal Vendor undertakes to the Purchaser that, if between the date of this Agreement and Completion, any event (including for the avoidance of doubt, any omission) occurs, which results, or which may result, in any of the Warranties being unfulfilled, untrue or inaccurate at Completion, then it shall immediately and in any event prior to Completion, give the Purchaser notice of that event and its likely consequences.

8.9.

None of the Warranties nor the indemnities given by the Principal Vendor in this Agreement shall be, or shall be deemed to be, qualified, modified or discharged, nor shall a claim by the Purchaser against the Principal Vendor under this Clause 8, be prevented or limited, by reason of any investigation or enquiry made by, or on behalf of the Purchaser and no information relating to the Target Business or the Business Assets of which the Purchaser has actual knowledge, other than only by reason of it being disclosed in or by the Disclosure Letter, shall prejudice any claim which the Purchaser shall be entitled to bring or shall operate to reduce any amount recoverable by the Purchaser under this Agreement.

8.10.

The Purchaser warrants and undertakes to the Vendors that each of the warranties set out in this Clause 8.10 is true and accurate as at the date of this Agreement and that each of such warranties will be true and accurate on the day of Completion by reference to the facts and circumstances then subsisting:

8.10.1.

the Purchaser is and each Local Purchaser is a company duly incorporated and validly existing under its respective laws of incorporation;

8.10.2.

the Purchaser and each Local Purchaser have the legal right and authority to enter into and perform this Agreement and any other documents to be entered into pursuant to this Agreement; this Agreement constitutes, and the documents to be entered into by the Purchaser or the Local Purchasers pursuant to it will when executed constitute, valid, legal and binding obligations of the Purchaser and the Local Purchasers, as applicable, in accordance with their respective terms;

8.10.3.

the execution and delivery of and the performance by the Purchaser and each Local Purchaser of its obligations, as applicable, under this Agreement and any other documents to be delivered pursuant to this Agreement as are relevant to the Purchaser or such Local Purchaser will not:

(a)

conflict with or result in a breach of, or constitute a default under, any instrument to which the Purchaser or the Local Purchaser is a party or by which the Purchaser or the Local Purchaser is bound; or

(b)

result in a breach of any order, judgement or decree of or undertaking to any court, governmental agency or regulatory body to which the Purchaser or the Local Purchaser is a party or by which the Purchaser or the Local Purchaser is bound;

in each case, which would prohibit the consummation of the transactions contemplated by this Agreement;

8.10.4.

the execution and delivery of this Agreement and the documents to be delivered under it and the consummation of the transactions contemplated hereby and thereby will not (i) violate, conflict with or result in any breach of any provision of the constitutional documents or by-laws of the Purchaser or a Local Purchaser or (ii) violate, conflict with or result in any breach of any statute, rule or governmental regulation applicable to the Purchaser or the Local Purchaser, in each case, which would prohibit the consummation of the transactions contemplated by this Agreement;

8.10.5.

no notice, permit, consent, approval, authorisation or order of or declaration or filing with, any governmental authority or third party is required to be made or obtained by the Purchaser or the Local Purchaser as a condition of the execution or delivery of this Agreement or the documents to be delivered under it or, other than the Conditions Precedent, the consummation of the transactions contemplated hereby or thereby;

8.10.6.

the Purchaser has determined in good faith that the fair market value of the Business Assets to be sold by the US Vendor, valued in accordance with the rules and regulations under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended is less than US$63.1 million; and

8.10.7.

the Purchaser has the financial resources required to fulfil its obligations under this Agreement in respect of the payment of the Initial Consideration and the issue of the Letter of Credit and, to the extent such resources rely on third parties providing finance, the Purchaser has committed facilities available to it which are not subject to any conditions outside the Purchaser’s control.

9.

CLAIMS PROCEDURE

9.1.

If any party to this Agreement (the “Claimant”) becomes aware of any matter that may give rise to a claim against another party to this Agreement (the “Recipient”) under this Agreement notice of that fact shall be given to the Recipient as soon as practicable but any failure to give such timely notice shall not affect the rights of the Claimant except to the extent that the Recipient is materially prejudiced by such failure.

9.2.

Without prejudice to the validity of the claim or alleged claim in question (and subject to the Recipient entering into such undertakings relating to confidentiality as the Claimant may reasonably require), and except as otherwise required by law, the Claimant shall allow, and shall procure that

the relevant Associated Companies of the Claimant allow, the Recipient and its accountants and professional advisers to investigate the matter or circumstance alleged to give rise to such claim and whether and to what extent any amount is payable in respect of such claim and for such purpose the Claimant shall give, and shall procure that the relevant Associated Companies of the Claimant give all relevant information,  access to premises and personnel during business hours and on reasonable advance notice, and the right to examine and copy or photograph any assets, accounts, documents and records, as the Recipient or its accountants or professional advisers may reasonably request (in each case at the Recipient’s cost).

9.3.

If the claim in question is a result of or in connection with a claim or liability to a third party then:

9.3.1.

no admission of liability shall be made by or on behalf of the Claimant or any Associated Company of the Claimant and the claim shall not be compromised, disposed of or settled without the consent of the Recipient (such consent not to be unreasonably withheld or delayed);

9.3.2.

the Recipient shall (subject to its providing an indemnity in terms reasonably satisfactory to the Claimant in respect of all costs and expenses which may be incurred by the Claimant or any Associated Company of the Claimant in complying with this Clause 9.3.2) be entitled at its own expense and in consultation with the Claimant to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest such claim or liability (including, without limitation, making counterclaims or other claims against third parties) in the name of and on behalf of the Claimant or any Associated Company of the Claimant concerned and to have the conduct of any related proceedings, negotiations or appeals; and

9.3.3.

the Claimant will give and procure that the relevant Associated Companies of the Claimant give, subject to their being paid all reasonable out of pocket costs and expenses, and except as otherwise required by law, all relevant information, access to premises and personnel during normal business hours on reasonable advance notice, and the right to examine and copy or photograph any assets, accounts, documents and records, for the purpose of avoiding, disputing, denying, defending, resisting, appealing, compromising or contesting any such claim or liability as the Recipient or their professional advisers reasonably request (in each case at the Recipient’s cost).  The Recipient agrees to and shall procure that its employees, agents and professional advisers, keep all such information confidential and only use it for such purpose.

This Clause 9.3 will not apply so as to give any of the Vendors any rights in respect of the conduct of the defence by the Purchaser or a Local Purchaser of claims made by a party to a Government Contract if in the reasonable opinion of the Purchaser or a Local Purchaser, as the case may be such defence of such claim would damage the Target Business.  Clause 9.3.2 will not apply as to any third party claims seeking an injunction or other relief which is not a

10.

PROTECTION OF GOODWILL

10.1.

The following terms shall have the following meanings respectively in this Clause 10:

10.1.1.

“Permitted Activity” means (a) all activities of any member of the Vendors’ Group, or interest in, or the management, operation, or ownership of, the respective businesses of any of them other than a Restricted Activity and (b) any activity which relates to or comprises (i) the manufacturing and quality control testing and analysis of vaccines (other than the Vaccines except pursuant to the Master Services Agreement, the Supply Agreement or any other agreement entered into between the Purchaser’s Group and the UK Vendor) by biological processes and/or (ii) the carrying out of process or analytical development for, or technical development in relation to the scale-up of, such manufacturing and quality control testing and analysis for customers engaged in the development of vaccines;

10.1.2.

“Restricted Activity” means carrying on the business of (i) the development, manufacture and sale of the Vaccines or (ii) the development, manufacture or sale of other vaccines against infection by anthrax or plague (but for the avoidance of doubt, the manufacture of (a) other vaccines (not being vaccines against infection by anthrax or plague) developed by third parties and (b) adjuvants for third parties used either in relation to the Vaccines or to any other types of vaccine are not within the scope of this definition); and

10.1.3

“Restricted Period” means three years commencing on Completion.

10.2.

Each of the Vendors undertakes with the Purchaser (and each other member of the Purchaser’s Group) that it will not and the Principal Vendor undertakes to procure that none of the Associated Companies of the Vendors will during the Restricted Period:

10.2.1.

carry on, be engaged in or in any way interested in or connected with any Restricted Activity during the Restricted Period; or

10.2.2.

from the date of this Agreement to the end of the Restricted Period otherwise than as agreed between the parties, offer employment to, enter into a contract for the services of, induce or seek to induce from the Target Business any Employee to become employed whether as employee, consultant or otherwise by any Vendor or any of its Associated Companies or any third party.

10.3.

Notwithstanding Clause 10.2 above, nothing shall prevent any member of the Vendors’ Group from time to time from:

10.3.1.

engaging in a Permitted Activity;

10.3.2.

acquiring and thereafter managing and operating any business, firm, company or group of companies which is engaged or interested in a Restricted Activity provided that  the Restricted Activity represents 20% or less of the turnover of the whole business, firm, company or group of companies acquired;

10.3.3.

engaging in a transaction under which all or part of the remaining business of the Vendors’ Group is sold or contributed to or combined with another business engaged or interested in a Restricted Activity in circumstances where the interest of the Vendors’ Group in the combined undertaking is less than or equal to 50%, provided that the Principal Vendor shall procure that it shall be a condition of any such transaction that the counterparty to such transaction agrees that the assets and employees of the Vendors’ Group which are included in such contribution or combination cannot be used in such a manner as would, if they had remained with the Vendors’ Group, have been in breach of this Clause 10;

10.3.4.

bona fide general advertising for employees or consultants and hiring such employees or consultants in response thereto.

10.4.

For the avoidance of doubt, if another entity acquires control of an entity which is currently an Associated Company of any Vendor, the Principal Vendor’s obligation to procure compliance with Clause 10.2 shall apply only to such Associated Company of the relevant Vendor and shall not (except, where relevant, as set out in Clause 10.3.3) extend to require compliance by any other entity within the acquirer’s group.

10.5.

Each Vendor shall promptly inform the Purchaser in writing if it acquires any interest in a business, firm, company or group of companies to which the exceptions in Clauses 10.3.2 and 10.3.3 apply.

10.6.

The Vendors consider that the restrictions contained in this Clause are no greater than is reasonable and necessary for the protection of the interest of the Purchaser and assuring the Purchaser the full benefit and value of the Goodwill but if any such restriction shall be held to be void but would be valid if deleted in part or reduced in application, such restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.

11.

CONTRACTS

11.1.

Subject to Clause 11.2, with effect from Completion and to the extent that the same is lawful and permissible under the relevant Contract, each of the Business Vendors assigns to the Purchaser (or the relevant Local Purchaser) its rights under each Contract.

11.2.

To the extent that the assignments referred to in Clause 11.1 are not lawful or permissible (whether due to the consent of the other party or parties to such contract not being obtained or otherwise), or in the event that a Contract can only be novated with the consent of a third party:

11.2.1.

each of the parties shall use all reasonable endeavours (including, in relation to the Purchaser, providing parent company guarantees on the account of the Local Purchasers if so requested) to procure

assignments or novations of the relevant Contract to the Purchaser or a Local Purchaser and where relevant shall seek to agree and execute with the relevant counterparty to such Contract a form of novation ; and

11.2.2.

until such assignments have been procured or the Contract has been novated to the Purchaser or a Local Purchaser:

(a)

this Agreement shall not constitute an assignment or attempted assignment of the Contract but the relevant Business Vendors shall hold the benefit of the relevant Contract and any monies, goods or other benefits received under such Contract in trust for the Purchaser or the relevant Local Purchaser absolutely (but only if the relevant Business Vendor can do so without causing an event of default or termination and without a breach of law);

(b)

the relevant Business Vendor shall at the cost of the Purchaser give all reasonable assistance to the Purchaser to enable the Purchaser or a Local Purchaser to enforce the relevant Business Vendor’s rights under the relevant Contract including giving the Purchaser access to all relevant books, documents and other information in relation to such Contract as the relevant Business Vendor may continue to hold and the Purchaser may reasonably require from time to time;

(c)

to the extent that such sub-contracting is permissible and lawful under the relevant Contract, the Purchaser or a Local Purchaser shall perform all of the obligations of the relevant Business Vendor under such Contract as sub-contractor of the relevant Business Vendor and where such sub-contracting is not permissible, the Purchaser or a Local Purchaser shall perform such obligations as agent for the relevant Business Vendor; and

(d)

without prejudice to the foregoing, the parties shall co-operate (each at its own expense) in making such other reasonable lawful alternative arrangements regarding the relevant Contract as may best achieve the transfer with effect from Completion of the benefit and burden of such Contract to the Purchaser or a Local Purchaser.

11.3.

The Purchaser undertakes in respect of each Contract assigned or novated to it hereunder or in respect of which the Purchaser or a Local Purchaser receives the benefit under Clause 11.2.2, that it will procure at its own expense the performance of the Business Vendors’ or Avecia Limited’s obligations thereunder and relieve and indemnify the Business Vendors and Avecia Limited of any liabilities in relation thereto excluding any liability to the extent such liability is incurred or increased as a result of any act of wilful default or bad faith on the part of the Business Vendors or Avecia Limited.

11.4.

If and to the extent that Avecia Limited retains any interest in any of the Contracts, it shall also comply with the obligations of the Business Vendors set out in this Clause.

12.

EMPLOYEES

The provisions of Schedule 6 shall apply in relation to the Employees and the transfer of the employment of the Employees to the Purchaser or a Local Purchaser and ancillary matters.

13.

POST-COMPLETION OBLIGATIONS

Debtors

13.1.

Not later than 30 days following Completion, the Principal Vendor shall provide to the Purchaser written details of the name and address of each Debtor, the amount owing to the relevant Business Vendor by such Debtor and the date on which the debt became due and payable.

Receipts by Vendors’ Group

13.2.

If at any time after Completion, any member of the Vendors’ Group receives any monies in respect of any Debtor or Claim then the Principal Vendor shall procure that such member of the Vendors’ Group shall pay to the Purchaser as soon as reasonably practicable the amount recovered (less any Taxation which would not have arisen but for the receipt of such monies and less any amount in respect of VAT included in the amount recovered, to the extent that the Business Vendor will be required to account to a Tax Authority for such amount and provided that:

13.2.1.

the Principal Vendor shall and shall procure that all members of the Vendors’ Group shall take all reasonable steps to reduce or eliminate any Taxation so arising and to recover any Taxation so paid; and

13.2.2.

if and to the extent that any member of the Vendor’s Group subsequently recovers all or part of any Taxation so paid, the Principal Vendor shall procure that such member of the Vendor’s Group shall, as soon as reasonably practicable and in any event, within five Business Days of receipt thereof, pay to the Purchaser the whole amount so recovered).

Vendors not to Collect Debtors

13.3.

For the avoidance of doubt, the Vendors shall not, without the prior written consent of the Purchaser, take any steps (including instructing any third party) to collect any amounts owed to them in respect of a Debtor, nor shall they (or authorise any third party to) settle, compromise or release any amounts owned to any of them in respect of a Debtor, nor institute or threaten to institute legal or arbitration proceedings in respect of any Debtor, and the Vendors shall not do anything to hinder the collection by the Purchaser of any amounts owing in respect of a Debtor.

Receipts by Purchaser’s Group

13.4.

If at any time after Completion any member of the Purchaser’s Group receives or has possession of any Excluded Asset or any monies attributable to any Excluded Asset, the Purchaser shall procure that the relevant member of the Purchaser’s Group shall pay or forward to the Principal Vendor as soon as reasonably practicable such Excluded Asset or monies (less any Taxation which would not have arisen but for the receipt or possession of such monies or Excluded Asset and less any amount in respect of VAT included in the amount recovered to the extent that the relevant member of the Purchaser’s Group will be required to account to a Tax Authority for such amount and provided that:

13.4.1.

the Purchaser shall and shall procure that all members of the Purchaser’s Group shall take all reasonable steps to reduce or eliminate any Taxation so arising and to recover any Taxation so paid; and

13.4.2.

if and to the extent that any member of the Purchaser’s Group subsequently recovers all or part of any Taxation so paid, the Purchaser shall procure that such member of the Purchaser’s Group shall, as soon as reasonably practicable and in any event within five Business Days of receipt thereof, pay to the Vendor the whole amount so recovered).

Trade Enquiries

13.5.

The Business Vendors shall refer promptly to the Purchaser any notices, correspondence, enquiries or orders relating to the Target Business, which are received by the Business Vendors on or after Completion and title in them shall vest in the Purchaser.

Further Assurance

13.6.

Each of the parties shall from time to time on being required to do so by another, do or procure that there is done all such acts reasonably in its power and/or execute and deliver all such further documents as such other party may reasonably consider necessary for giving full effect to this Agreement (provided that, subject to Clause 13.7, if one party requires another to execute a document pursuant to this Clause, the party making such request shall bear the cost of preparation, execution and, where applicable, filing of such document).

13.7.

The cost allocation referred to in Clause 13.6 shall not apply to any costs incurred in connection with the preparation, execution, implementation or filing of any document which a party had failed to provide in breach of the terms of this Agreement, the costs of which shall be borne by the party so in breach.

Use of Excluded Name

13.8.

Subject to Clause 13.9, the Purchaser undertakes to the Vendors that it shall not, and shall procure that no member of the Purchaser’s Group shall, after Completion, use in any way whatsoever any registered or unregistered trademarks (including any logos or other devices) incorporating the Excluded Name.

13.9.

The Purchaser and the Local Purchasers shall have the right to continue to use the trade mark “Avecia” on a royalty free, non-exclusive basis for a period of 3 months from Completion. Such use shall be solely on stationery, premises, promotional material, packaging and products and on any other assets comprising part of the Business Assets and to which such trade marks were affixed immediately before Completion, and solely in the manner in which they were being used immediately before Completion provided that the Purchaser shall use its reasonable endeavours to make clear on such stationery, packaging, products and promotional materials that the Purchaser or the Local Purchasers are not, and the Target Business is no longer, part of the Vendors’ Group and further provided that any goodwill arising from the use of such trade marks shall enure to the benefit of the Vendors’ Group.

Assistance with Tax Returns and Audit

13.10.

The Purchaser shall procure that the employees of the Purchaser’s Group from time to time shall provide such assistance to the Vendors’ Group (at the Purchaser’s expense) as is reasonably required for the purpose of the Vendors’ Group’s preparation and finalisation of individual and consolidated accounts of members of the Vendors’ Group.

13.11.

The Principal Vendor shall procure that the employees of the Vendors’ Group from time to time shall provide such assistance to the Purchaser’s Group (at the Principal Vendor’s expense) as is reasonably required for the purpose of the Purchaser’s Group’s completion of any relevant Tax returns or filings relating to the Target Business.

Procurement Obligations

13.12.

Where this Agreement provides for a member of the Vendors’ Group or a member of the Purchaser’s Group to be obliged in any way, such provision shall be construed as including an obligation on the Principal Vendor or the Purchaser, as the case may be, to procure that such obligation is discharged. Where this Agreement provides for a member of the Vendors’ Group or a member of the Purchaser’s Group enjoying any benefit, such provision shall be construed as including an obligation on the Purchaser or the Principal Vendor respectively to ensure that such benefit is provided or made available by the relevant member of its group.

Assignment of Lease

13.13.

The provisions of Schedule 8 shall apply in relation to the assignment of the Lease by Avecia Limited.

Records

13.14.

Other than in relation to VAT Records which are dealt with in Clause 15, in the event that any books or records (other than the Books and Records) relate in part (but not exclusively) to the Target Business and are not delivered to the Purchaser on Completion, the Vendors shall use all reasonable endeavours (so far as lies within their power) to ensure that such books and records are properly and diligently maintained and that, for a period of six years from Completion, the Purchaser and the Purchaser’s representatives shall be permitted to have access (at all reasonable times during normal business hours and on reasonable advance notice) to (and at the Purchaser’s expense, to take copies of) such records for the purposes of the Target Business or any Tax or other return in connection with it.

Financial Statements

13.15.

Not later than 45 days after the Completion Date, the Principal Vendor shall deliver to the Purchaser the Audited Non-Statutory Accounts.  The Principal Vendor and the Purchaser shall equally bear the costs of preparation and audit of the Audited Non-Statutory Accounts. The Principal Vendor shall provide such further co-operation to the Purchaser’s auditors as the Purchaser may reasonably request in respect of any questions or matters arising from the Audited Non-Statutory Accounts.

Novation of NIH Contracts

13.16.

The provisions of this Clause 13.16 apply in respect of the NIH Contracts.

13.16.1.

Following Completion, the Principal Vendor, the UK Vendor and Avecia Limited, to the extent applicable, will, in accordance with, and to the extent contemplated by, the Federal Acquisition Regulation Part 42, Subpart 42.12 (i) promptly submit a written request to, and use commercially reasonable efforts to cause, the US Government or other relevant governmental entity to novate each of the NIH Contracts to Purchaser or a Local Purchaser and to otherwise recognise the Purchaser or a Local Purchaser as the successor in interest to each of the NIH Contracts; and (ii) enter into novation agreements in the form set forth in FAR Part 42, Subpart 42.1204, which is attached as schedule C to the Government Related Subcontract Agreement (collectively, the “Novation Agreement”). The Purchaser shall cooperate with and assist the Principal Vendor, the UK Vendor and Avecia Limited in preparing the above-referenced submissions to the extent requested by the Principal Vendor

13.16.2.

The Principal Vendor and each other Vendor shall use commercially reasonable efforts and provide reasonable cooperation, and shall procure from each other Vendor such cooperation, in making personal introductions of representatives of the Purchaser to the contracting officers responsible for the award and administration of the NIH Contracts. The purposes of such introductions will include allowing the Purchaser to discuss the need for novation or other approvals of the transactions contemplated by this Agreement and related

agreements by the US Government or other relevant governmental entity, and ensuring good customer relationships following Completion. The Purchaser and the Principal Vendor will each use commercially reasonable efforts, and shall procure from each other Vendor and Local Purchaser such efforts, to promptly obtain all consents, approvals and waivers required for the purpose of processing, entering into and completing a Novation Agreement with regard to each NIH Contract, including responding to requests for information by the US Government or other relevant governmental entity with regard to such Novation Agreement. Further, from the date of this Agreement, until the process of entering into such Novation Agreements is complete (which the parties acknowledge is likely to occur following Completion), the Principal Vendor, Avecia Limited, the UK Vendor and the Purchaser, to the extent applicable, will each use commercially reasonable efforts to provide all reasonable information and take all other actions reasonably necessary to execute and consummate such Novation Agreements.

13.16.3.

In the event that the US Government or any other relevant governmental entity declines to enter into a specific Novation Agreement in accordance with, and to the extent required by, Federal Acquisition Regulation, Part 42, Subpart 42.12 recognizing the transfer of the NIH Contracts to the Purchaser or a Local Purchaser, or until such time as the US Government or other relevant governmental entity recognises such transfer by entering into a Novation Agreement, nothing in this Agreement will constitute a transfer, assignment, attempted transfer or an attempted assignment thereof.

13.16.4.

Until such time as the US Government or other relevant governmental entity recognises the transfer of the rights and obligations under a NIH Contract to the Purchaser, in accordance with, and to the extent required by, the Federal Acquisition Regulation Part 42, Subpart 42.12, the Principal Vendor or such other applicable Vendor shall subcontract with the Purchaser, pursuant to a subcontract agreement in substantially the form of the Government Related Subcontract Agreement, for the Purchaser or a Local Purchaser to perform for and in the place of the Principal Vendor or other applicable Vendor, any and all operations and provide any and all goods equipment, services and other performance obligations under the NIH Contracts as of Completion, pursuant to each of their respective terms and conditions, including any and all amendments, options, modifications, purchase orders issued thereunder and such other terms and conditions as may have been duly incorporated in the NIH Contracts; provided that the Principal Vendor, and such other Vendor, does not subcontract to the Purchaser or a Local Purchaser any NIH Contract for which novation is not required.

13.16.5.

The Purchaser shall perform and discharge each NIH Contract in a timely manner and in accordance with law and with all of the terms of such NIH Contract.

14.

GUARANTEES

14.1.

In this Clause:

14.1.1.

references to the “Guarantor” shall be construed both as a reference to the Purchaser (in relation to the Local Purchasers) and to the Principal Vendor (in relation to the Business Vendors); and

14.1.2.

references to the “Guaranteed Subsidiaries” means the Local Purchasers (in relation to the Purchaser) and the Business Vendors (in relation to the Principal Vendor).

14.2.

In consideration of the other parties entering into this Agreement the Guarantor hereby unconditionally and irrevocably guarantees as a primary obligation to the other parties (and their successors, transferees and assigns) due and punctual performance and observance by the Guaranteed Subsidiaries of all their obligations under or for breach of this Agreement and any agreement to be entered into pursuant to it (including obligations to pay damages) (the “Guaranteed Obligations”). The liability of the Guarantor under this Clause shall not be released or diminished by any variation of this Agreement or the terms of the Guaranteed Obligations, any forbearance, waiver, release, neglect or delay in seeking performance of the Guaranteed Obligations or any granting of time or any other indulgence or concession for such performance, or by any assignment of the benefit of the Guaranteed Obligations in accordance with Clause 19.18 or 19.19.

14.3.

If and whenever a Guaranteed Subsidiary defaults for any reason whatsoever (and irrespective of the time during which such default has been unremedied) in the performance of any of the Guaranteed Obligations, the Guarantor shall forthwith upon demand unconditionally and irrevocably perform (or procure performance of) and satisfy (or procure the satisfaction of) the Guaranteed Obligations in regard to which such default has been made as if it were the Guaranteed Subsidiary.