ASSET PURCHASE AGREEMENT
FOR THE PURCHASE OF THE ASSETS OF
ITF OPTICAL TECHNOLOGIES INC.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
APRIL 4, 2006
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TABLE OF CONTENTS
1. INTERPRETATION...........................................................2
1.1 DEFINITIONS........................................................2
1.2 HEADINGS...........................................................8
1.3 EXTENDED MEANINGS..................................................9
1.4 STATUTORY REFERENCES...............................................9
1.5 ACCOUNTING PRINCIPLES..............................................9
1.6 CURRENCY...........................................................9
2. PURCHASE AND SALE........................................................9
2.1 MANUFACTURING ASSETS TO BE SOLD AND PURCHASED......................9
2.2 R&D ASSETS TO BE SOLD AND PURCHASED...............................11
2.3 EXCLUDED ASSETS...................................................11
2.4 PURCHASE PRICE....................................................12
2.5 OBLIGATIONS AND LIABILITIES ASSUMED...............................13
2.6 OBLIGATIONS AND LIABILITIES NOT ASSUMED...........................14
2.7 ELECTIONS.........................................................14
2.8 MANARIS SHARES....................................................14
3. SELLER'S REPRESENTATIONS AND WARRANTIES.................................16
3.1 ORGANIZATION......................................................16
3.2 AUTHORITY.........................................................17
3.3 FINANCIAL.........................................................18
3.4 TAX MATTERS.......................................................18
3.5 ABSENCE OF CHANGES................................................18
3.6 CONDUCT OF PURCHASED BUSINESS.....................................18
3.7 ASSETS............................................................18
3.8 LEASED PREMISES...................................................18
3.9 CONTRACTS, AGREEMENTS AND COMMITMENTS.............................18
3.10 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS..................18
3.11 EMPLOYEES.........................................................18
3.12 EMPLOYEE BENEFITS.................................................18
3.13 COMPETITIVE BUSINESS..............................................18
3.14 INTELLECTUAL PROPERTY RIGHTS......................................18
3.15 PRODUCT WARRANTY..................................................18
3.16 PRODUCTS..........................................................18
3.17 PRODUCT LIABILITY.................................................18
3.18 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.......................18
3.19 LITIGATION........................................................18
3.20 FEES..............................................................18
4. SURVIVAL OF SELLER'S REPRESENTATIONS AND WARRANTIES.....................18
5. AVENSYS' REPRESENTATIONS AND WARRANTIES.................................18
5.1 ORGANIZATION......................................................18
5.2 AUTHORITY.........................................................18
5.3 FINANCIAL.........................................................18
5.4 TAX MATTERS.......................................................18
5.5 ABSENCE OF CHANGES................................................18
5.6 CONDUCT OF AVENSYS' BUSINESS......................................18
5.7 INTELLECTUAL PROPERTY RIGHTS......................................18
5.8 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.......................18
5.9 LITIGATION........................................................18
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5.10 FEES..............................................................18
6. AVENSYS LAB' REPRESENTATIONS AND WARRANTIES.............................18
6.1 ORGANIZATION......................................................18
6.2 AUTHORITY.........................................................18
6.3 FINANCIAL.........................................................18
6.4 TAX MATTERS.......................................................18
6.5 ABSENCE OF CHANGES................................................18
6.6 CONDUCT OF AVENSYS LAB'S BUSINESS.................................18
6.7 INTELLECTUAL PROPERTY RIGHTS......................................18
6.8 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.......................18
6.9 LITIGATION........................................................18
6.10 FEES..............................................................18
7. MANARIS' REPRESENTATIONS AND WARRANTIES.................................18
7.1 ORGANIZATION......................................................18
7.2 AUTHORITY.........................................................18
7.3 SEC FILINGS.......................................................18
8. SURVIVAL OF AVENSYS, AVENSYS LAB AND MANARIS' REPRESENTATIONS
AND WARRANTIES..........................................................18
9. PREFERRED HOLDERS' REPRESENTATIONS AND WARRANTIES.......................18
9.1 ACCREDITED INVESTOR...............................................18
9.2 GUARANTEE.........................................................18
9.3 SURVIVAL..........................................................18
10. COVENANTS............................................................18
10.1 EMPLOYEES.........................................................18
10.2 COVENANTS OF THE SELLERS..........................................18
10.3 COVENANTS OF AVENSYS, AVENSYS LAB AND MANARIS.....................18
10.4 ACCESS TO BOOKS AND RECORDS AND FINANCIAL STATEMENTS..............18
11. CONDITIONS OF CLOSING................................................18
11.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASERS......................18
11.2 CONDITIONS FOR THE BENEFIT OF THE SELLER..........................18
12. INDEMNIFICATION......................................................18
12.1 INDEMNIFICATION BY THE SELLER.....................................18
12.2 INDEMNIFICATION BY AVENSYS, AVENSYS LAB OR MANARIS................18
12.3 MATTERS INVOLVING THIRD PARTIES...................................18
12.4 DE MINIMUS LIABILITY..............................................18
12.5 SELLER'S MAXIMUM LIABILITY........................................18
12.6 MAXIMUM LIABILITY OF AVENSYS, AVENSYS LAB AND MANARIS.............18
12.7 CONSEQUENTIAL DAMAGES.............................................18
13. GENERAL..............................................................18
13.1 FURTHER ASSURANCES................................................18
13.2 TIME OF THE ESSENCE...............................................18
13.3 COMMISSIONS.......................................................18
13.4 PROFESSIONAL FEES.................................................18
13.5 PUBLIC ANNOUNCEMENTS..............................................18
13.6 BENEFIT OF THE AGREEMENT..........................................18
13.7 ENTIRE AGREEMENT..................................................18
13.8 AMENDMENTS AND WAIVER.............................................18
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13.9 ASSIGNMENT........................................................18
13.10 NOTICES...........................................................18
13.11 GOVERNING LAW.....................................................18
13.12 JURISDICTION......................................................18
13.13 AGENT FOR SERVICE.................................................18
13.14 COUNTERPARTS......................................................18
13.15 DELIVERY AND ACCEPTANCE...........................................18
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ASSET PURCHASE AGREEMENT made as of April 4, 2006.
BETWEEN: AVENSYS INC., ("AVENSYS") a company incorporated under Part
1A of the Companies Act (Quebec), having its head office at
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, herein acting and
represented by its duly authorized representative as he so
declares;
AND: AVENSYS LABORATORIES INC., ("AVENSYS LAB") a company
incorporated under Part 1A of the Companies Act (Quebec),
having its head office at ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, herein acting and represented
by its duly authorized representative as he so declares;
(AVENSYS and AVENSYS LAB are herein collectively referred to
as the "PURCHASERS")
AND: ITF OPTICAL TECHNOLOGIES INC., (the "SELLER") a company
incorporated under Part 1A of the Companies Act (Quebec),
having its head office at ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, herein acting and represented by its duly
authorized representative as he so declares,
AND: MANARIS CORPORATION, ("MANARIS") a corporation incorporated
under the laws of the state of Nevada, having a place of
business at ▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, herein acting and represented by its duly
authorized representative as he so declares,
AND INVESTISSEMENT TECHNOLOGIE (3599) INC., ("3599") a
INTERVENING: company incorporated under Part 1A of the
Companies Act (Quebec) having its head office at 600, de la
Gauchetiere West, Suite 1500, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, herein
acting and represented by its duly authorized representative
as he so declares,
AND ONTARIO TEACHERS' PENSION PLAN, ("OTPP") a
INTERVENING: corporation governed by the laws of the Province of Ontario,
having its head office at ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇, herein acting and represented by its duly authorized
representative as he so declares,
AND CELTIC HOUSE VENTURE PARTNERS FUND IIA LP,
INTERVENING: ("CELTIC") a limited partnership formed under the laws of
Ontario having its head office at ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, represented by Celtic House
General Partner (Fund IIA) Inc., its general partner, herein
acting and represented by its duly authorized representative
as he so declares,
AND GTI V LIMITED PARTNERSHIP, ("GTI V") a limited
INTERVENING: partnership formed under the laws of the Province of Quebec
having its head office at ▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, represented by its general partner
GTI V Inc., a corporation incorporated under the laws of the
Province of Quebec, herein acting and represented by its duly
authorized representative as he so declares,
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AND GTI V (NR) LIMITED PARTNERSHIP, ("GTI V (NR)") a
INTERVENING: limited partnership formed under the laws of the Province of
Quebec having its head office at ▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, represented by its general
partner GTI V (NR) Inc., a corporation incorporated under the
laws of the Province of Quebec, herein acting and represented
by its duly authorized representative as he so declares,
AND BAY TECH VENTURE CAPITAL GMBH & CO. KG., ("BAY
INTERVENING: TECH") a limited partnership incorporated under the laws of
Germany having its head office at ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, herein acting and represented by its duly
authorized representative as he so declares, (3599, OTPP,
Celtic, GTI V, GTI V (NR) and Bay Tech collectively referred
as the "PREFERRED HOLDERS")
WHEREAS the Seller carries on a business of manufacturing of all-fiber photonics
solutions for industrial, military, terrestrial and undersea systems (the
"PURCHASED BUSINESS");
AND WHEREAS the Seller also conducts R&D activities with respect to the
Purchased Business;
AND WHEREAS the Seller desires to sell and the Purchasers desire to purchase
certain assets of the Seller pertaining to the Purchased Business upon and
subject to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants and agreements
herein contained, the parties hereto agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
1.1.1 "ADVERSE CONSEQUENCES" means all actions, suits,
proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties,
interest, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable
legal and accounting fees and expenses;
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1.1.2 "AGREEMENT" means this agreement and all amendments made
hereto by written agreement between the Purchasers, the
Seller and Manaris;
1.1.3 "ASSETS" means collectively the Manufacturing Assets and
the R&D Assets;
1.1.4 "ASSUMED LIABILITIES" has the meaning set forth in
Section 2.5;
1.1.5 "AVENSYS' ASSETS" means the undertaking and all of the
assets of Avensys' Business of every kind and
description and wheresoever situated;
1.1.6 "AVENSYS' BUSINESS" means the business carried on by
Avensys which includes the business of environmental
monitoring of air, water, soil, buildings and materials;
1.1.7 "AVENSYS' FINANCIAL STATEMENTS" means the unaudited,
unconsolidated financial statements of Avensys for the
twelve-month period ended on December 31, 2005, a copy
of which is attached to Section 1.1.7 of the Purchasers'
Disclosure Schedule;
1.1.8 "AVENSYS' PRODUCTS" means any products (including custom
made products), as well as all software, source codes,
object codes and any related documentation or manuals,
developed, manufactured or owned by Avensys and which
may be necessary or useful in the conduct of the
Avensys' Business;
1.1.9 "AVENSYS LAB'S ASSETS" means the undertaking and all of
the assets of Avensys Lab's Business of every kind and
description and wheresoever situated;
1.1.10 "AVENSYS LAB'S BUSINESS" means the business carried on
by Avensys Lab which includes R&D activities in the
field of optical components and instrumentation as well
as packaged fiber-based sensors;
1.1.11 "AVENSYS LAB'S FINANCIAL STATEMENTS" means the
unaudited, unconsolidated financial statements of
Avensys Lab for the seven-month period ended on December
31, 2005, a copy of which is attached to Section 1.1.11
of the Purchasers' Disclosure Schedule;
1.1.12 "AVENSYS LAB'S PRODUCTS" means any products (including
custom made products), as well as all software, source
codes, object codes and any related documentation or
manuals, developed, manufactured or owned by Avensys Lab
and which may be necessary or useful in the conduct of
the Avensys Lab's Business;
1.1.13 "AVENSYS LAB SHARES" has the meaning set forth in
Section 2.4.2;
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1.1.14 "BUSINESS DAY" means a day other than a Saturday, Sunday
or statutory holiday in Montreal (Quebec);
1.1.15 "BUSINESS INTELLECTUAL PROPERTY" has the meaning set
forth in Section 3.14.1, with respect to the Seller,
Section 5.7.1 with respect to Avensys and Section 6.7.1
with respect to Avensys Lab;
1.1.16 "CLAIM" means any demand, action, suit, proceeding,
claim, assessment, damage, loss, fines, penalties,
liabilities, cost or expenses (including, without
limitation, interest, penalties and reasonable
attorneys' and experts' fee and disbursements), judgment
or settlement or compromise relating thereto;
1.1.17 "CLOSING DATE" means April 13, 2006 or such other date
as may be agreed to by the Purchasers, the Seller and
Manaris;
1.1.18 "CONTAMINANTS" means any substance, matter, waste,
pollutant, hazardous, toxic or deleterious substance,
dangerous goods or contaminant of any kind defined or
regulated under any Environmental Law;
1.1.19 "DISCHARGE" means the deposit, spill, emission, leaking,
pumping, release, dumping, issuance, migration, flowing,
discharge, injection, seeping, leaching or disposal;
1.1.20 "ENCUMBRANCE" in respect of any property or asset, means
any encumbrance of whatever kind or nature, regardless
of form, whether or not registered or registrable and
whether or not consensual or arising by law (statutory
or otherwise), including any mortgage, lien, charge,
pledge, title retention agreement or security interest,
whether fixed or floating, or any assignment, lease,
option, right of pre-emption, privilege, encumbrance,
restrictive covenant, right of use or other right or
claim of any kind or nature whatsoever which affects
ownership of, title to, or the right to possess, use or
occupy, such property or assets or any part thereof or
interest therein;
1.1.21 "EMPLOYEE BENEFIT PLAN" has the meaning set forth in
Section 3.12.1;
1.1.22 "ENVIRONMENTAL LAWS" means all applicable laws,
regulations or orders relating to the environment or its
protection;
1.1.23 "ENVIRONMENTAL PERMITS" has the meaning set forth in
Section 3.18.2 with respect to the Seller, Section 5.8.2
with respect to Avensys and Section 6.8.2 with respect
to Avensys Lab;
1.1.24 "EQUIPMENT LEASES" has the meaning set forth in Section
2.1.3.3;
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1.1.25 "EXCLUDED LIABILITIES" has the meaning set forth in
Section 2.6.1;
1.1.26 "FINANCIAL STATEMENTS" means the unaudited financial
statements relating to the Purchased Business for the
twelve-month period ended on December 31, 2005, a copy
of which is attached to Section 1.1.26 of the Seller's
Disclosure Schedule;
1.1.27 "FREE DATE" has the meaning set forth in Section 2.8.2;
1.1.28 "GAAP" has the meaning set forth in Section 1.5;
1.1.29 "HEALTH AND SAFETY LAWS" means all applicable Laws
relating to health and safety in the workplace;
1.1.30 "INBOUND LICENSED INTELLECTUAL PROPERTY" has the meaning
set forth in Section 3.14.1 with respect to the Seller,
Section 5.7.1 with respect to Avensys and Section 6.7.1
with respect to Avensys Lab;
1.1.31 "INDEMNITEE" has the meaning set forth in Section 12.3;
1.1.32 "INDEMNITOR" has the meaning set forth in Section 12.3;
1.1.33 "INTELLECTUAL PROPERTY RIGHTS" means all foreign and
domestic intellectual property rights and the subject
matter thereof, including or arising from, (i) all
patents and pending applications for patents throughout
the world, and for the Seller only, Patents; (ii) for
the Seller only, Technical Information; (iii) trademarks
and trademark rights, trade names, service marks, brand
names, certification marks, and other indications of
origin, whether registered or not, and the goodwill
associated therewith; (iv) copyrights, whether
registered or not, including without limitation,
computer programs and computer software and all source
and object code, algorithms, architecture, structure,
display screens, layouts and development tools related
thereto, promotional materials and databases; (v)
industrial designs, whether registered or not; (vi)
trade secrets and other confidential or non-public
information, including inventions, designs, samples,
schematics, customer lists, supplier and dealer lists
and marketing research; (vii) internet protocol
addresses and domain names, whether or not used or
currently in service; (viii) any similar intellectual or
industrial property or proprietary rights; (ix)
registrations of, and applications to register or for
any of the foregoing, and any renewal, extension,
reissue, division, continuation or modification thereof;
(x) all documentation and media constituting, describing
or relating to the foregoing, including without
limitation manuals, memoranda and records and the right
to register any of the foregoing; and "INTELLECTUAL
PROPERTY RIGHT" shall mean any one of them;
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1.1.34 "KNOWLEDGE" with regard to any particular matter
relating to a party means the actual knowledge of the
officers of said party regarding such matter, after
having conducted a diligent inquiry about such facts or
circumstances with any relevant person or other
resource, as a prudent and diligent administrator would
perform under such circumstances;
1.1.35 "LAWS" means all applicable laws, statutes, rules,
regulations, by-laws, decrees, ordinances, directives,
decisions, declarations, injunctions, decrees, orders in
council, judgments and orders of a governmental,
regulatory or judicial authority;
1.1.36 "LEASED PREMISES" has the meaning set forth in Section
3.8.1;
1.1.37 "LEASES" has the meaning set forth in Section 2.1.3.4;
1.1.38 "MANARIS SHARES" has the meaning set forth in Section
2.4.1(ii);
1.1.39 "MANUFACTURING ASSETS" means the undertaking and all of
the assets of the Purchased Business of every kind and
description and wheresoever situated, save and except
those assets listed in Section 2.3.1 and the R&D Assets;
1.1.40 "MANUFACTURING ASSETS PURCHASE PRICE" has the meaning
set forth in Section 2.4.1;
1.1.41 "MANUFACTURING FIXED ASSETS" has the meaning set forth
in Section 2.1.1;
1.1.42 "MATERIAL ADVERSE EFFECT" means an event, occurrence,
fact, condition, change or effect that has or will have
a material adverse effect on the operations, results of
operations, financial condition, properties (including
intangible properties), assets (including intangible
assets) or liabilities (i) in the case of the Seller, of
the Purchased Business taken as a whole or the Assets;
(ii) in the case of Avensys, of the Avensys' Business
taken as a whole or the Avensys' Assets; and (iii) in
the case of Avensys Lab, of the Avensys Lab's Business
taken as a whole or the Avensys Lab's Assets;
1.1.43 "OPEN SOURCE LICENSE" has the meaning set forth in
Section 3.14.10;
1.1.44 "ORDINARY COURSE OF BUSINESS" means substantially the
same manner in which the Seller has previously carried
on the Purchased Business;
1.1.45 "OTCBB" has the meaning set forth in Section 2.4.1(ii);
1.1.46 "OTHER LEASE" means the lease for the Seller's premises
located at 45, 55 and ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇;
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1.1.47 "OUTBOUND LICENSED INTELLECTUAL PROPERTY" has the
meaning set forth in Section 3.14.6 with respect to the
Seller, Section 5.7.5 with respect to Avensys and
Section 6.7.5 with respect to Avensys Lab;
1.1.48 "OWNED INTELLECTUAL PROPERTY" has the meaning set forth
in Section 3.14.1 with respect to the Seller, Section
5.7.1 with respect to Avensys and Section 6.7.1 with
respect to Avensys Lab;
1.1.49 "PATENTS" means all registered patents and pending
applications for patents throughout the world, owned by
the Seller as at the Closing Date, that are used in or
relating to the Purchased Business, which patents are
listed in Section 1.1.49 of the Seller's Disclosure
Schedule;
1.1.50 "PERIOD" has the meaning set forth in Section 2.8.2;
1.1.51 "PERMITS" has the meaning set forth in Section 2.1.3.7;
1.1.52 "PERSON" whether or not capitalized, shall mean any
natural person, corporation, unincorporated
organization, partnership, limited or unlimited
liability company, association, joint venture, trust or
government, or any agency or political subdivision of
any government or any other entity;
1.1.53 "PERSONNEL" has the meaning set forth in Section 12.1;
1.1.54 "PRODUCTS" means any products (including custom made
products), including without limitation all all-fiber
photonic products (including all components and modules
set forth in Section 1.1.54 of the Seller's Disclosure
Schedule), as well as all software, source codes, object
codes and any related documentation or manuals,
developed, manufactured or owned by the Seller and which
may be necessary or useful in the conduct of the
Purchased Business;
1.1.55 "PURCHASED AGREEMENTS" has the meaning set forth in
Section 2.1.3.2;
1.1.56 "PURCHASED BUSINESS" has the meaning set forth in the
preamble;
1.1.57 "PURCHASERS' DISCLOSURE SCHEDULE" means the disclosure
schedule dated as of the date hereof addressed by the
Purchasers to the Seller;
1.1.58 "R&D" means research and development;
1.1.59 "R&D ASSETS" has the meaning set forth in Section 2.2;
1.1.60 "R&D ASSETS PURCHASE PRICE" has the meaning set forth in
Section 2.4.2;
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1.1.61 "R&D FIXED ASSETS" has the meaning set forth in Section
2.2.1;
1.1.62 "REFERENCE SHARE PRICE" has the meaning set forth in
Section 2.4.1(ii);
1.1.63 "SALE PRICE" has the meaning set forth in Section 2.8.2;
1.1.64 "SELLER'S DISCLOSURE SCHEDULE" means the disclosure
schedule dated as of the date hereof addressed by the
Seller to the Purchasers;
1.1.65 "SHAREHOLDER AGREEMENT" means the shareholder agreement
among the shareholders of Avensys Lab entered as of the
Closing Date;
1.1.66 "SOFTWARE LICENSES" has the meaning set forth in Section
2.1.3.5;
1.1.67 "TAXES" means any federal, provincial, local, foreign
and other income, profits, franchise, capital,
withholding, employment insurance, social security,
occupational, production, severance, gross receipts,
value added, sales, use, excise, real and personal
property, ad valorem, occupancy, transfer, employment,
disability, workers' compensation or other similar tax,
duty or other governmental charge (including all
interest and penalties thereon and additions thereto);
1.1.68 "TECHNICAL INFORMATION" means work in progress, data,
information, know-how, descriptions of unpatented
technology, techniques, systems, product roadmaps,
layouts and development tools related thereto, bills of
material, experience and other technical information
used in or relating to the Purchased Business, including
proprietary processes, specifications, formulae,
algorithms, models, user interfaces, concepts, ideas,
techniques, methods, source codes, object codes and
methodologies;
1.1.69 "TOTAL PURCHASE PRICE" means the sum of the
Manufacturing Assets Purchase Price and the R&D Assets
Purchase Price;
1.1.70 "TRANSFERRED EMPLOYEES" has the meaning set forth in
Section 10.1.
1.2 HEADINGS
The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this
Agreement. The terms "THIS AGREEMENT", "HEREOF", "HEREUNDER" and
similar expressions refer to this Agreement and not to any
particular Article, Section or other portion hereof and include any
amendment hereto. Unless something in the subject matter or context
is inconsistent therewith, references herein to Articles or Sections
are to Articles or Sections of this Agreement.
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1.3 EXTENDED MEANINGS
In this Agreement, words importing the singular number only shall
include the plural and vice versa, words importing the masculine
gender shall include the feminine and neuter genders and vice versa
and words importing persons shall include individuals, partnerships,
limited liability companies, associations, trusts, unincorporated
organizations and corporations.
1.4 STATUTORY REFERENCES
In this Agreement, unless something in the subject matter or context
is inconsistent therewith or unless otherwise herein provided, a
reference to any statute is to that statute as now enacted or as the
same may from time to time be amended, re-enacted or replaced and
includes any regulations made thereunder.
1.5 ACCOUNTING PRINCIPLES
Wherever in this Agreement reference is made to a calculation to be
made in accordance with generally accepted accounting principles
("GAAP"), such reference shall be deemed to be to the generally
accepted accounting principles in Canada from time to time approved
by the Canadian Institute of Chartered Accountants, or any successor
institute, applicable as at the date on which such calculation is
made or required to be made in accordance with generally accepted
accounting principles and applied in a manner consistent with prior
periods of the Seller.
1.6 CURRENCY
All references to currency herein are to lawful money of Canada.
2. PURCHASE AND SALE
2.1 MANUFACTURING ASSETS TO BE SOLD AND PURCHASED
Upon and subject to the terms and conditions hereof, the Seller will
sell to Avensys and Avensys will purchase from the Seller as a going
concern, as of and with effect from the opening of business on the
Closing Date, all of the right, title, benefit and interest of the
Seller in and to the Manufacturing Assets. Without limiting the
generality of the foregoing, the Manufacturing Assets to be sold and
purchased under this Agreement include:
2.1.1 all fixed assets listed in Section 2.1.1 of the Seller's
Disclosure Schedule used by the Seller in connection
with the Purchased Business as of the Closing Date (the
"MANUFACTURING FIXED ASSETS").
2.1.2 all inventories listed in Section 2.1.2 of the Seller's
Disclosure Schedule used by the Seller in connection
with the Purchased Business as of the Closing Date,
including all supplies, finished goods, work in progress
and raw material, subject to changes in the Ordinary
Course of Business;
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2.1.3 all of the following intangible assets of the Seller as
of the Closing Date relating to the Purchased Business;
2.1.3.1 all records of sales for the customers and
suppliers including those listed in Section
2.1.3.1 of the Seller's Disclosure Schedule;
2.1.3.2 all of the right, title and interest of the
Seller in the agreements listed in Section
2.1.3.2 of the Seller's Disclosure Schedule
(the "PURCHASED AGREEMENTS");
2.1.3.3 all of the right, title and interest of the
Seller in the equipment leases listed in
Section 2.1.3.3 of the Seller's Disclosure
Schedule (the "EQUIPMENT LEASES");
2.1.3.4 all of the right, title and interest of the
Seller in the real estate leases listed in
Section 2.1.3.4 of the Seller's Disclosure
Schedule (the "LEASES");
2.1.3.5 all of the right, title and interest of the
Seller in the software licenses listed in
Section 2.1.3.5 of the Seller's Disclosure
Schedule (the "SOFTWARE LICENSES");
2.1.3.6 all of the right, title and interest of the
Seller in the unfilled orders received by
the Seller in connection with the Purchased
Business and in the commitments in favour of
the Seller for supply of goods and services
entered into in the Ordinary Course of
Business for use in the Purchased Business
whether or not there are any written
contracts in respect thereto, including
without limiting the generality of the
foregoing, the contracts and commitments
described in Section 2.1.3.6 of the Seller's
Disclosure Schedule, in each case to the
extent remaining unfilled at the Closing
Date;
2.1.3.7 all of the right, title and interest of the
Seller in the licenses, registrations and
permits required to carry on the Purchased
Business in its Ordinary Course of Business
listed or described in Section 2.1.3.7 of
the Seller's Disclosure Schedule (the
"PERMITS"); and
2.1.3.8 all of the right, title and interest of the
Seller in personnel records and other
records, books, documents and data bases
recorded or stored by means of any device,
including in electronic form, relating to
the Purchased Business, the Manufacturing
Assets and the Transferred Employees, as are
in the possession or under the control of
the Seller.
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2.2 R&D ASSETS TO BE SOLD AND PURCHASED
Upon and subject to the terms and conditions hereof, the Seller
shall sell, assign and transfer to Avensys Lab and Avensys Lab shall
purchase from the Seller as of and with effect from the opening of
business on the Closing Date, all of the right, title and interest
of the Seller in and to the following assets related to the
Purchased Business (the "R&D ASSETS"):
2.2.1 all fixed assets listed in Section 2.2.1 of the Seller's
Disclosure Schedule used by the Seller in connection
with the R&D activities of the Purchased Business (the
"R&D FIXED Assets");
2.2.2 all of the following intangible assets of the Seller, as
of the Closing Date, relating to the R&D activities of
the Purchased Business:
2.2.2.1 all Intellectual Property Rights of the
Seller as of the Closing Date, including,
without limitation, all Intellectual
Property Rights listed in Section 2.2.2.1 of
the Seller's Disclosure Schedule;
2.2.2.2 the goodwill of the Seller relating to the
Purchased Business, including the name "ITF
Optical Technologies Inc./ITF Technologies
Optiques Inc."; and
2.2.2.3 all of the right, title and interest of the
Seller in records, books, processes,
documents and data bases recorded or stored
by means of any device, including in
electronic form, relating to the R&D Assets,
as are in the possession or under the
control of the Seller.
2.3 EXCLUDED ASSETS
2.3.1 Notwithstanding anything to the contrary herein
contained, the "MANUFACTURING ASSETS" and the "R&D
Assets" being sold, assigned and conveyed hereunder
shall exclude the following assets of Seller as of the
Closing Date:
2.3.1.1 all cash and bank accounts;
2.3.1.2 all prepaid expenses and deposits;
2.3.1.3 all of the accounts receivable of the Seller
including those relating to the Purchased
Business;
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2.3.1.4 all income or corporation taxes recoverable
or refundable, any governmental rebates or
refunds and any R&D tax credit receivables
(it is however understood and agreed between
the parties that any rights to the
Technology Partnership Canada federal
government program application for the
Ultra-reliable fiber-optic systems for
trans-oceanic and high power laser
applications, for a total of five million
dollars ($5,000,000) covering expenses
retroactive to June 1, 2004 shall form part
of the Assets, to the extent assignable);
and
2.3.1.5 all of the right, title and interest of the
Seller in all insurance policies maintained
by the Seller with respect to the Purchased
Business;
2.3.1.6 all of the right, title and interest of the
Seller in all life insurance policies
maintained by the Seller with respect to any
shareholder of the Seller; and
2.3.1.7 all tax loss carry forwards and other tax
deferral assets of the Seller.
2.4 PURCHASE PRICE
2.4.1 The purchase price payable to the Seller for the
Manufacturing Assets (the "MANUFACTURING ASSETS PURCHASE
PRICE") shall be $1,750,000 payable as follows:
(i) $750,000 shall be paid by Avensys to the
Seller by certified cheque, bank draft or
wire transfer of immediately available funds
on the Closing Date;
(ii) $1,000,000 shall be paid on the date hereof
by the issuance by Manaris of restricted
common stock in the capital of Manaris (the
"MANARIS SHARES") on the direction of the
Seller to the Preferred Holders in the
proportions set out in Section 2.4.3, the
number of Manaris Shares to be issued to be
calculated on the basis of the average
closing price of the common stock of Manaris
on the NASD's Over the Counter Bulletin
Board ("OTCBB") for the 20 trading days
immediately prior to the date hereof
(converted into Canadian dollars at the Bank
of Canada closing spot rate on the trading
day immediately before the Closing Date) as
reported on the OTCBB's website (the
"REFERENCE SHARE PRICE").
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2.4.2 The purchase price payable to the Seller for the R&D
Assets (the "R&D ASSETS PURCHASE PRICE") shall be the
fair market value of the R&D Assets or $2,000,000
payable by the issuance by Avensys Lab, on the direction
of the Seller to the Preferred Holders in the
proportions set out in Section 2.4.3, on the Closing
Date of 580,000 common shares and 2,000,000 Class E
Preferred Shares in the capital of Avensys Lab
representing 58% of the voting rights attached to all of
the shares of Avensys Lab (the "AVENSYS LAB SHARES").
2.4.3 Manaris Shares and Avensys Lab Shares shall be issued to
the Preferred Holders and shall be payable at the
direction of the Seller to each of the Preferred
Holders, according to their respective shareholding
interest in the Seller, as follows:
Preferred Holder Percentage
---------------- ----------
3599 42%
OTPP 22%
Celtic 14%
GTI V 7.12%
GTI V (NR) 2.88%
Bay Tech 12%
TOTAL 100%
2.4.4 The Seller and the Purchasers, in filing their
respective income tax returns, will use the allocations
of the Manufacturing Assets Purchase Price and the R&D
Assets Purchase Price as shall be mutually agreed at the
Closing Date.
2.5 OBLIGATIONS AND LIABILITIES ASSUMED
Avensys shall assume, and shall fulfill and perform the following
liabilities of the Seller (collectively the "ASSUMED LIABILITIES"):
2.5.1 the obligations and liabilities of the Seller accruing
on or after the Closing Date under the agreements of the
Seller relating to the Purchased Business described in
Sections 2.1.3.2, 2.1.3.3, 2.1.3.4, 2.1.3.5, 2.1.3.6 and
2.1.3.7; and
2.5.2 all standard product warranties of the Seller related to
the Purchased Products sold in connection with the
Purchased Business both before the Closing Date and
afterwards.
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2.6 OBLIGATIONS AND LIABILITIES NOT ASSUMED
2.6.1 Except as explicitly and specifically provided for in
Section 2.5 and Section 10.1, the Purchasers shall not
assume and shall not be liable or responsible for any
obligations, commitments or liabilities, contingent or
otherwise, of any nature whatsoever and whether
disclosed or undisclosed (i) related to the Seller, or
(ii) related to the Manufacturing Assets, the R&D Assets
or the Purchased Business and arising after the Closing
Date in respect of any fact, condition or circumstance
existing or occurring on or prior to the Closing Date
(the "EXCLUDED LIABILITIES"), including:
2.6.1.1 the Other Lease;
2.6.1.2 any taxes under the Income Tax Act (Canada)
or any other taxes whatsoever that may be or
become payable by the Seller including any
income or corporation taxes resulting from
or arising as a consequence of the sale by
the Seller to the Purchasers of the
Purchased Business and the Assets hereunder;
2.6.1.3 any indebtedness of the Seller to its
bankers, shareholders or any other Person;
and
2.6.1.4 any liabilities or obligations of the Seller
arising out of the conduct of the Purchased
Business prior to the Closing Date.
2.7 ELECTIONS
2.7.1 The Seller and the Purchasers will on the Closing Date
jointly execute an election under section 167(1.1) of
the Excise Tax Act (Canada) and section 75 of an Act
respecting the Quebec Sales Tax (Quebec) on the forms
prescribed for such purposes along with any
documentation necessary or desirable in order to effect
the transfer of the Assets without payment of any GST or
QST. The Purchasers will timely file within the
statutory delay such election forms, along with any
documentation necessary or desirable to give effect
thereto with the Ministere du Revenu du Quebec, together
with such party's GST and QST returns for the reporting
period in which the transactions contemplated herein are
consummated.
2.8 MANARIS SHARES
2.8.1 Within ninety (90) days following the Closing Date,
Manaris shall, at its expense:
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2.8.1.1 file the required registration statement
with the U.S. Securities and Exchange
Commission (the "SEC") to register the
Manaris Shares so as to permit the offer,
sale and distribution to the public on a
continuous basis all of the Manaris Shares
and any shares issuable pursuant to Section
2.8.2 as freely tradable and shall use
commercially reasonable efforts to cause
such registration to become effective;
2.8.1.2 prepare and file with the SEC such
amendments and supplements to such
registration statement, and the prospectus
used in connection with such registration
statement, as may be necessary to comply
with the United States Securities Act of
1933, as amended (the "SECURITIES ACT") in
order to enable the disposition of all
securities covered by such registration
statement;
2.8.1.3 furnish to the Preferred Holders such
numbers of copies of a prospectus as
required by the Securities Act, and such
other documents as the Preferred Holders may
reasonably request in order to facilitate
their disposition of their Manaris Shares;
2.8.1.4 notify each Preferred Holder, promptly after
Manaris receives notice thereof, of the time
when such registration statement has been
declared effective or a supplement to any
prospectus forming a part of such
registration statement has been filed and
after such registration statement becomes
effective, notify each Preferred Holder of
any request by the US Securities and
Exchange Commission that Manaris amend or
supplement such registration statement or
prospectus; and
2.8.1.5 use commercially reasonable efforts to cause
all Manaris Shares to be listed on the
OTCBB;
failing which, Manaris shall forthright issue to the
respective Preferred Holders, in the proportions set out
in Section 2.4.3, a further amount of common stock of
Manaris equal to 10% of the Manaris Shares without
prejudice to the rights and recourses of the Preferred
Holders set out in Section 2.8.2.
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2.8.2 The Preferred Holders in the proportions set out in
Section 2.4.3 shall be permitted to sell in every
three-month period following the date on which the
Manaris Shares become freely tradable (the "FREE DATE")
the lesser of (i) 25% of the Manaris Shares and (ii) the
average weekly reported volume of trading in Manaris
common shares on the OTCBB in the previous three-month
period. Notwithstanding the foregoing, the Preferred
Holders shall be permitted to sell any number of the
Manaris Shares in any three-month period through the
facilities of the OTCBB if the closing price of shares
of common stock of Manaris on the OTCBB on the date of
the sale of the Manaris Shares is higher than the
Reference Share Price. The Preferred Holders shall also
be permitted to transfer all or any of the Manaris
Shares at any time at any price by private sale to a
bona fide third-party purchaser.
In addition, if within the period ending one year after
the Free Date (the "Period"), the Preferred Holders sell
Manaris Shares through the facilities of the OTCBB at a
price ("SALE PRICE") which is less than the Reference
Share Price, Manaris shall, at the option of the
Preferred Holders, within five (5) Business Days of the
end of the Period (i) pay in cash the cumulative
shortfall, if any, between the Reference Share Price
multiplied by the number of Manaris Shares actually sold
by all of the Preferred Holders within the Period and
the Sale Prices for any Manaris Shares actually sold or
(ii) issue that number of free trading shares of common
stock of Manaris equal to the Shortfall divided by the
closing price of the shares of common stock of Manaris
on the OTCBB the date of the end of the Period or, if
such date is not a trading day on the OTCBB, the trading
day prior to such date.
2.8.3 In the event that all or part of Manaris Shares are not
freely tradeable (except due to restrictions imposed by
a regulatory authority on a Preferred Holder) on the
OTCBB on or prior to May 1, 2007, Manaris shall pay to
the Preferred Holders, in the proportions set out in
Section 2.4.3, an amount in cash equal to the number of
Manaris Shares which are not freely tradeable multiplied
by the Reference Share Price within 30 days of receiving
a written notice from a Preferred Holder together with
the certificate representing its proportion of such
number of Manaris Shares.
3. SELLER'S REPRESENTATIONS AND WARRANTIES
Except as otherwise indicated, the Seller hereby represents and warrants
to the Purchasers as follows, it being acknowledged by the Seller that the
Purchasers are relying upon such representations and warranties in
purchasing the Assets.
3.1 ORGANIZATION
The Seller is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with
the full corporate power to own or lease or use all of the Assets
and to carry on the Purchased Business, and is duly qualified as a
corporation to do business in each jurisdiction in which the
Purchased Business is carried on and the Seller has made all
necessary material filings under all applicable corporate,
securities and taxation laws or any other laws to which the Seller
is subject.
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3.2 AUTHORITY
3.2.1 The Seller has the corporate power, authority and right
to enter into and deliver this Agreement and to perform
its obligations hereunder and full right to transfer the
legal and beneficial title and ownership of the Assets
to the Purchasers free and clear of all Encumbrances and
any other rights of third parties, and all requisite
director, shareholder or other corporate approval on the
part of the Seller have been obtained to permit the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.2.2 This Agreement constitutes a valid and legally binding
obligation of the Seller enforceable against the Seller
in accordance with its terms, subject, however, to
limitations with respect to enforcement imposed by law
in connection with bankruptcy or similar proceedings and
to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the
court from which they are sought.
3.2.3 There is no contract, option or any other right of
another binding upon, or which at any time in the future
may become binding upon the Seller to sell, transfer,
assign, pledge, charge, mortgage or in any other way
dispose of or encumber any of the Assets other than
pursuant to the provisions of this Agreement, or that
would restrain or prevent the consummation of the
transactions contemplated by this Agreement.
3.2.4 Except as set forth in Sections 3.8.3, 3.8.5 and 3.9.2
of the Seller's Disclosure Schedule, neither the
entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by
the Seller will result in:
3.2.4.1 the violation of any of the provisions of
the charter documents or by-laws of the
Seller;
3.2.4.2 the violation of any agreement or other
instrument to which the Seller is a party or
by which it or the Assets are bound;
3.2.4.3 the violation of any applicable Laws;
3.2.4.4 the creation of any Encumbrance upon the
Assets; or
3.2.4.5 a conflict with, breach of or creation of an
event of default (or event that, with the
giving of notice or lapse of time or both,
would constitute an event of default) under,
or an event which would give any party the
right to accelerate any obligation under,
any agreement, mortgage, license, lease,
indenture, instrument, order, arbitration
award, judgment or decree to which the
Seller is a party or by which the Seller,
the Purchased Business or the Assets are
bound or affected.
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3.2.5 No consent, approval, waiver or authorization is
required to be obtained by the Seller from, and no
notice or filing is required to be given by the Seller
to, or made by the Seller with, any Person in connection
with the execution, delivery and performance by the
Seller of this Agreement, except as disclosed in
Sections 3.8.3 and 3.9.2 of the Seller's Disclosure
Schedule.
3.3 FINANCIAL
3.3.1 The Financial Statements:
3.3.1.1 are in accordance with the books and
accounts of the Seller as at and for the
twelve-month period ended on December 31,
2005;
3.3.1.2 are true, complete and correct and present
fairly the assets, liabilities, financial
position and results of operations, as
applicable, including, without limiting the
generality of the foregoing, all contingent
liabilities of the Purchased Business as at
and for the twelve-month period ended on
December 31, 2005; and
3.3.1.3 have been prepared in accordance with GAAP
applied in a manner consistent with past
practices. 3.3.2 The books and records of
the Seller relating to the Purchased
Business are true and correct and present
fairly and disclose in all material respects
the financial position of the Purchased
Business and all material financial
transactions of the Seller relating to the
Purchased Business have been accurately
recorded in such books and records and, to
the extent possible, such books and records
have been prepared in accordance with GAAP
consistently applied.
3.4 TAX MATTERS
3.4.1 The Seller is registered under Part IX of the Excise Tax
Act (Canada) with registration number 141729467 RT.
3.4.2 The Seller is not a non-resident person within the
meaning of section 116 of the Income Tax Act (Canada).
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3.5 ABSENCE OF CHANGES
3.5.1 With respect to the Purchased Business, since December
31, 2005 and except as set forth in Section 3.5 of the
Seller's Disclosure Schedule:
3.5.1.1 there has been no changes in the affairs, business,
operations or condition of the Purchased Business,
financial or otherwise (whether arising as a result of
any legislative or regulatory change, revocation of any
license or right to do business, fire, explosion,
accident, casualty, labour dispute, flood, drought,
riot, storm, condemnation, act of God, public force or
otherwise, whether or not covered by insurance) that has
a Material Adverse Effect, except changes occurring in
the Ordinary Course of Business which do not have a
Material Adverse Effect;
3.5.1.2 the Purchased Business has been carried on in the
Ordinary Course of Business and the Seller has not
entered into any transaction out of the Ordinary Course
of Business;
3.5.1.3 the Seller has not disposed of any capital assets or
incurred or authorized any capital expenditures in
excess of $25,000 in the aggregate in connection with or
having an effect on the Purchased Business;
3.5.1.4 the Seller has not made any purchase, sale or
disposition of any asset or property other than in the
Ordinary Course of Business, nor mortgaged, pledged or
subjected to lien, charge or Encumbrance of any kind,
any of the Assets other than in the Ordinary Course of
Business;
3.5.1.5 there has been no change in the accounting methods or
tax practices or elections used by the Seller;
3.5.1.6 except for the Other Lease, no party (including the
Seller) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease or license (or
series of related agreements, contracts, leases, and
licenses) involving more than $10,000 to which the
Seller is a party or by which it is bound;
3.5.1.7 the Seller has not entered into any employment contract
or collective bargaining agreement, written or oral, or
modified the terms of any existing employment contract
or agreement other than for hourly workers hired or
given wage increases by oral agreement;
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3.5.1.8 the Seller has not granted any bonuses or other increase
in the compensation of any of its employees, including
the Transferred Employees, and has not increased the
compensation to any other employees or independent
contractors outside the Ordinary Course of Business;
3.5.1.9 the Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for
the benefit of any of its employees;
3.5.1.10 the Seller has not made any other change in employment
terms for any of its employees outside the Ordinary
Course of Business;
3.5.1.11 the Seller has not entered into any contract or
agreement relating to the construction of tenant
improvements with respect to any of the Leased Premises;
3.5.1.12 the Seller has not granted any license or sublicense of
any rights under or with respect to any Intellectual
Property Rights;
3.5.1.13 the Seller has not concluded any transaction which could
have a Material Adverse Effect; and
3.5.1.14 the Seller has not made any commitments with respect to
any of the foregoing.
3.6 CONDUCT OF PURCHASED BUSINESS
3.6.1 The Seller is duly licensed or qualified to do business
and is in good standing in the jurisdictions set forth
in Section 3.6.1 of the Seller's Disclosure Schedule
which jurisdictions are the only jurisdictions wherein
the character or location of the properties owned or
leased or the nature of the conduct of the Purchased
Business by the Seller makes such qualification
necessary. Set forth in Section 3.6.1 of the Seller's
Disclosure Schedule is each location where the Seller
(a) has a place of business, and (b) owns or leases
property, with respect to the Purchased Business.
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3.6.2 The Seller is conducting and has conducted the Purchased
Business in compliance with all applicable Laws of the
Province of Quebec and of Canada and all municipalities
thereof in which the Purchased Business is carried on,
is not in breach of any such Laws and duly possesses all
permits and quotas, in such province and all
municipalities thereof in which the Seller carries on
the Purchased Business to enable the Purchased Business
to be carried on as now conducted and its assets to be
owned, leased and operated, and all such licences,
registrations, qualifications and permits are valid and
subsisting and in good standing and none of the same
contains or is subject to any term, provision, condition
or limitation which has or may have a Material Adverse
Effect or which may adversely change or terminate such
licence, registration, qualification or permit by virtue
of the completion of the transactions contemplated
hereby.
3.6.3 The Permits listed in Section 2.1.3.7 of the Seller's
Disclosure Schedule is a true and complete list of all
licences, registrations and permits necessary or
required to enable the Purchased Business to be carried
on as now conducted and its assets to be owned, leased
and operated, and all such licences, registrations and
permits are transferable by the Seller to the Purchasers
on the Closing Date.
3.7 ASSETS
3.7.1 Except as set forth or disclosed herein or in Section
3.7 of the Seller's Disclosure Schedule, the Seller is
the owner of all of the Assets with good and marketable
title, free and clear of all Encumbrances.
3.7.2 The assets, properties and rights reflected in the
Financial Statements comprise and, subject to changes in
the Ordinary Course of Business, will, together with the
Business Intellectual Property, comprise all of the
assets, properties and rights of every type and
description, real, personal and intangible used by the
Seller and necessary for the operations of the Purchased
Business as currently conducted.
3.7.3 All Manufacturing Fixed Assets and R&D Fixed Assets,
including all equipment owned or used by the Seller in
connection with the Purchased Business, have been
properly maintained and are in reasonable working order
for the purposes of ongoing operation, subject to
ordinary wear and tear for equipment of comparable age
or use in the Ordinary Course of Business.
3.7.4 No notice has been received by the Seller of any
outstanding orders, notices or similar requirements
relating to the Purchased Business issued by any
building, environmental, fire, health, labour or police
authorities or from any other federal, provincial or
municipal authority and there are no matters under
discussion between the Seller and any such authorities
relating to orders, notices or similar requirements.
3.8 LEASED PREMISES
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3.8.1 With respect to the Purchased Business, the Seller does
not own or lease, directly or indirectly, any interest
in real property, other than the premises being the
object of the Leases (the "LEASED PREMISES") and the
premises being the object of the Other Lease. The Seller
has not assigned, sublet, transferred, conveyed or
encumbered any interest in the Leases. The Leased
Premises have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been
operated and maintained in accordance with applicable
Laws.
3.8.2 The Leased Premises have been properly maintained and
are in good order and condition, subject to ordinary
wear and tear for premises of comparable nature, use and
age.
3.8.3 No consent, authorization or approval is required from
any person pursuant to the Leases or from any authority
pursuant to any Laws or otherwise in relation to the
consummation of the transactions contemplated in this
Agreement, other than as set forth in Section 3.8.3 of
the Seller's Disclosure Schedule hereto.
3.8.4 Except as a result of the requirements to obtain the
consents listed in Section 3.8.3 of the Seller's
Disclosure Schedule, the Leases are valid and in full
force, unamended, and each of the Leases constitutes the
entire agreement between the parties thereto in relation
to the Leased Premises.
3.8.5 Except as set forth in Section 3.8.5 of the Seller's
Disclosure Schedule, the transactions contemplated in
this Agreement will not result in a default or early
termination of any of the Leases.
3.8.6 Except as a result of the requirements to obtain the
consents listed in Section 3.8.3 of the Seller's
Disclosure Schedule, there is no default or event which
with notice or lapse of time, or both, under, and no
outstanding notice of default has been given in respect
of, and no claim, action or demand or other proceeding
has been made or, to the Knowledge of the Seller is
pending or threatened by or against the Leased Premises
or the Leases.
3.8.7 The Seller has not received notice of, and, to the
Knowledge of the Seller, there is no contravention of or
non-compliance with any Laws arising from the occupancy,
leasing or use of the Leased Premises or otherwise
relating to or in connection with the Leased Premises.
3.8.8 The Leased Premises are supplied with utilities and
other services reasonably necessary for the operation of
the Leased Premises for the Business as presently
conducted.
22
3.9 CONTRACTS, AGREEMENTS AND COMMITMENTS
3.9.1 The Seller has disclosed and identified all contracts,
agreements or commitments (written or oral) to which the
Seller is a party or by which it is bound with respect
to the Purchased Business, involving aggregate payments
in excess of $10,000, copies of which have been provided
or made available to Purchaser. All of the Purchased
Agreements, the Equipment Leases and the Leases are
legal, binding, valid, enforceable, and in full force
and effect.
3.9.2 No consent, authorization or approval is required from
any person pursuant to the Purchased Agreements, the
Equipment Leases and the Leases or from any authority
pursuant to any Laws or otherwise in relation to the
consummation of the transactions contemplated in this
Agreement, other than as set forth in Section 3.9.2 of
the Seller's Disclosure Schedule.
3.9.3 Except as a result of the requirements to obtain the
consents listed in Section 3.9.2 of the Seller's
Disclosure Schedule, the Seller is not in default (or
will be in default with the passage of time or notice or
otherwise) under any of the Purchased Agreements, the
Equipment Leases and the Leases.
3.10 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
None of the Seller or, to the Knowledge of the Seller, any
Transferred Employee or ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ has any direct or
indirect controlling interest in any competitor or supplier of the
Purchased Business, or in any Person with whom the Seller is doing
business, other than as set forth in Section 3.10 of the Seller's
Disclosure Schedule.
3.11 EMPLOYEES
3.11.1 The Seller has identified for the Purchasers all of the
employees, consultants and subcontractors employed or
who provide services to the Purchased Business. Section
3.11.1 of the Seller's Disclosure Schedule sets out (i)
the names of the Transferred Employees, (ii) their
status (part-time, full time, CSST, long term
disability, short term disability, other types of
leaves) and (iii) their hiring date and term of
employment. The employee files of the Seller contain
each Transferred Employee's social insurance numbers and
correct and complete details of each Transferred
Employee's annual and hourly wages as well as their
eligibility to any Employee Benefit plan.
3.11.2 The Seller is in full compliance with all Laws including
with respect to employment and employment practices,
terms and conditions of employment, wages and hours,
non-discrimination in employment, pay equity,
occupational health and safety and is not engaged in any
unfair labour practice.
23
3.11.3 The Seller is not involved in or, to the Knowledge of
the Seller, threatened with any labour dispute,
arbitration, grievance, law suit or administrative
proceeding relation to labour matters involving any of
the employees of the Seller.
3.11.4 The Seller is not, and never has been, bound by or a
party to any collective bargaining agreement, or other
agreement with labour unions or associations
representing employees of the Seller and there are no
actual or, to the Knowledge of the Seller, threatened or
pending organizing activities by any trade union,
council of trade unions, employee bargaining agency or
affiliated bargaining agent.
3.11.5 No trade union, council of trade unions, employee
bargaining agency or affiliated bargaining agent:
3.11.5.1.1 holds or has ever held bargaining rights
with respect to any of the Seller's
employees by way of certification, interim
certification, voluntary recognition,
designation or successor rights; or
3.11.5.1.2 to the Knowledge of the Seller, has applied
to be certified as the bargaining agent of
the Seller's employees.
3.11.6 All accruals for, premiums for employment insurance,
health premiums, Canada and Quebec Pension Plan
premiums, accrued wages, salaries and commissions and
Employee Benefit Plan payments have been reflected in
the books and records of the Seller and all accruals for
unpaid vacation pay have been paid to the employees of
the Seller or will be paid prior to the Closing Date.
3.11.7 Except as disclosed in Section 3.11.7 of the Seller's
Disclosure Schedule and except for remuneration
(including severance) paid to employees in the Ordinary
Course of Business and made at current rates of
remuneration, no payments have been made or authorized
since December 31, 2005 by the Seller to officers,
directors or employees of the Seller.
3.12 EMPLOYEE BENEFITS
3.12.1 Except for the arrangements set forth in Section 3.12.1
of the Seller's Disclosure Schedule, the Seller neither
maintains nor contributes to, nor has ever maintained or
contributed to, any pension, profit-sharing, deferred
compensation, bonus, stock option, share appreciation
right, severance, group or individual health, dental,
medical, disability life insurance, survivor benefit, or
24
similar plan, policy or arrangement, whether formal or
informal, written or oral, for the benefit of any
director, officer, consultant or employee, whether
active or terminated. Each of the arrangements set forth
in Section 3.12.1 of the Seller's Disclosure Schedule is
hereinafter referred to as an "EMPLOYEE BENEFIT PLAN".
3.12.2 The Seller has heretofore delivered to the Purchasers
true, correct, complete and up-to-date copies of each
Employee Benefit Plan of the Seller.
3.12.3 Except as set forth in Section 3.12.3 of the Seller's
Disclosure Schedule,
3.12.3.1 there is no pending or, to the Knowledge of
the Seller, threatened legal action,
proceeding or investigation, other than
routine claims for benefits, concerning any
Employee Benefit Plan or, to the Knowledge
of the Seller, any fiduciary or service
provider thereof and, to the Knowledge of
the Seller, there is no basis for any such
legal action or proceeding;
3.12.3.2 no liability (contingent or otherwise) to
any multi-employer plan has been incurred by
the Seller or any affiliate thereof (other
than insurance premiums satisfied in due
course);
3.12.3.3 no communication, report or disclosure has
been made which, at the time made, did not
accurately reflect the terms and operations
of any Employee Benefit Plan;
3.12.3.4 no Employee Benefit Plan provides welfare
benefits subsequent to termination of
employment to employees or their
beneficiaries;
3.12.3.5 no benefits due under any Employee Benefit
Plan have been forfeited subject to the
possibility of reinstatement (which
possibility would still exist at or after
the Closing Date); and
3.12.3.6 the Seller has not undertaken to maintain
any Employee Benefit Plan for any period of
time and each such Plan may be terminated at
the sole discretion of the sponsor thereof,
subject only to such constraints as may be
imposed by applicable Laws.
25
3.13 COMPETITIVE BUSINESS
The Seller has not been made aware of any supervisory, managerial or
executive employee of the Seller intending to resign, to establish a
competitive business or to take employment with a competitor of the
Purchased Business except, however, that Seller does not make any
representation or warranty with respect to ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
3.14 INTELLECTUAL PROPERTY RIGHTS
3.14.1 The Business Intellectual Property constitutes all of
the Intellectual Property Rights (excluding any
Intellectual Property Rights that are in the public
domain) that are used in or necessary for the conduct of
the Purchased Business as presently conducted. For the
purpose of Section 3 only, "BUSINESS INTELLECTUAL
PROPERTY" shall mean collectively all Intellectual
Property Rights owned by the Seller (the "OWNED
INTELLECTUAL PROPERTY") or of which the Seller is the
licensee or in which the Seller has any right (other
than with respect to "off-the-shelf" software which is
generally commercially available to the public at retail
in which the Seller is the licensee of such software)
(the "INBOUND LICENSED INTELLECTUAL PROPERTY").
3.14.2 Section 3.14.2 of the Seller's Disclosure Schedule sets
forth a complete list of all Owned Intellectual Property
for which an application for registration or issuance
has been filed and/or for which a registration or a
notice of issuance has been delivered, including the
respective jurisdiction, registration and application
number. The registrations of all registered Owned
Intellectual Property are in full force and effect with
all maintenance or renewal fees or payments relating
thereto having been paid in a timely manner. All
applications to register Owned Intellectual Property are
proceeding normally and all prescribed fees have been
paid.
3.14.3 Except as set forth in Section 3.14.3 and Section 3.14.4
of the Seller's Disclosure Schedule, the Seller is the
sole legal and beneficial owner, unencumbered by any
liens, charges or encumbrances of any kind, of all Owned
Intellectual Property. The Seller lawfully possesses all
technical information and know-how used in the creation,
development, support and maintenance of the Products and
has not disclosed any such confidential information and
know-how to any third party, except as necessary in the
conduct of the Purchased Business and such third parties
always having been bound by written, contractual
confidentiality obligations with respect to such
confidential information.
26
3.14.4 Except as set forth in Section 3.14.4 of the Seller's
Disclosure Schedule, the Business Intellectual Property
is freely transferable by the Seller to the Purchasers
on the Closing Date.
3.14.5 The only licenses or other agreements under which the
Seller was granted rights in the Inbound Licensed
Intellectual Property Rights are listed and described in
Section 3.14.5 of the Seller's Disclosure Schedule. All
such licenses are in full force and effect and there is
no material default in connection therewith.
3.14.6 The only licenses or other agreements under which the
Seller has granted to any Person rights in the Business
Intellectual Property (for the purpose of Section 3
only, the "OUTBOUND LICENSED INTELLECTUAL PROPERTY") are
listed and described in Section 3.14.6 of the Seller's
Disclosure Schedule. The Seller has not granted any
exclusive licenses to third parties to use the Outbound
Licensed Intellectual Property.
3.14.7 No termination of any Seller license agreement in
respect of the Outbound Licensed Intellectual Property
(other than any expiration of the stated term thereof)
or loss or modification of rights of the Seller
thereunder is pending or, to the Seller's Knowledge,
threatened. There is no outstanding or, to the Seller's
Knowledge, threatened dispute or disagreement with
respect to any license agreement in respect of the
Outbound Licensed Intellectual Property that reasonably
could be expected to materially affect any of the
respective rights and obligations of the parties
thereunder. The execution, delivery and performance by
the Seller of this Agreement and the consummation of the
transactions contemplated hereby and thereby, will not
result in the loss or impairment of, or give rise to,
any right of any third party to terminate, reprice or
otherwise modify any rights or obligations of the Seller
under any license agreement in respect of the Outbound
Licensed Intellectual Property.
3.14.8 Except for the Persons listed in Section 3.14.8 of the
Seller's Disclosure Schedule, all employees and
contractors who are involved in the development of the
Owned Intellectual Property, (i) have assigned to and in
favour of the Seller all Intellectual Property Rights
developed in connection with the Owned Intellectual
Property; and (ii) have waived their moral rights in
such Intellectual Property Rights. No former or present
employee or contractor of the Seller claims or has
claimed to own any Intellectual Property Rights in the
Products.
3.14.9 To the Seller's Knowledge, the Seller is not making
unauthorized use of any confidential information or
trade secrets of any Person and, to the Seller's
Knowledge, no employee or contractor of the Seller is
violating or has violated any third party Intellectual
Property Rights or any confidentiality obligations
toward third parties undertaken by them or any of the
Seller, other than as set forth in Section 3.14.9 of the
Seller's Disclosure Schedule.
27
3.14.10 No source code of any software owned by the Seller that
has been incorporated or embedded in any Products that
comprise the Purchased Business has been licensed or
otherwise disclosed to another Person other than an
escrow agent pursuant to the terms of a source code
escrow agreement in customary form, other than as set
forth in Section 3.14.10 of the Seller's Disclosure
Schedule. No software that has been incorporated or
embedded in any Products that comprise the Purchased
Business contains any code that is owned by any third
party, including any code that is licensed pursuant to
the provisions of any "open source" license agreement,
or any other license agreement that requires source code
be distributed or made available in connection with the
distribution of the licensed software in object code
form or that limits the amount of fees that may be
charged in connection with sublicensing or distributing
such licensed software, other than as set forth in
Section 3.14.10 of the Seller's Disclosure Schedule
3.14.11 Except as disclosed in Section 3.14.11 of the Seller's
Disclosure Schedule: (i) the Seller has not received any
notice alleging that the conduct of the Purchased
Business infringes any third party Intellectual Property
Rights; (ii) the Seller has not at any time been sued or
been the subject of a Claim, or been a defendant in any
Claim (other than one which has been finally settled
prior to the date hereof with no ongoing obligations)
that involves the infringement or alleged infringement
of any third party Intellectual Property Rights, and no
such Claims are pending or, to the Knowledge of the
Seller, threatened; (iii) the Seller has not made any
Claim of infringement of any of the Owned Intellectual
Property against any other Person; and (iv) to the
Knowledge of the Seller, there is no infringement by any
other Person of any Business Intellectual Property. None
of the Owned Intellectual Property is subject to any
outstanding order, judgment, decree, stipulation or
agreement restricting the use thereof by the Seller or
restricting the licensing thereof by the Seller to any
Person. With the exception of those agreements entered
into with its customers, distributors and system
integrators, the Seller has not entered into any
agreement to indemnify any other Person against any
charge of infringement of any Owned Intellectual
Property.
3.15 PRODUCT WARRANTY
No Product or service sold or delivered by the Seller with respect
to the Purchased Business is subject to any guaranty, warranty or
other indemnity beyond the Seller's applicable standard terms and
conditions of sale and all applicable statutory or common law rules,
regulations and laws in connection with the Purchased Business.
28
3.16 PRODUCTS
Subject to warranty claims in the Ordinary Course of Business, all
Products previously or presently supplied, licensed or otherwise
made available by the Seller in connection with the Purchased
Business to any third party:
3.16.1 perform substantially in accordance with their
specifications and user manuals and other descriptions,
warranties or representations applied in respect of such
Products, including the Products' specifications
attached to Section 3.16.1 of the Seller's Disclosure
Schedule;
3.16.2 are and have at all times been properly and promptly
maintained and updated by the Seller; and
3.16.3 the Seller has not agreed to and is not obliged to
replace or repair any defective Products free of charge
or to refund or to issue any credit note or to write off
or reduce indebtedness in respect of any Products it has
licensed or sold.
3.17 PRODUCT LIABILITY
The Seller has no liability (and, to the Knowledge of the Seller,
there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or
demand against the Seller giving rise to any liability) arising out
of any injury to individuals or property as a result of the
ownership, possession or use of any Product or service sold or
delivered by the Seller in the connection with the Purchased
Business.
3.18 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
3.18.1 The Seller, its operations, activities, equipment,
buildings, immoveables and the properties it owns,
leases, occupies or has the custody of, including the
Leased Premises, have at all time been and are in
compliance with all applicable Environmental Laws and
Health and Safety Laws.
3.18.2 The Seller has obtained and holds all permits,
certificates, licenses, certificates of authorization,
approvals, consent, registrations and other
authorizations required under applicable Environmental
Laws for its operations and activities (the
"ENVIRONMENTAL PERMITS"); each Environmental Permit is
valid and in force and the operations and activities of
the Seller and the Purchased Business are in compliance
with the conditions set out in the Environmental
Permits; to the Knowledge of the Seller, there is no
grounds for revocation, change, expiry or annulment of
any Environmental Permits.
29
3.18.3 The Seller, and to the Knowledge of the Seller, in
connection with its work, its employees, agents,
shareholders, directors and officers has never been
declared guilty of committing an offence for a violation
of Environmental Laws or Health and Safety Laws and has
never been imposed a fine or has never otherwise settled
such a prosecution.
3.18.4 There are no Contaminants in, on or under the equipment,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of the Seller,
including the Leased Premises, the presence of which
constitutes a violation of applicable Environmental Laws
or Health and Safety Laws.
3.18.5 The Seller has not received any written or verbal notice
or request for information in the context of any
environmental or health and safety, federal, provincial,
regional or municipal investigation or inspection.
3.18.6 The Seller has not used and is not using Contaminants
and has not allowed and is not allowing Contaminants to
be used at any equipment, building, immoveable or
property owned, leased or occupied by or under the
custody of the Seller, including the Leased Premises,
except in compliance with Environmental Laws and Health
and Safety Laws.
3.18.7 The Seller has not and does not Discharge or allow the
Discharge of Contaminants and to the Knowledge of the
Seller, there is no Discharge of Contaminants on, in,
under, into, onto, from or outside the equipments,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of the Seller including
the Leased Premises. All Contaminants and other
materials or substances disposed of, treated, handled or
stored at such equipments, buildings, immoveables or
properties have at all time and are being disposed of,
handled, treated and stored in compliance with
Environmental Laws and Health and Safety Laws.
3.18.8 There are no PCBs, asbestos, urea formaldehyde, methane,
ozone-depleting substances, lead-based paint, radon or
radioactive substances in, on or under the equipment,
buildings, immoveables or properties owned, leased or
occupied by or under the custody of the Seller,
including the Leased Premises.
30
3.18.9 There is no action, order, decision, directive,
declaration, decree, judgment, suit or proceeding,
pending or threatened, against the Seller, or to the
Knowledge of the Seller, its employees, agents,
shareholders, directors and officers, or involving the
Seller or the Purchased Business, by or before any
tribunal, commission, agency or any governmental entity
(including the Commission de la sante et de la securite
du travail, Environment Canada, Transport Canada,
Fisheries and Oceans Canada, the Ministry of the
Environment (Quebec) and the Ministry of Natural
Resources (Quebec)), and to the Knowledge of the Seller,
there is no event or fact based on which such action,
order, decision, directive, declaration, decree,
judgment, suit or proceeding may be instituted.
3.19 LITIGATION
3.19.1 There are no Claims (including without limitation any
derivative proceeding on behalf of the Seller) pending
or, to the Knowledge of the Seller, threatened against
the Seller or the Purchased Business, or the ability of
the Seller to consummate the transactions contemplated
hereunder, before or by any federal, state, provincial,
municipal or other governmental court, department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, whether or not insured, or which
might involve the possibility of any judgment or
liability against the Seller or the Purchased Business.
3.19.2 There are no (i) outstanding judgments, orders,
injunctions or decrees of any governmental authority or
arbitration tribunal against the Seller or any of its
affiliates or the Purchased Business, or (ii)
investigations by any governmental authority which are,
to the Knowledge of the Seller, pending or threatened
against the Purchased Business, the Seller or any of its
affiliates, and which have or could have an adverse
effect on the ability of the Seller to consummate the
transactions contemplated hereby or to perform the
obligations of the Seller under this Agreement.
3.20 FEES
The Seller does not have any liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Purchasers
could become liable or obligated.
4. SURVIVAL OF SELLER'S REPRESENTATIONS AND WARRANTIES
All representations and warranties of the Seller set forth in Article 3
shall survive for one year from the Closing Date, except that
representations and warranties fraudulently made shall survive without
limitation.
31
5. AVENSYS' REPRESENTATIONS AND WARRANTIES
Avensys represents and warrants to the Seller and the Preferred Holders
that:
5.1 ORGANIZATION
Avensys is duly incorporated, organized and validly existing and in
good standing under the Laws of its jurisdiction of incorporation.
5.2 AUTHORITY
5.2.1 Avensys has good and sufficient power, authority and
right to enter into and deliver this Agreement and to
complete the transactions contemplated hereby.
5.2.2 This Agreement has been duly executed and delivered by
Avensys, and is a valid and binding obligation of
Avensys enforceable in accordance with its terms.
5.2.3 Neither the entering into, the delivery of this
Agreement nor the completion of the transactions
contemplated hereby by Avensys will result in:
5.2.3.1 the violation of any of the provisions of
the charter documents or by-laws of Avensys;
5.2.3.2 the violation of any agreement or other
instrument to which Avensys is a party or by
which it is bound;
5.2.3.3 the violation of any applicable law, rule,
regulation, judgment, order or decree; or
5.2.3.4 a conflict with, breach of or creation of an
event of default (or event that, with the
giving of notice or lapse of time or both,
would constitute an event of default) under,
or an event which would give any party the
right to accelerate any obligation under,
any agreement, mortgage, license, lease,
indenture, instrument, order, arbitration
award, judgment or decree to which Avensys
is a party or by which Avensys, Avensys'
Business or Avensys' Assets are bound or
affected.
5.2.4 No consent, approval, waiver or authorization is
required to be obtained by Avensys from, and no notice
or filing is required to be given by Avensys to, or made
by Avensys with, any Person in connection with the
execution, delivery and performance by Avensys of this
Agreement, except as disclosed in Sections 5.2.4 of the
Purchasers' Disclosure Schedule.
32
5.3 FINANCIAL
5.3.1 Avensys' Financial Statements:
5.3.1.1 are in accordance with the books and
accounts of Avensys as at and for the
six-month period ended on December 31, 2005;
5.3.1.2 are true, complete and correct and present
fairly the assets, liabilities, financial
position and results of operations, as
applicable, as at and for the six-month
period ended on December 31, 2005; and
5.3.1.3 have been prepared in accordance with GAAP
applied in a manner consistent with past
practices.
5.3.2 The books and records of Avensys are true and correct
and present fairly and disclose in all material respects
the financial position of Avensys' Business and all
material financial transactions of Avensys relating to
Avensys' Business have been accurately recorded in such
books and records and, to the extent possible, such
books and records have been prepared in accordance with
GAAP consistently applied.
5.4 TAX MATTERS
5.4.1 Avensys is registered under Part IX of the Excise Tax
Act (Canada) with registration number 141196691RT.
5.5 ABSENCE OF CHANGES
5.5.1 With respect to Avensys' Business, since December 31,
2005 and except as set forth in Section 5.5 of the
Purchasers' Disclosure Schedule:
5.5.1.1 there has been no changes in the affairs,
business, operations or condition of
Avensys' Business, financial or otherwise
(whether arising as a result of any
legislative or regulatory change, revocation
of any license or right to do business,
fire, explosion, accident, casualty, labour
dispute, flood, drought, riot, storm,
condemnation, act of God, public force or
otherwise, whether or not covered by
insurance) that has a Material Adverse
Effect, except changes occurring in the
Ordinary Course of Business which do not
have a Material Adverse Effect;
33
5.5.1.2 Avensys' Business has been carried on in the
Ordinary Course of Business and Avensys has
not entered into any transaction out of the
Ordinary Course of Business;
5.5.1.3 Avensys has not concluded any transaction
which could have a Material Adverse Effect;
and
5.5.1.4 Avensys has not made any commitments with
respect to any of the foregoing.
5.6 CONDUCT OF AVENSYS' BUSINESS
5.6.1 Avensys is duly licensed or qualified to do business and
is in good standing in the jurisdictions set forth in
Section 5.6.1 of the Purchasers' Disclosure Schedule
which jurisdictions are the only jurisdictions wherein
the character or location of the properties owned or
leased or the nature of the conduct of Avensys' Business
by Avensys makes such qualification necessary. Set forth
in Section 5.6.1 of the Purchasers' Disclosure Schedule
is each location where Avensys (a) has a place of
business, and (b) owns or leases property, with respect
to Avensys' Business.
5.6.2 Avensys is conducting and has conducted Avensys'
Business in compliance with all applicable Laws of the
Province of Quebec and of Canada and all municipalities
thereof in which Avensys' Business is carried on, is not
in breach of any such Laws and duly possesses all
permits and quotas, in such province and all
municipalities thereof in which Avensys carries on
Avensys' Business to enable Avensys' Business to be
carried on as now conducted and its assets to be owned,
leased and operated, and all such licences,
registrations, qualifications and permits are valid and
subsisting and in good standing and none of the same
contains or is subject to any term, provision, condition
or limitation which has or may have a Material Adverse
Effect or which may adversely change or terminate such
licence, registration, qualification or permit by virtue
of the completion of the transactions contemplated
hereby.
5.6.3 The permits listed in Section 5.6.3 of the Purchasers'
Disclosure Schedule is a true and complete list of all
licences, registrations and permits necessary or
required to enable Avensys' Business to be carried on as
now conducted and its assets to be owned, leased and
operated.
5.7 INTELLECTUAL PROPERTY RIGHTS
34
5.7.1 The Business Intellectual Property constitutes all of
the Intellectual Property Rights (excluding any
Intellectual Property Rights that are in the public
domain) that are used in or necessary for the conduct of
Avensys' Business as presently conducted. For the
purpose of Section 5 only, "BUSINESS INTELLECTUAL
PROPERTY" shall mean collectively all Intellectual
Property Rights owned by Avensys (the "OWNED
INTELLECTUAL Property") or of which Avensys is the
licensee or in which Avensys has any right (other than
with respect to "off-the-shelf" software which is
generally commercially available to the public at retail
in which Avensys is the licensee of such software) (the
"INBOUND LICENSED INTELLECTUAL PROPERTY").
5.7.2 Section 5.7.2 of the Purchasers' Disclosure Schedule
sets forth a complete list of all Owned Intellectual
Property for which an application for registration or
issuance has been filed and/or for which a registration
or a notice of issuance has been delivered, including
the respective jurisdiction, registration and
application number. The registrations of all registered
Owned Intellectual Property are in full force and effect
with all maintenance or renewal fees or payments
relating thereto having been paid in a timely manner.
All applications to register Owned Intellectual Property
are proceeding normally and all prescribed fees have
been paid.
5.7.3 Except as set forth in Section 5.7.3 and Section 5.7.4
of the Purchasers' Disclosure Schedule, Avensys is the
sole legal and beneficial owner, unencumbered by any
liens, charges or encumbrances of any kind, of all Owned
Intellectual Property. Avensys lawfully possesses all
technical information and know-how used in the creation,
development, support and maintenance of the Avensys'
products and has not disclosed any such confidential
information and know-how to any third party, except as
necessary in the conduct of the Avensys' Business and
such third parties always having been bound by written,
contractual confidentiality obligations with respect to
such confidential information.
5.7.4 The only licenses or other agreements under which
Avensys was granted rights in the Inbound Licensed
Intellectual Property Rights are listed and described in
Section 5.7.4 of the Purchasers' Disclosure Schedule.
All such licenses are in full force and effect and there
is no material default in connection therewith.
5.7.5 The only licenses or other agreements under which
Avensys has granted to any Person rights in the Business
Intellectual Property (for the purpose of Section 5
only, the "OUTBOUND LICENSED INTELLECTUAL PROPERTY") are
listed and described in Section 5.7.5 of the Purchasers'
Disclosure Schedule. Avensys has not granted any
exclusive licenses to third parties to use the Outbound
Licensed Intellectual Property.
35
5.7.6 No termination of any Avensys license agreement in
respect of the Outbound Licensed Intellectual Property
(other than any expiration of the stated term thereof)
or loss or modification of rights of Avensys thereunder
is pending or, to Avensys' Knowledge, threatened. There
is no outstanding or, to Avensys' Knowledge, threatened
dispute or disagreement with respect to any license
agreement in respect of the Outbound Licensed
Intellectual Property that reasonably could be expected
to materially affect any of the respective rights and
obligations of the parties thereunder. The execution,
delivery and performance by Avensys of this Agreement
and the consummation of the transactions contemplated
hereby and thereby, will not result in the loss or
impairment of, or give rise to, any right of any third
party to terminate, reprice or otherwise modify any
rights or obligations of Avensys under any license
agreement in respect of the Outbound Licensed
Intellectual Property.
5.7.7 Except for the Persons listed in Section 5.7.7 of the
Purchasers' Disclosure Schedule, all employees and
contractors who are involved in the development of the
Owned Intellectual Property, (i) have assigned to and in
favour of Avensys all Intellectual Property Rights
developed in connection with the Owned Intellectual
Property; and (ii) have waived their moral rights in
such Intellectual Property Rights. No former or present
employee or contractor of Avensys claims or has claimed
to own any Intellectual Property Rights in the Avensys'
products.
5.7.8 To Avensys' Knowledge, Avensys is not making
unauthorized use of any confidential information or
trade secrets of any Person and, to Avensys' Knowledge,
no employee or contractor of Avensys is violating or has
violated any third party Intellectual Property Rights or
any confidentiality obligations toward third parties
undertaken by them or any of Avensys, other than as set
forth in Section 5.7.8 of the Purchasers' Disclosure
Schedule.
5.7.9 No source code of any software owned by Avensys that has
been incorporated or embedded in any Avensys' products
that comprise Avensys' Business has been licensed or
otherwise disclosed to another Person other than an
escrow agent pursuant to the terms of a source code
escrow agreement in customary form, other than as set
forth in Section 5.7.9 of the Purchasers' Disclosure
Schedule. No software that has been incorporated or
embedded in any Avensys' products that comprise Avensys'
Business contains any code that is owned by any third
party, including any code that is licensed pursuant to
the provisions of any "open source" license agreement,
or any other license agreement that requires source code
be distributed or made available in connection with the
distribution of the licensed software in object code
form or that limits the amount of fees that may be
charged in connection with sublicensing or distributing
such licensed software, other than as set forth in
Section 5.7.9 of the Purchasers' Disclosure Schedule.
36
5.7.10 Except as disclosed in Section 5.7.10 of the Purchasers'
Disclosure Schedule: (i) Avensys has not received any
notice alleging that the conduct of Avensys' Business
infringes any third party Intellectual Property Rights;
(ii) Avensys has not at any time been sued or been the
subject of a Claim, or been a defendant in any Claim
(other than one which has been finally settled prior to
the date hereof with no ongoing obligations) that
involves the infringement or alleged infringement of any
third party Intellectual Property Rights, and no such
Claims are pending or, to the Knowledge of Avensys,
threatened; (iii) Avensys has not made any Claim of
infringement of any of the Owned Intellectual Property
against any other Person; and (iv) to the Knowledge of
Avensys, there is no infringement by any other Person of
any Business Intellectual Property. None of the Owned
Intellectual Property is subject to any outstanding
order, judgment, decree, stipulation or agreement
restricting the use thereof by Avensys or restricting
the licensing thereof by Avensys to any Person. With the
exception of those agreements entered into with its
customers, distributors and system integrators, Avensys
has not entered into any agreement to indemnify any
other Person against any charge of infringement of any
Owned Intellectual Property.
5.8 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
5.8.1 Avensys, its operations, activities, equipment,
buildings, immoveables and the properties it owns,
leases, occupies or has the custody of, have at all time
been and are in compliance with all applicable
Environmental Laws and Health and Safety Laws.
5.8.2 Avensys has obtained and holds all permits,
certificates, licenses, certificates of authorization,
approvals, consent, registrations and other
authorizations required under applicable Environmental
Laws for its operations and activities (the
"ENVIRONMENTAL PERMITS"); each Environmental Permit is
valid and in force and the operations and activities of
Avensys and Avensys' Business are in compliance with the
conditions set out in the Environmental Permits; to the
Knowledge of Avensys, there is no grounds for
revocation, change, expiry or annulment of any
Environmental Permits.
5.8.3 Avensys, and to the Knowledge of Avensys, in connection
with its work, its employees, agents, shareholders,
directors and officers has never been declared guilty of
committing an offence for a violation of Environmental
Laws or Health and Safety Laws and has never been
imposed a fine or has never otherwise settled such a
prosecution.
37
5.8.4 There are no Contaminants in, on or under the equipment,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of Avensys, the
presence of which constitutes a violation of applicable
Environmental Laws or Health and Safety Laws.
5.8.5 Avensys has not received any written or verbal notice or
request for information in the context of any
environmental or health and safety, federal, provincial,
regional or municipal investigation or inspection.
5.8.6 Avensys has not used and is not using Contaminants and
has not allowed and is not allowing Contaminants to be
used at any equipment, building, immoveable or property
owned, leased or occupied by or under the custody of
Avensys, except in compliance with Environmental Laws
and Health and Safety Laws.
5.8.7 Avensys has not and does not Discharge or allow the
Discharge of Contaminants and to the Knowledge of
Avensys, there is no Discharge of Contaminants on, in,
under, into, onto, from or outside the equipments,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of Avensys. All
Contaminants and other materials or substances disposed
of, treated, handled or stored at such equipments,
buildings, immoveables or properties have at all time
and are being disposed of, handled, treated and stored
in compliance with Environmental Laws and Health and
Safety Laws.
5.8.8 There are no PCBs, asbestos, urea formaldehyde, methane,
ozone-depleting substances, lead-based paint, radon or
radioactive substances in, on or under the equipment,
buildings, immoveables or properties owned, leased or
occupied by or under the custody of Avensys.
5.8.9 There is no action, order, decision, directive,
declaration, decree, judgment, suit or proceeding,
pending or threatened, against Avensys, or to the
Knowledge of Avensys, its employees, agents,
shareholders, directors and officers, or involving
Avensys or Avensys' Business, by or before any tribunal,
commission, agency or any governmental entity (including
the Commission de la sante et de la securite du travail,
Environment Canada, Transport Canada, Fisheries and
Oceans Canada, the Ministry of the Environment (Quebec)
and the Ministry of Natural Resources (Quebec)), and to
the Knowledge of Avensys, there is no event or fact
based on which such action, order, decision, directive,
declaration, decree, judgment, suit or proceeding may be
instituted.
38
5.9 LITIGATION
5.9.1 There are no Claims (including without limitation any
derivative proceeding on behalf of Avensys) pending or,
to the Knowledge of Avensys, threatened against Avensys,
or the ability of Avensys to consummate the transactions
contemplated hereunder, before or by any federal, state,
provincial, municipal or other governmental court,
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, whether or not
insured, or which might involve the possibility of any
judgment or liability against Avensys.
5.9.2 There are no (i) outstanding judgments, orders,
injunctions or decrees of any governmental authority or
arbitration tribunal against Avensys or any of its
affiliates or Avensys' Business, or (ii) investigations
by any governmental authority which are, to the
Knowledge of Avensys, pending or threatened against
Avensys' Business, Avensys or any of its affiliates and
which have or could have an adverse effect on the
ability of Avensys to consummate the transactions
contemplated hereby or to perform the obligations of
Avensys under this Agreement.
5.10 FEES
Avensys does not have any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller
could become liable or obligated.
6. AVENSYS LAB' REPRESENTATIONS AND WARRANTIES
Avensys Lab represents and warrants to the Seller and the Preferred
Holders that:
6.1 ORGANIZATION
Avensys Lab is duly incorporated, organized and validly existing and
in good standing under the Laws of its jurisdiction of
incorporation.
6.2 AUTHORITY
6.2.1 Avensys Lab has good and sufficient power, authority and
right to enter into and deliver this Agreement and to
complete the transactions contemplated hereby.
6.2.2 This Agreement has been duly executed and delivered by
Avensys Lab, and is a valid and binding obligation of
Avensys Lab enforceable in accordance with its terms.
39
6.2.3 Neither the entering into, the delivery of this
Agreement nor the completion of the transactions
contemplated hereby by Avensys Lab will result in:
6.2.3.1 the violation of any of the provisions of
the charter documents or by-laws of Avensys
Lab;
6.2.3.2 the violation of any agreement or other
instrument to which Avensys Lab is a party
or by which it is bound;
6.2.3.3 the violation of any applicable law, rule,
regulation, judgment, order or decree; or
6.2.3.4 a conflict with, breach of or creation of an
event of default (or event that, with the
giving of notice or lapse of time or both,
would constitute an event of default) under,
or an event which would give any party the
right to accelerate any obligation under,
any agreement, mortgage, license, lease,
indenture, instrument, order, arbitration
award, judgment or decree to which Avensys
Lab is a party or by which Avensys Lab,
Avensys Lab's Business or Avensys Lab's
Assets are bound or affected.
6.2.4 All necessary corporate action has been taken to validly
create and issue the Avensys Lab Shares and to register
such Avensys Lab Shares in the name of the Seller.
6.2.5 Upon the consummation of the transaction contemplated by
this Agreement, the Avensys Lab Shares will be validly
issued and outstanding as fully paid and non-assessable
shares of Avensys Lab registered in the name of the
Seller.
6.2.6 No consent, approval, waiver or authorization is
required to be obtained by Avensys Lab from, and no
notice or filing is required to be given by Avensys Lab
to, or made by Avensys Lab with, any Person in
connection with the execution, delivery and performance
by Avensys Lab of this Agreement, except as disclosed in
Sections 6.2.6 of the Purchasers' Disclosure Schedule.
6.3 FINANCIAL
6.3.1 Avensys Lab's Financial Statements:
6.3.1.1 are in accordance with the books and
accounts of Avensys as at and for the
seven-month period ended on December 31,
2005;
40
6.3.1.2 are true, complete and correct and present
fairly the assets, liabilities, financial
position and results of operations, as
applicable, as at and for the seven -month
period ended on December 31, 2005; and
6.3.1.3 have been prepared in accordance with GAAP
applied in a manner consistent with past
practices.
6.3.2 The books and records of Avensys Lab are true and
correct and present fairly and disclose in all material
respects the financial position of Avensys Lab's
Business and all material financial transactions of
Avensys relating to Avensys Lab's Business have been
accurately recorded in such books and records and, to
the extent possible, such books and records have been
prepared in accordance with GAAP consistently applied.
6.4 TAX MATTERS
6.4.1 Avensys Lab is registered under Part IX of the Excise
Tax Act (Canada) with registration number 837037076RT.
6.5 ABSENCE OF CHANGES
6.5.1 With respect to Avensys Lab's Business, since December
31, 2005 and except as set forth in Section 6.5 of the
Purchasers' Disclosure Schedule:
6.5.1.1 there has been no changes in the affairs,
business, operations or condition of Avensys
Lab's Business, financial or otherwise
(whether arising as a result of any
legislative or regulatory change, revocation
of any license or right to do business,
fire, explosion, accident, casualty, labour
dispute, flood, drought, riot, storm,
condemnation, act of God, public force or
otherwise, whether or not covered by
insurance) that has a Material Adverse
Effect, except changes occurring in the
Ordinary Course of Business which do not
have a Material Adverse Effect;
6.5.1.2 Avensys Lab's Business has been carried on
in the Ordinary Course of Business and
Avensys Lab has not entered into any
transaction out of the Ordinary Course of
Business;
6.5.1.3 Avensys Lab has not concluded any
transaction which could have a Material
Adverse Effect; and
41
6.5.1.4 Avensys Lab has not made any commitments
with respect to any of the foregoing.
6.6 CONDUCT OF AVENSYS LAB'S BUSINESS
6.6.1 Avensys Lab is duly licensed or qualified to do business
and is in good standing in the jurisdictions set forth
in Section 6.6.1 of the Purchasers' Disclosure Schedule
which jurisdictions are the only jurisdictions wherein
the character or location of the properties owned or
leased or the nature of the conduct of Avensys Lab's
Business by Avensys Lab makes such qualification
necessary. Set forth in Section 6.6.1 of the Purchasers'
Disclosure Schedule is each location where Avensys Lab
(a) has a place of business, and (b) owns or leases
property, with respect to Avensys Lab's Business.
6.6.2 Avensys Lab is conducting and has conducted Avensys
Lab's Business in compliance with all applicable Laws of
the Province of Quebec and of Canada and all
municipalities thereof in which Avensys Lab's Business
is carried on, is not in breach of any such Laws and
duly possesses all permits and quotas, in such province
and all municipalities thereof in which Avensys Lab
carries on Avensys Lab's Business to enable Avensys
Lab's Business to be carried on as now conducted and its
assets to be owned, leased and operated, and all such
licences, registrations, qualifications and permits are
valid and subsisting and in good standing and none of
the same contains or is subject to any term, provision,
condition or limitation which has or may have a Material
Adverse Effect or which may adversely change or
terminate such licence, registration, qualification or
permit by virtue of the completion of the transactions
contemplated hereby.
6.6.3 The permits listed in Section 6.6.3 of the Purchasers'
Disclosure Schedule is a true and complete list of all
licences, registrations and permits necessary or
required to enable Avensys Lab's Business to be carried
on as now conducted and its assets to be owned, leased
and operated.
6.7 INTELLECTUAL PROPERTY RIGHTS
6.7.1 The Business Intellectual Property constitutes all of
the Intellectual Property Rights (excluding any
Intellectual Property Rights that are in the public
domain) that are used in or necessary for the conduct of
Avensys Lab's Business as presently conducted. For the
purpose of Section 6 only, "BUSINESS INTELLECTUAL
PROPERTY" shall mean collectively all Intellectual
Property Rights owned by Avensys Lab (the "OWNED
INTELLECTUAL PROPERTY") or of which Avensys Lab is the
licensee or in which Avensys Lab has any right (other
than with respect to "off-the-shelf" software which is
generally commercially available to the public at retail
in which Avensys Lab is the licensee of such software)
(the "INBOUND LICENSED INTELLECTUAL PROPERTY").
42
6.7.2 Section 6.7.2 of the Purchasers' Disclosure Schedule
sets forth a complete list of all Owned Intellectual
Property for which an application for registration or
issuance has been filed and/or for which a registration
or a notice of issuance has been delivered, including
the respective jurisdiction, registration and
application number. The registrations of all registered
Owned Intellectual Property are in full force and effect
with all maintenance or renewal fees or payments
relating thereto having been paid in a timely manner.
All applications to register Owned Intellectual Property
are proceeding normally and all prescribed fees have
been paid.
6.7.3 Except as set forth in Section 6.7.3 and Section 6.7.4
of the Purchasers' Disclosure Schedule, Avensys Lab is
the sole legal and beneficial owner, unencumbered by any
liens, charges or encumbrances of any kind, of all Owned
Intellectual Property. Avensys Lab lawfully possesses
all technical information and know-how used in the
creation, development, support and maintenance of the
Avensys Lab's products and has not disclosed any such
confidential information and know-how to any third
party, except as necessary in the conduct of the Avensys
Lab's Business and such third parties always having been
bound by written, contractual confidentiality
obligations with respect to such confidential
information.
6.7.4 The only licenses or other agreements under which
Avensys Lab was granted rights in the Inbound Licensed
Intellectual Property Rights are listed and described in
Section 6.7.4 of the Purchasers' Disclosure Schedule.
All such licenses are in full force and effect and there
is no material default in connection therewith.
6.7.5 The only licenses or other agreements under which
Avensys Lab has granted to any Person rights in the
Business Intellectual Property (for the purpose of
Section 6 only, the "OUTBOUND LICENSED INTELLECTUAL
PROPERTY") are listed and described in Section 6.7.5 of
the Purchasers' Disclosure Schedule. Avensys Lab has not
granted any exclusive licenses to third parties to use
the Outbound Licensed Intellectual Property.
43
6.7.6 No termination of any Avensys Lab license agreement in
respect of the Outbound Licensed Intellectual Property
(other than any expiration of the stated term thereof)
or loss or modification of rights of Avensys Lab
thereunder is pending or, to Avensys Lab's Knowledge,
threatened. There is no outstanding or, to Avensys Lab's
Knowledge, threatened dispute or disagreement with
respect to any license agreement in respect of the
Outbound Licensed Intellectual Property that reasonably
could be expected to materially affect any of the
respective rights and obligations of the parties
thereunder. The execution, delivery and performance by
Avensys Lab of this Agreement and the consummation of
the transactions contemplated hereby and thereby, will
not result in the loss or impairment of, or give rise
to, any right of any third party to terminate, reprice
or otherwise modify any rights or obligations of Avensys
Lab under any license agreement in respect of the
Outbound Licensed Intellectual Property.
6.7.7 Except for the Persons listed in Section 6.7.7 of the
Purchasers' Disclosure Schedule, all employees and
contractors who are involved in the development of the
Owned Intellectual Property, (i) have assigned to and in
favour of Avensys Lab all Intellectual Property Rights
developed in connection with the Owned Intellectual
Property; and (ii) have waived their moral rights in
such Intellectual Property Rights. No former or present
employee or contractor of Avensys Lab claims or has
claimed to own any Intellectual Property Rights in the
Avensys Lab's products.
6.7.8 To Avensys Lab's Knowledge, Avensys Lab is not making
unauthorized use of any confidential information or
trade secrets of any Person and, to Avensys Lab's
Knowledge, no employee or contractor of Avensys Lab is
violating or has violated any third party Intellectual
Property Rights or any confidentiality obligations
toward third parties undertaken by them or any of
Avensys Lab, other than as set forth in Section 6.7.8 of
the Purchasers' Disclosure Schedule.
6.7.9 No source code of any software owned by Avensys Lab that
has been incorporated or embedded in any Avensys Lab's
products that comprise Avensys Lab's Business has been
licensed or otherwise disclosed to another Person other
than an escrow agent pursuant to the terms of a source
code escrow agreement in customary form, other than as
set forth in Section 6.7.9 of the Purchasers' Disclosure
Schedule. No software that has been incorporated or
embedded in any Avensys Lab's products that comprise
Avensys Lab's Business contains any code that is owned
by any third party, including any code that is licensed
pursuant to the provisions of any "open source" license
agreement, or any other license agreement that requires
source code be distributed or made available in
connection with the distribution of the licensed
software in object code form or that limits the amount
of fees that may be charged in connection with
sublicensing or distributing such licensed software,
other than as set forth in Section 6.7.9 of the
Purchasers' Disclosure Schedule.
44
6.7.10 Except as disclosed in Section 6.7.10 of the Purchasers'
Disclosure Schedule: (i) Avensys Lab has not received
any notice alleging that the conduct of Avensys Lab's
Business infringes any third party Intellectual Property
Rights; (ii) Avensys Lab has not at any time been sued
or been the subject of a Claim, or been a defendant in
any Claim (other than one which has been finally settled
prior to the date hereof with no ongoing obligations)
that involves the infringement or alleged infringement
of any third party Intellectual Property Rights, and no
such Claims are pending or, to the Knowledge of Avensys
Lab, threatened; (iii) Avensys Lab has not made any
Claim of infringement of any of the Owned Intellectual
Property against any other Person; and (iv) to the
Knowledge of Avensys Lab, there is no infringement by
any other Person of any Business Intellectual Property.
None of the Owned Intellectual Property is subject to
any outstanding order, judgment, decree, stipulation or
agreement restricting the use thereof by Avensys Lab or
restricting the licensing thereof by Avensys Lab to any
Person. With the exception of those agreements entered
into with its customers, distributors and system
integrators, Avensys Lab has not entered into any
agreement to indemnify any other Person against any
charge of infringement of any Owned Intellectual
Property.
6.8 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
6.8.1 Avensys Lab, its operations, activities, equipment,
buildings, immoveables and the properties it owns,
leases, occupies or has the custody of, have at all time
been and are in compliance with all applicable
Environmental Laws and Health and Safety Laws.
6.8.2 Avensys Lab has obtained and holds all permits,
certificates, licenses, certificates of authorization,
approvals, consent, registrations and other
authorizations required under applicable Environmental
Laws for its operations and activities (the
"ENVIRONMENTAL PERMITS"); each Environmental Permit is
valid and in force and the operations and activities of
Avensys Lab and Avensys Lab's Business are in compliance
with the conditions set out in the Environmental
Permits; to the Knowledge of Avensys Lab, there is no
grounds for revocation, change, expiry or annulment of
any Environmental Permits.
6.8.3 Avensys Lab, and to the Knowledge of Avensys Lab, in
connection with its work, its employees, agents,
shareholders, directors and officers has never been
declared guilty of committing an offence for a violation
of Environmental Laws or Health and Safety Laws and has
never been imposed a fine or has never otherwise settled
such a prosecution.
45
6.8.4 There are no Contaminants in, on or under the equipment,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of Avensys Lab, the
presence of which constitutes a violation of applicable
Environmental Laws or Health and Safety Laws.
6.8.5 Avensys Lab has not received any written or verbal
notice or request for information in the context of any
environmental or health and safety, federal, provincial,
regional or municipal investigation or inspection.
6.8.6 Avensys Lab has not used and is not using Contaminants
and has not allowed and is not allowing Contaminants to
be used at any equipment, building, immoveable or
property owned, leased or occupied by or under the
custody of Avensys Lab, except in compliance with
Environmental Laws and Health and Safety Laws.
6.8.7 Avensys Lab has not and does not Discharge or allow the
Discharge of Contaminants and to the Knowledge of
Avensys Lab, there is no Discharge of Contaminants on,
in, under, into, onto, from or outside the equipments,
buildings, immoveables or properties owned, leased,
occupied by or under the custody of Avensys Lab. All
Contaminants and other materials or substances disposed
of, treated, handled or stored at such equipments,
buildings, immoveables or properties have at all time
and are being disposed of, handled, treated and stored
in compliance with Environmental Laws and Health and
Safety Laws.
6.8.8 There are no PCBs, asbestos, urea formaldehyde, methane,
ozone-depleting substances, lead-based paint, radon or
radioactive substances in, on or under the equipment,
buildings, immoveables or properties owned, leased or
occupied by or under the custody of Avensys Lab.
6.8.9 There is no action, order, decision, directive,
declaration, decree, judgment, suit or proceeding,
pending or threatened, against Avensys Lab, or to the
Knowledge of Avensys Lab, its employees, agents,
shareholders, directors and officers, or involving
Avensys Lab or Avensys Lab's Business, by or before any
tribunal, commission, agency or any governmental entity
(including the Commission de la sante et de la securite
du travail, Environment Canada, Transport Canada,
Fisheries and Oceans Canada, the Ministry of the
Environment (Quebec) and the Ministry of Natural
Resources (Quebec)), and to the Knowledge of Avensys
Lab, there is no event or fact based on which such
action, order, decision, directive, declaration, decree,
judgment, suit or proceeding may be instituted.
46
6.9 LITIGATION
6.9.1 There are no Claims (including without limitation any
derivative proceeding on behalf of Avensys Lab) pending
or, to the Knowledge of Avensys Lab, threatened against
Avensys Lab, or the ability of Avensys Lab to consummate
the transactions contemplated hereunder, before or by
any federal, state, provincial, municipal or other
governmental court, department, commission, board,
bureau, agency or instrumentality, domestic or foreign,
whether or not insured, or which might involve the
possibility of any judgment or liability against Avensys
Lab.
6.9.2 There are no (i) outstanding judgments, orders,
injunctions or decrees of any governmental authority or
arbitration tribunal against Avensys Lab, or (ii)
investigations by any governmental authority which are,
to the Knowledge of Avensys Lab, pending or threatened
against Avensys Lab, and which have or could have an
adverse effect on the ability of Avensys Lab to
consummate the transactions contemplated hereby or to
perform the obligations of Avensys Lab under this
Agreement.
6.10 FEES
Avensys Lab does not have any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller
could become liable or obligated.
7. MANARIS' REPRESENTATIONS AND WARRANTIES
Manaris represents and warrants to the Seller and the Preferred Holders that:
7.1 ORGANIZATION
Manaris is duly incorporated, organized and validly existing and in
good standing under the Laws of its jurisdiction of incorporation.
7.2 AUTHORITY
7.2.1 Manaris has good and sufficient power, authority and
right to enter into and deliver this Agreement and to
complete the transactions contemplated hereby.
7.2.2 This Agreement has been duly executed and delivered by
Manaris, and is a valid and binding obligation of
Manaris enforceable in accordance with its terms.
47
7.2.3 Neither the entering into, the delivery of this
Agreement nor the completion of the transactions
contemplated hereby by Manaris will result in:
7.2.3.1 the violation of any of the provisions of
the charter documents or by-laws of Manaris;
7.2.3.2 the violation of any agreement or other
instrument to which Manaris is a party or by
which it is bound;
7.2.3.3 the violation of any applicable law, rule,
regulation, judgment, order or decree; or
7.2.3.4 a conflict with, breach of or creation of an
event of default (or event that, with the
giving of notice or lapse of time or both,
would constitute an event of default) under,
or an event which would give any party the
right to accelerate any obligation under,
any agreement, mortgage, license, lease,
indenture, instrument, order, arbitration
award, judgment or decree to which Manaris
is a party or by which Manaris is bound or
affected.
7.2.4 All necessary corporate actions has been taken to
validly create and issue the Manaris Shares and to
register such Manaris Shares in the name of the Seller.
7.2.5 Upon the consummation of the transaction contemplated by
this Agreement, the Manaris Shares will be validly
issued and outstanding as fully paid and non-assessable
shares of Manaris registered in the name of the Seller
and subject only to Manaris' compliance with Section
2.8.1, the Manaris Shares will be freely tradable on the
OTCBB.
7.2.6 No consent, approval, waiver or authorization is
required to be obtained by Manaris from, and no notice
or filing is required to be given by Manaris to, or made
by Manaris with, any Person in connection with the
execution, delivery and performance by Manaris of this
Agreement, except as set forth in Section 2.8.1 and as
disclosed in Section 7.2.6 of the Purchasers' Disclosure
Schedule.
7.3 SEC FILINGS
Manaris has filed all reports required to be filed by Manaris and
has publicly announced all material facts relating to Manaris as
required under the Securities Act and the Exchange Act for the two
(2) years preceding the date hereof. All such reports and public
announcements comply in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations thereunder as of the dates such reports
were filed.
48
8. SURVIVAL OF AVENSYS, AVENSYS LAB AND MANARIS' REPRESENTATIONS AND WARRANTIES
All representations and warranties of Avensys, Avensys Lab and Manaris set forth
in Articles 5, 6 and 7 shall survive for a period of one year from the Closing
Date, except that representations and warranties fraudulently made shall survive
without limitation.
9. PREFERRED HOLDERS' REPRESENTATIONS AND WARRANTIES
Each of the Preferred Holders represents and warrants to the Purchaser that:
9.1 ACCREDITED INVESTOR
It is an "accredited investor" within the meaning of National
Instrument 45-106 - Prospectus and Registration Exemptions published
by the Canadian Securities Administrators such that one or more of
the categories set forth in the form attached as Section 9.1 of the
Seller's Disclosure Schedule correctly and in all respects describes
it as so indicated by checking the box opposite each category on
such form which so describes it, and it acknowledges that by
executing this Agreement, it is certifying that the statements made
by checking the appropriate accredited investor categories on such
form are true and correct.
9.2 GUARANTEE
It has the capacity and power to carry out the undertakings set
forth in Section 12.5.2 and all necessary actions or consents to
authorize the performance of same have been taken or obtained.
9.3 SURVIVAL
The representations and warranties of the Preferred Holders set
forth in Section 9.1 shall survive for a period of one year from the
Closing Date, except that representations and warranties
fraudulently made shall survive without limitation.
10. COVENANTS
10.1 EMPLOYEES
10.1.1 The Purchasers undertake to continue the employment on
and after the Closing Date of all of the employees who
are employed by the Seller in the Purchased Business and
all subcontractors whose names are listed in Section
10.1.1 of the Seller's Disclosure Schedule, except for
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ whose employment
and any employment agreements shall be terminated by the
Closing Date (the "TRANSFERRED EMPLOYEES"), the whole in
accordance with the Civil Code of Quebec.
49
10.1.2 Notwithstanding the provisions of Section 10.1.1 of the
Seller's Disclosure Schedule, the Seller will continue
to be responsible for and will discharge, indemnify and
save the Purchasers harmless from and against all
obligations and liabilities resulting from (i) all
rights and entitlements, including wages, vacation pay,
employee benefits payment, severance pay, termination
pay, notice of termination of employment or pay in lieu
of such notice, damages for wrongful dismissal,
reinstatement rights for ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and (ii) wages, employee benefits payment and
vacation pay accrued up to the close of business on the
day immediately preceding the Closing Date in respect of
the Transferred Employees. The Purchasers assume and
will discharge all such obligations and liabilities
accruing after the close of business on the day
immediately preceding the Closing Date in respect of the
Transferred Employees.
10.2 COVENANTS OF THE SELLERS
10.2.1 The Seller shall ensure that the representations and
warranties of the Seller set forth in Article 3 are true
and correct at the Closing Date and that the conditions
of closing for the benefit of the Purchasers set forth
in Section 11.1 have been performed or complied with by
the Closing Date.
10.2.2 The Seller shall permit the Purchasers, through their
agents and representatives, to make such reasonable
investigation prior to the Closing Date of the Assets
and of the Seller's financial and legal condition as the
Purchasers consider necessary or advisable to
familiarize themselves with the Assets and other matters
and the Seller shall supply any and all documents and
records of the Seller to the Purchasers and their agents
and representatives as they may reasonably require. Such
investigations and inspections shall not, however,
affect or mitigate the Seller's covenants,
representations and warranties hereunder which shall
continue in full force and effect.
10.2.3 The Seller also hereby undertakes to grant reasonable
access to the Purchasers to all of the Assets located at
45, 55 and ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in Saint-Laurent. The
Purchasers shall be responsible to remove the Assets
from said location by May 31, 2006 and shall be liable
to the Seller for any Claim incurred by the Seller
directly as a result of the use of such premises or
removal of the Assets.
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10.3 COVENANTS OF AVENSYS, AVENSYS LAB AND MANARIS
10.3.1 Each of Avensys, Avensys Lab and Manaris shall ensure
that the representations and warranties set out in
Articles 5, 6 and 7 are true and correct at the Closing
Date and that the conditions of closing for the benefit
of the Seller set out in Section 11.2 have been
performed or complied with by the Closing Date.
10.3.2 Each of Avensys, Avensys Lab and Manaris shall permit
the Seller, through its agents and representatives, to
make such reasonable investigation prior to the Closing
Date of Avensys, Avensys Lab and Manaris as the Seller
considers necessary or advisable to familiarize itself
with Avensys, Avensys Lab and Manaris and Avensys,
Avensys Lab and Manaris shall supply any and all
documents and records of Avensys, Avensys Lab and
Manaris to the Seller and its agents and representatives
as they may reasonably require. Such investigations and
inspections shall not, however, affect or mitigate
Avensys, Avensys Lab and Manaris' covenants,
representations and warranties hereunder which shall
continue in full force and effect.
10.3.3 The Preferred Holders will be entitled to nominate for a
period of three (3) years from the Closing Date one (1)
representative on the board of directors of Manaris,
which nominee shall be subject to Manaris' approval
which shall not be unreasonably withheld. Manaris shall
use its commercially reasonable best efforts to ensure
that such nominee is duly elected to its board.
10.3.4 Manaris shall (i) make and keep current public
information available, as those terms are understood and
defined in Rule 144 under the Securities Act, at all
times after the effective date of the registration
statement filed by Manaris pursuant to Section 2.8.1;
and (ii) use commercially reasonable efforts to file
with the SEC in a timely manner all reports and other
documents required of Manaris under the Securities Act
and the Exchange Act.
10.3.5 Avensys Lab shall make reasonably available to Seller
following the Closing Date, such Transferred Employees
and ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, if employed by the Seller, in
order to assist the Seller in the completion of all
reports and other documents necessary to obtain
investment and research and development tax credits up
to the Closing Date. For and in consideration of such
services, Avensys Lab and Seller shall agree on a fee
arrangement prior to the Closing Date.
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10.4 ACCESS TO BOOKS AND RECORDS AND FINANCIAL STATEMENTS
Upon written request to the Purchasers, the Purchasers shall
provide, both before and after the Closing Date, Manaris and its
representatives with reasonable access to the books and records and
financial statements of the Seller (before the Transaction) and all
related files and information in the Seller's possession or in the
work files of the auditors of the Purchasers as required to allow
Manaris to prepare financial statements and to permit Manaris'
auditors to render an opinion on such financial statements and to
permit Manaris to comply with any filing or other requirement
applicable under securities legislation.
11. CONDITIONS OF CLOSING
11.1 Conditions for the benefit of the Purchasers
11.1.1 The sale by the Seller and the purchase by the
Purchasers of the Assets is subject to the following
conditions which are for the exclusive benefit of the
Purchasers to be performed or complied with at or prior
to the Closing Date:
11.1.1.1 the representations and warranties of the
Seller set forth in Article 3 shall be true
and correct at the Closing Date with the
same force and effect as if made at and as
of such date;
11.1.1.2 the Seller shall have performed or complied
with all of the terms, covenants and
conditions of this Agreement to be performed
or complied with by the Seller at or prior
to the Closing Date;
11.1.1.3 the Purchasers shall be furnished with such
certificates of the Seller or of officers of
the Seller as the Purchasers or the
Purchasers' counsel may reasonably think
necessary in order to establish that the
terms, covenants and conditions contained in
this Agreement to have been performed or
complied with by the Seller, at or prior to
the Closing Date have been performed and
complied with and that the representations
and warranties of the Seller herein given
are true and correct at the Closing Date;
11.1.1.4 there will have been obtained from all
appropriate federal, provincial, municipal
or other governmental or administrative
bodies such other approvals or consents as
are required to permit the change of
ownership of the Assets contemplated hereby
and to permit the Purchased Business to be
carried on by the Purchasers as now
conducted;
52
11.1.1.5 all necessary steps and proceedings will
have been taken to permit the Assets to be
duly and regularly transferred to and
registered in the name of the Purchasers
including obtaining the consents listed in
Sections 3.8.3, 3.8.5 and 3.9.2 of the
Seller's Disclosure Schedule to the
assignment of the Purchased Agreements, the
Equipment Leases and the Leases;
11.1.1.6 the absence of any material adverse change
in the Purchased Business, financial
conditions, prospects, assets or operations;
11.1.1.7 the absence of any material pending or
threatened litigation involving the Seller,
the Purchased Business or the transactions
contemplated hereby;
11.1.1.8 there shall be a license agreement entered
into between Avensys and Avensys Lab
satisfactory to the parties;
11.1.1.9 there shall be a shareholders' agreement
entered into between the shareholders of
Avensys Lab satisfactory to the parties;
11.1.1.10 there shall be a sub-lease agreement entered
into between Avensys and Avensys Lab with
respect to the premises located at ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇;
11.1.1.11 the Seller shall have delivered to the
Purchasers a favorable opinion of the
Seller's counsel satisfactory to the
Purchasers;
11.1.1.12 the Purchasers shall be provided with
evidence of strike-off of any hypothec or
charge on the Manufacturing Assets or the
R&D Assets at the Registre des droits
personnels et reels mobiliers; and
11.1.1.13 there shall be a start-up budget submitted
for Avensys Lab which shall be to the
satisfaction of the parties.
11.1.2 In case any term or covenant of the Seller or condition
to be performed or complied with for the benefit of the
Purchasers at or prior to the Closing Date has not been
performed or complied with at or prior to the Closing
Date, the Purchasers, without limiting any other right
that the Purchasers have, may at their sole option
either:
11.1.2.1 rescind this Agreement by notice to the
Seller, and in such event the Purchasers
will be released from all obligations
hereunder; or
53
11.1.2.2 waive compliance with any such term,
covenant or condition in whole or in part on
such terms as may be agreed upon without
prejudice to any of its rights of rescission
in the event of non-performance of any other
term, covenant or condition in whole or in
part;
and, if the Purchasers rescind this Agreement pursuant
to Section 11.1.2, the Seller will also be released from
all obligations hereunder unless the term, covenant or
condition for which the Purchasers have rescinded this
Agreement was one that the Seller had covenanted,
pursuant to this Agreement, to ensure had been performed
or complied with, in which event the Seller will be
liable to the Purchasers for any Claims incurred by the
Purchasers directly or indirectly as a result of such
breach.
11.2 CONDITIONS FOR THE BENEFIT OF THE SELLER
11.2.1 The sale by the Seller and the purchase by the
Purchasers of the Assets is subject to the following
condition which is for the exclusive benefit of the
Seller to be performed or complied with at or prior to
the Closing Date:
11.2.1.1 the representations and warranties of each
of Avensys, Avensys Lab and Manaris set
forth in Articles 5, 6 and 7 shall be true
and correct at the Closing Date with the
same force and effect as if made at and as
of such date; and
11.2.1.2 the Purchasers and Manaris shall have
performed or complied with all of the terms,
covenants and conditions of this Agreement
to be performed or complied with by the
Purchasers and Manaris at or prior to the
Closing Date;
11.2.1.3 the Seller shall be furnished with such
certificates of the Purchasers or Manaris or
of officers of Purchasers or Manaris as the
Seller or the Seller's counsel may
reasonably think necessary in order to
establish that the terms, covenants and
conditions contained in this Agreement to
have been performed or complied with by the
Purchasers and Manaris, at or prior to the
Closing Date have been performed and
complied with and that the representations
and warranties of the Purchasers and Manaris
herein given are true and correct at the
Closing Date;
11.2.1.4 Avensys Lab and Manaris shall have obtained
the approval of their respective board of
directors for the issuance of the Avensys
Lab Shares and the Manaris Shares
respectively;
11.2.1.5 the consents listed in Sections 5.2.4, 6.2.6
and 7.2.6 of the Purchasers' Disclosure
Schedule shall have been obtained;
11.2.1.6 the absence of any material adverse change
in the business, financial condition,
prospects, assets or operations of Avensys,
Avensys Lab or Manaris;
54
11.2.1.7 the absence of any material pending or
threatened litigation involving the
Purchasers or Manaris, Avensys' Business,
Avensys Lab's Business or the transactions
contemplated hereby;
11.2.1.8 the Seller, at its sole and absolute
discretion, shall be satisfied with its due
diligence investigation of the Purchasers
and Manaris;
11.2.1.9 the Seller shall have obtained the written
approval of this Agreement and the
transactions contemplated thereby by special
resolution of the shareholders of the
Seller;
11.2.1.10 there shall be a license agreement entered
into between Avensys and Avensys Lab
satisfactory to the parties;
11.2.1.11 there shall be a shareholders' agreement
entered into between the shareholders of
Avensys Lab satisfactory to the parties;
11.2.1.12 there shall be a sub-lease agreement entered
into between Avensys and Avensys Lab with
respect to the premises located at ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇;
11.2.1.13 the Purchasers and Manaris shall have
delivered to the Seller a favorable opinion
of the counsel of the Purchasers and Manaris
satisfactory to the Seller; and
11.2.1.14 there shall be a start-up budget submitted
for Avensys Lab which shall be to the
satisfaction of the parties.
11.2.2 In case any term or covenant of the Purchasers or
Manaris or condition to be performed or complied with
for the benefit of the Seller at or prior to the Closing
Date has not been performed or complied with at or prior
to the Closing Date, the Seller, without limiting any
other right that the Seller has, may at its sole option
either:
11.2.2.1 rescind this Agreement by notice to the
Purchasers and Manaris, and in such event
the Seller will be released from all
obligations hereunder; or
11.2.2.2 waive compliance with any such term,
covenant or condition in whole or in part on
such terms as may be agreed upon without
prejudice to any of its rights of rescission
in the event of non-performance of any other
term, covenant or condition in whole or in
part;
55
and, if the Seller rescinds this Agreement pursuant to
Section 11.2.2, the Purchasers will also be released
from all obligations hereunder unless the term, covenant
or condition for which the Seller has rescinded this
Agreement was one that the Purchasers or Manaris had
covenanted, pursuant to this Agreement, to ensure had
been performed or complied with, in which event the
Purchasers and Manaris will be liable to the Seller for
any Claims incurred by the Seller directly or indirectly
as a result of such breach.
12. INDEMNIFICATION
12.1 INDEMNIFICATION BY THE SELLER
12.1.1 Regardless of any investigation made at any time by or
on behalf of each of the Purchasers or any information
each of the Purchasers or any of its directors,
officers, employees representatives, agents, attorneys,
accountants, consultants or affiliates (the "PERSONNEL")
may have, and provided that the Purchasers provide the
Seller with a written notice of its Claim for
indemnification on or prior to the expiration of the
applicable survival period set forth in this Agreement,
the Seller shall indemnify, defend and hold the
Purchasers harmless from and against any Adverse
Consequences arising out of, resulting from, or relating
to any of the following (and whether or not pursuant to
a Claim by a third party or a loss, cost, liability or
obligation suffered by either of the Purchasers
directly):
12.1.1.1 any violation, contravention or breach of
any term, provision, covenant, agreement or
obligation of the Seller under this
Agreement; or
12.1.1.2 any inaccuracy or misrepresentation in, or
breach of, any representation or warranty
made by the Seller under this Agreement, the
Seller's Disclosure Schedule or in any
certificate delivered pursuant to this
Agreement; or
12.1.1.3 any Excluded Liabilities.
12.1.2 Save and except where there may be an actual conflict of
interest, the Preferred Holders shall appoint a single
legal counsel to represent them in any proceedings
brought against any of them pursuant to Section 12.1.1.
12.2 INDEMNIFICATION BY AVENSYS, AVENSYS LAB OR MANARIS
56
12.2.1 Regardless of any investigation made at any time by or
on behalf of the Seller or the Preferred Holders or any
information the Seller or the Preferred Holders or any
of their respective Personnel may have and provided that
the Seller or the Preferred Holders provides Avensys,
Avensys Lab or Manaris, as the case may be, with a
written notice of its claim for indemnification on or
prior to the expiration of any applicable survival
period set forth in this Agreement, Avensys, Avensys Lab
and Manaris shall solidarily indemnify and hold the
Seller, the Preferred Holders and their respective
Personnel harmless from and against any Adverse
Consequences arising out of, resulting from, or relating
to any of the following (and whether or not pursuant to
a Claim by a third party or a loss, cost, liability or
obligation suffered by the Seller or a Preferred Holder
directly):
12.2.2 any violation, contravention or breach of any term,
provision, covenant, agreement, or obligation of
Avensys, Avensys Lab or Manaris under this Agreement; or
12.2.3 any inaccuracy or misrepresentation in, or breach of,
any representation or warranty made by Avensys, Avensys
Lab or Manaris, as the case may be, under this Agreement
or in any certificate delivered pursuant to this
Agreement.
12.3 MATTERS INVOLVING THIRD PARTIES
The obligations of the Seller, Avensys, Avensys Lab and Manaris
under this Article 12, in the case of any Claim by a third party,
are conditional upon the party that is otherwise entitled to be
indemnified (the "INDEMNITEE") giving prompt notice to the other
(including, in the case of a Claim for indemnification against
Seller, of concurrent notice thereof to the Preferred Holders) (the
"INDEMNITOR") of such Claim and permitting the Indemnitor at its
expense to participate in all negotiations relating thereto, to
assume the defence of any action or proceeding relating thereto and
to determine (with the Indemnitee, acting reasonably) whether any
settlement should be made with respect thereto; provided that if, in
the sole opinion of the Indemnitee, the interests of the Indemnitee
are different from those of the Indemnitor in connection with such
Claim, the Indemnitee will have the right, at the Indemnitor's
expense, to defend its own interests provided that any settlement of
such Claim is on terms and conditions approved by the Indemnitor,
acting reasonably. If the Indemnitor does not defend any Claim, or
give notice of its intention to so defend within thirty (30) days of
notice of claim by the Indemnitee under this Section 12.3, the
Indemnitee will have the right to do so on its own behalf and on
behalf of the Indemnitor at the expense of the Indemnitor.
12.4 DE MINIMUS LIABILITY
Subject to the provisions of Section 12.5 herein, the obligation of
a party to indemnify another pursuant to this Article 12 shall be
applicable only to the extent that the party seeking indemnification
has one or more Claims exceeding in the aggregate $25,000.
57
12.5 SELLER'S MAXIMUM LIABILITY
12.5.1 The parties agree that the liability of the Seller and
Preferred Holders pursuant to Section 12.1, Section
12.5.2 and any other claim hereunder shall not exceed
$3,750,000 and that, in the event of any Claim in
respect thereof, the Seller and/or the Preferred Holders
shall be entitled to obtain a release of any amount owed
by them:
12.5.1.1 firstly, by surrendering to Manaris any
number of Manaris Shares;
12.5.1.2 secondly, by reducing the price of the Put
Option (as this term is defined in the
Shareholder Agreement) which may be
exercised by the Preferred Holders in
accordance with Section 4.13 of the
Shareholder Agreement; and
12.5.1.3 thirdly by surrendering to the Purchasers
any number of Avensys Lab Shares, or, if
surrender of Avensys Lab Shares would in the
opinion of the Company, imperil the
Company's qualification for research and
development tax credits, from cash forming
part of the Manufacturing Assets Purchase
Price received by the Seller including any
cash amount received from the sale of
Manaris Shares by the Preferred Holders.
Notwithstanding the above, in the event that the
Preferred Holders do not exercise the Put Option (as
this term is defined in the Shareholder Agreement)
within the Permitted Window (as this term is defined in
the Shareholder Agreement), any payment of any Claim by
a reduction in the Put Option price in accordance with
Section 12.5.1.2 shall be null and without effect and
the Purchasers shall be entitled to payment of the Claim
in accordance with Sections 12.5.1.1 and 12.5.1.3.
The amounts of the release received pursuant to the
surrendering of Manaris Shares or Avensys Lab Shares
shall be determined on the basis of the issuing price
per Manaris Share or Avensys Lab Share, as the case may
be, determined in Section 2.4 hereof.
12.5.2 The Preferred Holders, on a non solidary basis (ie.
severally and not jointly and severally), irrevocably
and unconditionally, guarantee to the Purchasers and
Manaris the payment of any and all indemnity due to the
Purchasers or Manaris, as the case may be, in accordance
with Section 12.5.1, in the proportions set forth in
Section 2.4.3.
58
12.6 MAXIMUM LIABILITY OF AVENSYS, AVENSYS LAB AND MANARIS
The parties agree that the liability of Avensys, Avensys Lab and
Manaris for indemnification pursuant to Section 12.2 shall not
exceed the following amounts:
12.6.1 for Avensys and Avensys Lab, $2,000,0000 in the
aggregate;
12.6.2 for Manaris, $1,000,000 less any amount in cash paid by
Manaris pursuant to Section 2.8.3.
12.7 CONSEQUENTIAL DAMAGES
Neither party shall be liable for indirect, incidental, special,
consequential damages or punitive or exemplary losses, damage or
expenses of any kind or for amounts for business interruption, loss
of income, lost profits, lost data or lost savings or any other
commercial or economic loss of any kind arising out of or relating
to such party's performance or failure to perform under this
Agreement, even if it has been advised of their possible existence,
or even if same were reasonably foreseeable.
13. GENERAL
13.1 FURTHER ASSURANCES
The Seller and the Purchasers shall from time to time execute and
deliver all such further documents and instruments and do all acts
and things as the other party may, either before or after the
Closing Date, reasonably require to effectively carry out or better
evidence or perfect the full intent and meaning of this Agreement.
13.2 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
13.3 COMMISSIONS
The Seller and the Purchasers agree to indemnify and save harmless
one another from and against any claims whatsoever for any
commission or other remuneration payable or alleged to be payable to
any person in respect of the transactions contemplated herein,
whether such person purports to act or have acted for the Seller or
the Purchasers in connection with the transactions contemplated
herein.
13.4 PROFESSIONAL FEES
Each of the parties hereto shall pay their respective legal and
accounting and other professional costs and expenses incurred in
connection with the preparation, execution and delivery of this
Agreement and all documents and instruments executed pursuant hereto
and any other costs and expenses whatsoever and howsoever incurred,
including in connection with any post-closing matters.
59
13.5 PUBLIC ANNOUNCEMENTS
No public announcement or press release concerning the existence of
this Agreement, the contents hereof or the transactions contemplated
hereby shall be made by the Seller or the Purchasers without the
prior written consent and joint approval of the Seller, the
Purchasers and Manaris (except as required pursuant to applicable
Laws including Manaris' disclosure obligations under securities
legislation).
13.6 BENEFIT OF THE AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, personal
representatives, successors and permitted assigns of the parties
hereto.
13.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and cancels and
supersedes any prior understandings and agreements between the
parties hereto with respect thereto, including the Letter of Intent
dated February 13, 2006. There are no representations, warranties,
terms, conditions, undertakings or collateral agreements, express,
implied or statutory, between the parties other than as expressly
set forth in this Agreement.
13.8 AMENDMENTS AND WAIVER
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by the parties
hereto and no waiver of any breach of any term or provision of this
Agreement shall be effective or binding unless made in writing and
signed by the parties entitled to waive the same.
13.9 ASSIGNMENT
This Agreement may not be assigned by a party hereto without the
prior written consent of the other parties hereto.
13.10 NOTICES
Any demand, notice or other communication to be given in connection
with this Agreement shall be given in writing and shall be given by
personal delivery, by registered mail or by electronic means of
communication addressed to the recipient as follows:
60
TO AVENSYS, AVENSYS LAB AND MANARIS:
AVENSYS INC.
▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ d'Amours, President and Chief Executive
Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
AVENSYS LABORATORIES INC.
▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
MANARIS CORPORATION
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to (but which shall not constitute notice to
the Purchasers or Manaris):
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 2500
1000 de La Gauchetiere Street West
Montreal, Quebec
H3B 0A2
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
61
TO THE SELLER, C/O THE PREFERRED HOLDERS AT THE RESPECTIVE ADDRESSES
SET OUT BELOW.
with a required copy to (but which shall not constitute notice to
the Seller):
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
TO THE PREFERRED HOLDERS:
INVESTISSEMENT TECHNOLOGIE (3599) INC.
▇▇▇, ▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Corporate Secretary
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
ONTARIO TEACHERS' PENSION PLAN
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President, Venture Capital
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the General Counsel:
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
CELTIC HOUSE VENTURE PARTNERS FUND IIA LP
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Partner and Chief Operating Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
62
GTI V LIMITED PARTNERSHIP
▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: General Partner
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
GTI V (NR) LIMITED PARTNERSHIP
▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: General Partner
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
BAY TECH VENTURE CAPITAL GMBH & CO. KG.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attention: Limited Managing Partner
Telecopier: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇
or to such other address, individual or electronic communication
number as may be designated by notice given by a party to the
others. Any demand, notice or other communication given by personal
delivery shall be conclusively presumed to have been given on the
day of actual delivery thereof and, if given by registered or
certified mail, on the third Business Day following the deposit
thereof in the mail and, if given by electronic communication, on
the day of successful transmittal thereof if given during the normal
business hours of the recipient and on the Business Day during which
such normal business hours next occur if not given during such hours
on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to have known of any
difficulties with the postal system which might affect the delivery
of mail, any such demand, notice or other communication shall not be
mailed but shall be given by personal delivery or by electronic
communication.
13.11 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Quebec and the laws of Canada applicable
therein.
63
13.12 JURISDICTION
The courts of the Province of Quebec have non-exclusive jurisdiction
with respect to any action or dispute arising under this Agreement.
The Seller, the Preferred Holders, the Purchasers and Manaris each
attorns to the non-exclusive jurisdiction of the courts of the
Province of Quebec.
13.13 AGENT FOR SERVICE
The Preferred Holders irrevocably appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP to be
their agent for the receipt of service of process in Quebec. The
Preferred Holders agree that any service document may be effectively
served on them in connection with proceedings in Quebec by service
on their agent.
13.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed and original but all of which together shall
constitute one and the same instrument.
13.15 DELIVERY AND ACCEPTANCE
The parties shall be entitled to rely on delivery by facsimile
machine of an executed copy of this Agreement and acceptance by a
party of such facsimile copy shall be equally effective to create a
valid and binding agreement between each of the parties in
accordance with the terms hereof.
64
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
referred to above.
AVENSYS INC.
By: /s/ ▇▇▇▇▇▇ d'Amours
-------------------
▇▇▇▇▇▇ d'Amours,
President and Chief Executive Officer
AVENSYS LABORATORIES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------
▇▇▇▇▇▇ ▇▇▇▇▇,
President
ITF OPTICAL TECHNOLOGIES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇,
President and Chief Executive Officer
MANARIS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
INVESTISSEMENT TECHNOLOGIE (3599) INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
By: /s/ Michel Sainte-▇▇▇▇▇
-----------------------
Name: Michel Sainte-▇▇▇▇▇
Title: Secretaire Adjoint
65
ONTARIO TEACHERS' PENSION PLAN
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Venture
Capital
CELTIC HOUSE VENTURE PARTNERS FUND IIA LP
BY CELTIC HOUSE GENERAL PARTNER (FUND IIA)
INC., ITS GENERAL PARTNER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Partner and Chief Operating Officer
GTI V LIMITED PARTNERSHIP
BY GTI V INC., ITS GENERAL PARTNER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior General Partner
GTI V (NR) LIMITED PARTNERSHIP
BY GTI V (NR) INC., ITS GENERAL PARTNER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior General Partner
BAY TECH VENTURE CAPITAL GMBH & CO. KG
By: /s/ ▇▇▇▇ ▇. ▇▇▇'Ewodo
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇'Ewodo
Title: Partner
