Document:

EXHIBIT
10.1

 

ASSET PURCHASE AGREEMENT

 

This
ASSET PURCHASE AGREEMENT (this “Agreement”) is effective as of April 13, 2005
(the “Effective Date”), by and between Stressgen Bioreagents Corporation, a
Delaware corporation (“Buyer”) and Stressgen Bioreagents Limited Partnership, a
British Columbia limited partnership (“Seller”), the general partner of which
is Stressgen Holdings Corporation, a Yukon Territories corporation (“SHC”) and
the sole limited partner of which is Stressgen Biotechnologies Corporation, a
Yukon Territories corporation (“SBC,” and together with SHC, “Partners”), with
reference to the following facts:

 

WHEREAS,
Seller is wholly-owned by Partners;

 

WHEREAS,
Seller operates and holds a bioreagents business (the “Business”);

 

WHEREAS,
Buyer desires to purchase from Seller and Seller desires to sell to Buyer, with
the consent of the Partners, on the terms and subject to the conditions of this
Agreement, certain selected assets of Seller used in and necessary for the
operation of the Business.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the representations,
warranties, covenants and agreements contained below, the parties agree as
follows:

 

ARTICLE 1

 

PURCHASE
AND SALE OF SELECTED ASSETS

 

1.1           Purchase and Sale.  On the
Closing Date (as defined in Section 2.1 below), Seller agrees to sell,
transfer, assign and deliver to Buyer and Buyer agrees to purchase, accept and
acquire from Seller, all of Seller’s right, title and interest in and to the
assets (the “Assets”) of Seller described in the Bill of Sale attached as Exhibit
A (the “Bill of Sale”).  To clarify
the composition of the Assets, the parties acknowledge that the Assets do not
include the excluded assets (the “Excluded Assets”) described on Exhibit B.  On the Closing Date, Seller shall deliver an
executed Bill of Sale to Buyer and shall simultaneously take all additional
steps and execute all additional documents and instruments as may be necessary
to put Buyer in possession and complete operating control of the Assets and to
transfer all Seller’s right, title and interest in and to the Assets to Buyer.

 

1.2           Purchase Price. 
Upon the terms and subject to the conditions contained herein, the
purchase price to be paid by Buyer to Seller for the sale, transfer, assignment
and delivery of the Assets (the “Purchase Price”) shall be as follows:

 

(a)           $5,850,000 in cash at the Closing,
subject to Section 1.3.

 

(b)           $650,000 (the “Holdback”)
which shall be delivered to Seller on the date that is one (1) year after the
Closing Date (“Escrow Period”), subject to the terms and provisions of Section
7 hereof and the Escrow Agreement.

 

All
currency amounts appearing in this agreement are expressed in US dollars unless
otherwise notated.  The Purchase Price is
exclusive of, and Buyer shall be liable for, all sales, use or other transfer
tax required by Part 9 of the ETA; provided, however, that the Buyer and Seller
shall jointly elect and use commercial best efforts to qualify under Section
167 of the ETA to have no GST payable with respect to the supply of the
business assets.

 

 

1.3           Closing Balance Sheet Adjustment.

 

(a)           Within thirty (30) days after the Closing
Date, Seller shall cause to be prepared and shall deliver to Buyer a
preliminary balance sheet of Seller as of the close of business on the Closing
Date, which balance sheet shall reflect, among other things, total Current
Assets (other than intercompany receivables and an amount of cash sufficient to
satisfy Section 1.3(c) below), total Current Liabilities and Net Plant and
Equipment (“Preliminary Closing Date Balance Sheet”).  Current Liabilities shall only include
Assumed Liabilities (as defined in section 1.4 below).  The Preliminary Closing Date Balance Sheet
shall be prepared in accordance with Canadian GAAP applied in a manner consistent
with that utilized in preparing the Financial Statements (as defined in Section
3.6).

 

(b)           Buyer shall have thirty (30) days
following receipt of the Preliminary Closing Date Balance Sheet to review and
make adjustments to the Preliminary Closing Date Balance Sheet, including
preparation of a schedule translating the Preliminary Closing Date Balance
Sheet into U.S. Dollars for purposes of measuring the Net Current Assets (as
defined below).  Seller shall give
support and provide information to Buyer as reasonably necessary during Buyer’s
review period to facilitate a substantive review and adjustment.  Buyer shall deliver the reviewed and adjusted
Preliminary Closing Date Balance Sheet (“Buyer’s Adjusted Closing Date Balance
Sheet”) to Seller prior to the end of such thirty (30) day period.

 

(c)           If Seller does not dispute the amounts
set forth in the Buyer’s Adjusted Closing Date Balance Sheet, the Buyer’s
Adjusted Closing Date Balance Sheet shall be conclusive.  If Seller disputes any amount set forth in
the Buyer’s Adjusted Closing Date Balance Sheet, Seller shall so notify Buyer
in writing (specifying Seller’s objections and the reasons therefor in
reasonable detail) within thirty (30) days following receipt thereof and the
parties will use all reasonable efforts to resolve any such disputes.  If any such dispute cannot promptly be
resolved (but in any event within thirty (30) days after submission of the
written objections of Seller, the parties agree that they will submit the
matter to the office of JAMS/Endispute located in San Diego, California (or, if
none, then the office of JAMS/Endispute located closest to San Diego,
California) to be arbitrated by a single arbitrator to be mutually selected by
the parties.  The resolution of the
dispute by JAMS/Endispute will be conclusive and binding upon the parties.  The fees and expenses of JAMS/Endispute will
be paid by the party JAMS/Endispute determines to be the non-prevailing party,
or if there is no prevailing party as determined by the arbitrator.  The Buyer’s Adjusted Closing Date Balance
Sheet and the information set forth thereon, as finally determined pursuant to
this Section 1.3(b), is hereinafter referred to as the “Final Closing Balance
Sheet.”

 

(d)           In the event the Current Assets less
Current Liabilities set forth in the Final Closing Balance Sheet (“Net Current
Assets”) is less than $925,000, then Seller shall be liable to pay over to
Buyer an amount in cash equal to the difference between (i) $925,000 and (ii)
the Net Current Assets.

 

(e)   Any payment required to be made under Section 1.3(c)
shall be made within fifteen (15) business days after the determination thereof
(“Due Date”), without setoff for any other matter, by wire transfer to an
account designated by Buyer.  If such
payment is not made by the Due Date, Seller shall pay interest from the Due
Date until the date paid at a simple rate of interest equal to eight percent
(8%) per annum; provided, in no event shall such rate exceed the maximum rate
permitted by law and provided further that no interest shall accrue on any
payment due under Section 1.3(c) for so long as a dispute exists under Section
1.3(b).

 

1.4           Assumed Liabilities. 
Upon the terms and subject to the conditions contained herein, Buyer
shall assume all of the current obligations and liabilities of Seller set forth
on attached Exhibit C

 

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(the “Assumed Liabilities”), which shall set forth the obligations and
liabilities being assumed as of the Closing Date.  Buyer shall not assume and shall under no
circumstances be responsible for, and Seller shall retain and be responsible
for, any liabilities or obligations of Seller related to the Assets of Seller
whatsoever, regardless of amount, character or description, or whether accrued,
contingent, determined, undetermined, known or unknown or otherwise, including
(without limitation) any obligation or liability whatsoever arising from the
conduct of the Business at or prior to the Closing Date other than the Assumed
Liabilities and the employment-related obligations expressly described in
Article 8.  Without limiting the
foregoing, Seller shall retain and be responsible for discharging (i) any
amounts owed to banks or other financial institutions under lines of credit,
capital leases or other debt instruments, (ii) all other non-scheduled
liabilities, and (iii) all inter-company liabilities, except for fees payable
as of the closing for services provided by Stressgen to Seller in the ordinary
course of business, including human resources, information technology, library,
clinical, administrative, laboratory safety, intellectual property, legal and
certain financial services (the “Inter-company Services”); provided, however,
that any amounts owed to Stressgen by the Buyer for Inter-Company Services
rendered to Seller but unpaid as of the Closing Date shall be specifically
scheduled in Exhibit C.

 

1.5           Allocation of Purchase Price. 
The Purchase Price to be paid by Buyer to Seller hereunder shall be
allocated among the Assets in a manner to be mutually agreed upon by the
parties.  The parties hereto agree to
report this transaction to all taxing authorities in accordance with such
allocation of Purchase Price.

 

1.6           Assignment of Contracts. 
Notwithstanding anything in this Agreement or the Bill of Sale, neither
this Agreement nor the Bill of Sale shall constitute an agreement to assign the
right, title or interest of Seller in, to or under any contract or any claim or
right of any benefit arising under any contract or resulting therefrom if any
attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or adversely affect the rights of Buyer or
Seller thereunder or if by its nature such contract cannot be assigned.  Seller shall use reasonable commercial
efforts to obtain, and Buyer will cooperate with Seller to obtain, the consent
of such third party to the assignment or transfer of such contracts to
Buyer.  Notwithstanding the foregoing,
the obligations of Seller under this Section shall not include any obligation
to make any payment (other than a payment accrued prior to the Closing Date) or
incur any economic burden other than reasonable administrative costs in order
to obtain the consent of such third parties.

 

ARTICLE 2

 

CLOSING

 

2.1           Closing.  The closing
(the “Closing”) shall be consummated at the offices of Heller Ehrman at 4350 La
Jolla Village Drive, 7th Floor, San Diego, California, at 10:00 a.m. (Pacific
Standard Time) on the third Business Day following the satisfaction (or, to the
extent permitted by Law, waiver) by the applicable party or parties of the
conditions set forth in Article 5 and Article 6 (other than those conditions
that by their terms cannot be satisfied until the time of the Closing but
subject to the satisfaction (or, to the extent permitted by Law, waiver by the
applicable party or parties) of such conditions), or at such other place, time
and date as the Parties shall agree in writing but in any event not later than
April 30, 2005 (the “Closing Date”) notwithstanding anything to the contrary
herein, even though the Closing may occur at a later date, for purposes of this
Agreement, the effective date of the transfer of the Assets and the assumption
and assignment of the Assumed Liabilities shall be the Effective Date.

 

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2.2           Actions at Closing. 
At the Closing, the parties shall take such actions and execute and
deliver such agreements, bills of sale and other instruments and documents
necessary to effect the transactions subject to the terms of this Agreement.

 

2.2.1        At the Closing, the Seller will:

 

(a)   deliver, or cause to be delivered, to Buyer, a duly
executed Bill of Sale, substantially in the form of Exhibits A attached
hereto;

 

(b)   deliver, or cause to be delivered, to Buyer, a
Transition Services Agreement (the “Transition Services Agreement”),
substantially in the form of Exhibit G attached hereto, duly executed by
Seller;

 

(c)   deliver, or cause to be delivered, to Buyer, a Patent
License Agreement (the “Patent License Agreement”), substantially in the form
of Exhibit J attached hereto, and a Trademark License Agreement
(collectively with the Patent License Agreement, the “License Agreements”),
substantially in the form of Exhibit K attached hereto, each duly
executed by Seller;

 

(d)   deliver, or cause to be delivered, to Buyer, an Escrow
Agreement (the “Escrow Agreement”), substantially in the form of Exhibit F
attached hereto, duly executed by Seller; and

 

(e)   deliver, or cause to be delivered, to the Buyer a
certificate of either the President or Chief Financial Officer of Seller dated
as of the Closing Date and certifying as to (a) the accuracy of the
representations and warranties contained in Article 3 as of the Closing Date
and (b) the absence of any Material Adverse Effect, in a form reasonably
acceptable to Buyer and its counsel.

 

2.2.2        At the Closing, Buyer will:

 

(a)   deliver, or cause to be delivered, to Seller, the
Transition Services Agreement, duly executed by Buyer;

 

(b)   deliver, or cause to be delivered, to Seller, the
License Agreements, each duly executed by Buyer;

 

(c)   deliver, or cause to be delivered, to Seller, the
Escrow Agreement, duly executed by Buyer; and

 

(d)   pay to the Seller the Purchase Price in accordance
with Section 1.2.

 

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ARTICLE 3

 

REPRESENTATIONS
AND WARRANTIES OF SELLER

 

Except
as set forth in the disclosure schedule attached hereto as Exhibit D and
referencing the specific section of this Article 3 (the “Disclosure Schedule”),
Seller hereby represents and warrants to Buyer as follows (Notwithstanding the
foregoing, the parties acknowledge and agree that the Disclosure Schedule, if
any, delivered at the Effective Date may be supplemented and amended by Seller
prior to the Closing, subject to the acceptance of Buyer, such acceptance not
to be unreasonably withheld or delayed, such reasonableness to be determined
with respect to typical asset purchase transactions of the type contemplated
herein):

 

3.1           Organization and Capitalization. 
Seller is a limited partnership duly organized, validly existing and in
good standing under the laws of the province of British Columbia and has full
power and authority to carry on its business as now being conducted.

 

3.2           Authorization. 
The execution, delivery and performance by Seller of this Agreement, and
all documents and instruments contemplated hereby, referenced herein or
executed in connection herewith (collectively, the “Related Documents”), and
the consummation by Seller of the transactions contemplated hereby and therein,
have been duly authorized and approved by all necessary proceedings of Seller
and its Partners.  This Agreement and
each of the Related Documents have been duly executed and delivered by Seller
and each constitutes a legal, valid and binding agreement of Seller,
enforceable against Seller in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors’ rights.

 

3.3           Title; Condition of Assets. 
Except as set forth on the Disclosure Schedule, Seller has good,
marketable and insurable title to all of the Assets, free and clear of all
mortgages, liens (tax or otherwise), pledges, charges, leases, encumbrances,
claims or restrictions of any kind or character.  The Assets are in good operating condition
with no known defects, excepting normal wear and tear, and conform with all
applicable laws, regulations, ordinances and the like.  The Assets constitute all of the material
rights and properties, tangible or intangible, real or personal, which are used
in the conduct of the Business.  No other
material properties or rights, whether or not owned by Seller, are required for
the operation of the Business.  Seller is
in possession and operating control of all of its assets, properties and rights
related to the conduct of the Business. 
The Assets are not subject to any liability or obligation of whatever
nature, whether known or unknown, absolute, accrued, contingent or otherwise,
other than the Assumed Liabilities.

 

3.4           No Violation. 
The execution, delivery and performance of this Agreement and the
Related Documents by Seller will not (with notice and/or the lapse of time)
result in a breach or violation of, or constitute a material default under, its
Certificate of Limited Partnership or Limited Partnership Agreement as such
organizational documents have been amended or under any agreement to which
Seller is a party or by which Seller is bound, and will not be in violation of
any constitution, statute, judgment, order, rule, regulation or other
restriction in effect at the Closing Date of any court or federal, state or
other Governmental Authority having jurisdiction over Seller or the
Assets.  Seller is not a party to,
subject to or bound by any agreement or judgment, order, writ, injunction or
decree of any court or federal, state or other Governmental Authority that
prevents or impairs the consummation of the transactions contemplated by this
Agreement or the Related Documents or the rights of the Buyer hereunder and
thereunder.

 

3.5           Governmental Authorities. 
Except as set forth in the Disclosure Schedule, Seller is not required
to submit any notice, report or other filing to any Governmental Authority nor
is any consent,

 

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approval or authorization of any Governmental Authority required to be
obtained by Seller in connection with the consummation of the transactions
contemplated hereby or in the Related Documents.

 

3.6           Financial Statements.  
The Disclosure Schedule contains an unaudited Balance Sheet of Seller (“Balance
Sheet”) as at December 31, 2004 (the “Balance Sheet Date”), and a Statement of
Income and Expense of Seller for the twelve -month period then ended (the “Income
Statement”), collectively referred to herein as the “Financial Statements.”  The Balance Sheet fairly and accurately
represents the financial position of SBLP as of the Balance Sheet Date and the
Income Statement accurately represents the results of the operations of SBLP
for the twelve-month period ended December 31, 2004.  Each of the Balance Sheet and the Income
Statement has been prepared in accordance with Canadian GAAP.

 

3.7           Brokers.  Neither
Seller nor its officers, employees or agents have employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders’ fees
in connection with the transactions contemplated hereby or the Related
Documents.

 

3.8           Inventory.  All inventory
of Seller reflected on the Balance Sheet is (except to the extent of reserves
reflected thereon) of a quality and quantity usable and salable in the ordinary
course of the Business as of the Balance Sheet Date, and all such inventory is
reflected on the Balance Sheet with adequate provisions or adjustments for
damaged, defective or excess inventory, slow-moving inventory and inventory
obsolescence and shrinkage at the lower of cost or realizable market value
using a standard costing method of valuation in accordance with Canadian GAAP
consistently applied.

 

3.9           Litigation.  Except as set
forth in the Disclosure Schedule, there are no claims, actions, litigation,
suits, proceedings or investigations pending or, to the knowledge of Seller,
threatened against or affecting any of the Assets, the Business or the consummation
of the transactions contemplated hereby or the Related Documents, at law or in
equity or before or by any governmental or regulatory authority, agency or
instrumentality or before any arbitrator of any kind, and to the knowledge of
Seller there is no valid basis for any such claim, action, litigation, suit,
proceeding or investigation.  The
Disclosure Schedule contains a list and brief description of all claims,
actions, litigation, suits, hearings, proceedings or investigations relating to
the Assets or the Business which resulted in a judgment, settlement,
compromise, release, payment or award of any nature and which arose within
three years prior to the Closing Date. 
No governmental or regulatory authority, agency or instrumentality has
at any time challenged or questioned the legal right of Seller to sell any of
its products or to provide any of its services in the present manner or as
contemplated in the conduct of the Business.

 

3.10         Contracts.  Seller is not
(and, to the knowledge of Seller no other party is) in breach or default under
(with notice and/or the lapse of time), and there is no valid basis for a claim
of breach or default under, any material agreement, instrument, commitment,
contract or other obligation of any type to which Seller is a party or is
bound, or to which the Assets or Business are subject, and no event has
occurred which constitutes or, with the lapse of time and/or the giving of
notice, will constitute such a breach or default.  The Assets are not subject to any agreement,
contract, commitment or instrument maintained by Seller, or other obligation,
whether written or oral and of whatever nature. 
A true copy of each agreement, contract, commitment or instrument of the
type set forth above has been provided to Buyer’s counsel prior to Closing and
an accurate listing of same has been set forth in the Disclosure Schedule (“Scheduled
Contracts”).  All Scheduled Contracts are
in full force and effect and are valid, binding and enforceable in accordance
with their respective terms.  To the
knowledge of Seller all parties to such Scheduled Contracts have complied with
the provisions thereof; no such party is in default under any of the terms
thereof and no event has occurred that (with the passage of time and/or the
giving of notice) would constitute a default by any party under any provision
thereof.

 

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3.11         Compliance with Law. 
Seller is, in the conduct of the Business and ownership and use of the
Assets, in compliance with all applicable foreign, federal, provincial or local
laws, statutes, rules, regulations, ordinances, codes, orders, licenses,
franchises, permits, authorizations and concessions (collectively, “Regulations”),
as such apply to the Assets, including without limitation, any applicable
intellectual property law or other Regulations in respect of any of Seller’s
operations related to its business, except where its non-compliance would not
have a material adverse effect on the Assets or the transactions contemplated
by this Agreement.

 

3.12         Licenses, Permits and Authorizations. 
The Disclosure Schedule contains a list of all approvals,
authorizations, consents, licenses, franchises, orders and other permits of,
and filings with, any governmental authority, whether foreign, federal,
provincial or local (“Permits”), which are required for or benefit the Assets
or the conduct of the Business.  All
Permits are in full force and effect.

 

3.13         Environmental Matters.

 

(a)           The operations of Seller are currently
and have at all times been in compliance in all material respects with all
applicable Environmental Laws.

 

(b)           There are not currently nor, to the
Knowledge of Seller,  have there even
been any underground storage tanks on any real property owned, operated or
leased by Seller.  No Hazardous Material
has been stored, generated, treated, discharged or released in or upon any real
property owned, operated or leased by Seller during the period of such
ownership or before the period of Seller’s or, to Seller’s Knowledge,  a predecessor of Seller’s, ownership, lease
or operation in violation of, or in a quantity reportable under, any
Environmental Law or that is reasonably likely to result in any material
Environmental Costs and Liabilities.

 

(c)           Seller is not subject to any
Environmental Costs and Liabilities, and, to Seller’s Knowledge, no facts or
circumstances exist which could give rise to any Environmental Costs and
Liabilities.

 

(d)           The Disclosure Schedule lists all
Environmental Permits maintained by Seller. 
Such Environmental Permits are all Environmental Permits necessary for
Seller’s operations and (i) Seller is in
compliance in all respects with such Environmental Permits,
(ii) there are no Legal Proceedings pending nor, to Seller’s
Knowledge, threatened to revoke, cancel or suspend such Environmental Permits, (iii) Seller has not received any notice from any
Governmental Authority to the effect that there is lacking any Environmental
Permit required for the operations of the Business or for the current use or operation
of any property owned, operated or leased by Seller or any of its Affiliates
and (iv) the consummation of the transactions
contemplated hereby will not constitute a transfer or assignment of any such
Environmental Permits nor will such consummation require any filing or
registration with or notice to any Governmental Authority and all such
Environmental Permits shall remain in full force during the period covered by
the Transition Services Agreement.

 

(e)           Neither Seller nor any of its Affiliates
nor, to Seller’s Knowledge, any predecessor of Seller or such Affiliates, are
subject to any outstanding order, request or demand of any Governmental
Authority or other Person, or, to the Knowledge of Seller, any federal,
provincial, local or foreign investigation respecting (i) actual
or alleged violations of Environmental Laws, (ii) any
Remedial Action or (iii) any Environmental Costs and Liabilities.  Neither Seller nor any of its Affiliates, nor
to Seller’s knowledge, any predecessor of Seller or its Affiliates, have
received any written notice from any Governmental Authority or other Person,
respecting any violation of Environmental Laws.

 

7

 

(f)            There are no Legal Proceedings pending
or, to the Seller’s knowledge, threatened against Seller or any of its
Affiliates, alleging the violation of any Environmental Law or Environmental
Permit.

 

(g)           Neither Seller nor any of its Affiliates
nor, to the Seller’s knowledge, any predecessor of Seller or any of its Affiliates,
has filed any notice under federal, provincial or municipal law indicating past
or present generation, transportation, treatment, storage or disposal of or
reporting a Release of any Hazardous Material.

 

(h)           None of the operations of Seller nor any
of its Affiliates or, to Seller’s knowledge, of any predecessor of Seller or
such predecessor’s Affiliates, involves or previously involved, except in
compliance with all Environmental Laws, the generation, transportation,
treatment, storage or disposal of Hazardous Material.

 

(i)            Seller has not received notice of
liability or potential liability at, nor are there any pending or, to Seller’s
Knowledge,  threatened Legal Proceedings
with respect to, any facility at which Seller or its Affiliates, or to Seller’s
knowledge, any predecessor of Seller or such predecessor’s Affiliates, has
transported, disposed of, or arranged for the transportation to or disposal of
any Hazardous Material.

 

(j)            There has been no environmental
investigation, study, audit, test, review or other analysis conducted in
relation to the current or prior business of the Seller or any of its
Affiliates, nor to Seller’s knowledge, any predecessor of Seller or such
predecessor’s Affiliates or any property or facility now or previously owned or
leased by Seller or any of their respective Affiliates, other than those listed
on the Disclosure Schedule, copies of which have been delivered to Buyer.

 

(k)           To Seller’s Knowledge, there is no
asbestos, asbestos-containing building materials, polychlorinated biphenyls, or
urea formaldehyde presently in use or otherwise located at any real property
currently owned, operated, occupied or leased by Seller.

 

3.14         Tax Matters. 
With respect to the Business, Seller (and each of the Partners in
connection with the activities of Seller) has duly filed on a timely basis all
Tax Returns required to be filed by it and has paid, or contested in good
faith, all material Taxes that are due and payable, and all assessments,
reassessments, penalties, interest and fines due and payable by it, the
non-payment of which could result in a Tax Lien on the Assets.  Seller (and each of the Partners in
connection with the activities of Seller) is not now the subject of a Legal
Proceeding concerning any Tax that could result in a Tax Lien against the
Assets and the Partners have been issued Canadian federal and provincial
assessments in respect of all Taxes covering all periods up to and including
December 31, 2004.  There are no Tax
Liens for Taxes other than Permitted Encumbrances upon any of the Assets and no
event has occurred that with the passage of time or the giving of notice, or
both, could reasonably be expected to result in a Tax Lien other than permitted
Encumbrances on any of the Assets.  The
Seller and the Partners are not aware of any liability or contingent liability
for Taxes or any grounds for an assessment or reassessment of any Taxes,
including aggressive treatment of income, expenses, credits or other claims for
deduction under any Tax Return, where such liability could result in a Tax Lien
on the Assets.  The Seller and the
Partners are not non-residents of Canada for purposes of the Income Tax Act
(Canada).

 

3.15         Intangible Property Rights. 
The Disclosure Schedule lists all patents, patent applications, inventions,
licenses, trade names, trademarks, service marks, brandmarks, registered
copyrights or registrations or applications therefor, franchises and other
assets of like kind (such assets and rights herein called “Rights”), used in
the Business, which are registered in the name of Seller or which affect the
Assets in any manner whatsoever (including any such rights held by Affiliates),
the ownership of all the

 

8

 

foregoing being separately stated. 
The expiration dates, if any, of each of the Rights are set forth in the
Disclosure Schedule by product.  Seller
owns or possesses license rights to all Rights used in the conduct of the
Business; such Rights are adequate for the conduct of the Business and will not
be adversely affected by the transactions contemplated hereby and in the
Related Documents; and to Seller’s knowledge are not being infringed or
violated by any other person or entity. 
All Rights are, and upon the consummation of the transactions contemplated
by this Agreement and the Related Documents will be, vested in Buyer free of
any equities, claims, liens, encumbrances or restrictions of whatever nature
and Seller has not granted any license or right thereto to others.  No products sold or services provided by
Seller infringe the rights of others. 
All licenses granted to Seller by others with respect to the Business
are set forth in the Disclosure Schedule, and except as set forth on the
Disclosure Schedule all such licenses are freely assignable.  No director, officer, employee, agent or
affiliate of Seller owns, directly or indirectly, in whole or in part, any
Rights which have been used in the Business by Seller, or the use of which is
necessary for or in furtherance of the Business as now conducted or which
affect the Assets in any manner whatsoever. 
All technology, data, processes, formulas, trade secrets and the like
used in the operation of the Business (herein called “Know-How”) are owned
exclusively by Seller, free of any equities, claims, liens, encumbrances or
restrictions of whatever nature and Seller has not granted any license or right
thereto to others.  Upon consummation of
the transactions contemplated by this Agreement and the Related Documents, Buyer
shall have all rights and interest in and to such Know-How and Seller shall
maintain such in strict confidence, which obligation of confidentiality shall
survive the Closing hereunder.

 

3.16         Insurance.  The
Disclosure Schedule contains a list and brief description of each insurance
policy to which Seller has been a party, a named insured or otherwise the
beneficiary of coverage at any time in the past three years in connection with
the Assets or Business and of individual claims in excess of $50,000, and
similar claims in excess, in the aggregate, of $200,000 during any 12-month
period, made by Seller within three years prior to the date hereof, under any
insurance policies.  Such insurance is
adequate in kind and amount to cover known insurable risks of Seller occurring
prior to the Closing.

 

3.17         Employee Relations. 
The records maintained by Seller related to the employees of the Seller
are accurate and complete.  Seller is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and there are no amounts accrued and/or owing as of the Closing Date in respect
of the employees of Seller, including wages, employment insurance premiums,
Canada Pension Plan contributions and Workers Compensation premiums and
assessments, except as set forth on the Disclosure Schedule.  Seller has no continuing obligation,
including any obligation for health, life, medical insurance or other similar
fringe benefits to any former employee of the Seller.  Seller has no liability with respect to
employees who have been terminated or given notice of termination prior to the
Closing Date.  Section 3.17 of the
Disclosure Schedule sets forth a true, correct and complete list of the employees
of the Seller, their names, job descriptions, ages, dates of hire, length of
service, salary or wage rates, bonus and commission arrangements, benefit
entitlement, immigration status, if any, and status as full-time or part-time,
permanent or temporary and the length of any temporary or fixed term
employment.  Section 3.17 of the
Disclosure Schedule sets forth a list of all employment or compensation
agreements with each officer and employee of Seller (including all severance, “stay-put”
and similar agreements and all agreements which result in the creation or
occurrence of any right, duty or obligation based upon, or as a result of, any
change of control of Seller or its assets). 
To Seller’s Knowledge, no employee has any plans to terminate employment
with Seller.

 

3.18         Labor Matters. 
Seller has not experienced any labor disputes or any work stoppages due
to labor disagreements and to Seller’s Knowledge there is no such dispute or
work stoppage threatened against Seller. 
No employee of Seller is represented by any union or collective bargaining
agent and to

 

9

 

the Knowledge of Seller, there has been no union organizational effort
in respect of any employees of Seller since the formation of Seller.  No trade union has applied to
have Seller declared a related employer pursuant to the Labour
Relations Code (British Columbia ) or any similar legislation in any
jurisdiction in which the Seller carries on business.  There are no pending or, to the knowledge of Seller,
threatened Legal Proceedings by any Person or Governmental Authority against
Seller with respect to any violation or alleged violation of any applicable
federal, state or local laws, rules or regulations (a) prohibiting
discrimination on any basis, including, without limitation, on the basis of
race, color, religion, sex, disability, national origin or age or (b) relating to employment or labor, including,
without limitation, those related to immigration, wages, hours or plant
closing.

 

3.19         Benefit Plans.

 

(a)           The Disclosure Schedule identifies each
deferred compensation, bonus or incentive compensation, equity incentive or
purchase, severance, termination pay, hospitalization or other medical benefit,
life or other insurance, vision, dental, drug, sick leave, disability, salary
continuation, vacation, supplemental unemployment benefits, profit sharing,
incentive or other compensation, mortgage assistance, pension or supplemental
pension plan, retirement compensation arrangement, group registered retirement
savings plan, deferred profit sharing plan, employee profit sharing plan,
savings, retirement or supplemental retirement plan, program or arrangement or
any other plan, program, or arrangement for the benefit of the employees of the
Seller, whether funded or unfunded, formal or informal, that is maintained,
contributed to or required to be contributed to, by Seller, or to which Seller
is a party, or bound by, or under which Seller has any liability or contingent
liability with respect to or relating to the Business or the Assets for the benefit
of employees or former employees of Seller and their dependents (the “Benefit
Plans”).

 

(b)           A true, current and complete copy of each
Benefit Plan (as amended to date) and the literature, booklets, summaries or
manuals prepared for or circulated to employees generally concerning each
Benefit Plan has been provided to Buyer for its information, even though the
Benefit Plans do not constitute part of the Assets.

 

(c)           Each of the Benefit Plans is, and has
been, established, registered, qualified, administered and invested in
compliance with (i) the terms thereof, (ii) all applicable laws, including,
without limiting the generality of the foregoing, the applicable tax
legislation, (iii) the administrative practices of the Tax Authorities;
and Seller has not received, in the last three (3) years, any notice from any
person questioning or challenging such compliance (other than in respect of any
claim related solely to that person), and Seller has no knowledge of any such
notice from any person questioning or challenging such compliance beyond the
last three (3) years.

 

(d)           None of Seller and any of its agents are
in breach of their fiduciary duty with respect to the Benefit Plans.

 

(e)           All obligations due under the Benefit
Plans (whether pursuant to the terms thereof or any applicable laws) have been
satisfied, and there are no outstanding defaults or violations thereunder by
Seller nor does Seller have any knowledge of any default or violation by any
other person to the Benefit Plans.

 

(f)            Except as set forth on the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in
any payment becoming due (other than the expiration of eligibility for the
exercise of options and to claim benefits under) any current or former
director, officer or employee of Seller, (ii) increase any compensation of any
current or former director, officer or employee of Seller, (iii) increase
any benefits

 

10

 

otherwise payable
under any Benefit Plan, or (iv) result in the acceleration of the time of
payment or vesting of (other than the expiration of eligibility for the
exercise of options and to claim benefits under) any such compensation or benefits.

 

(g)           All employer and employee payments,
contributions and premiums required to be remitted, paid to or in respect of
the Benefit Plans have been paid in a timely fashion in accordance with the
terms thereof and all applicable laws, and no Taxes or fees are owing or
exigible under any of the Benefit Plans.

 

(h)           There is no Legal Proceeding by any
applicable Governmental Authority pending or, to the knowledge of Seller,
threatened in respect of any of the Benefit Plans or their assets, and, to the
knowledge of Seller, no facts exist which could reasonably be expected to give
rise to any such proceeding, action, investigation, suit or claim (other than
routine claims for benefits).

 

(i)            Each of the Benefit Plans which has or
purports to have tax-favoured treatment at the date hereof meets all
requirements for tax-favoured treatment in effect as of the date hereof and has
complied with the Tax Act and the administrative practices of Canada Revenue
Agency, to the extent it purports to qualify for such treatment.

 

(j)            Each of the Benefit Plans which purports
to qualify as a particular type of plan under the Tax Act at the date hereof
meets all requirements for such qualification in effect as of the date hereof
and has complied with the provisions of the Tax Act and the administrative
practices of Canada Revenue Agency applicable to such plan.

 

(k)           Except as set forth on the Disclosure
Schedule, Seller does not provide, and is not obligated to provide, medical,
hospital, dental, life or other benefit under any Benefit Plan to any current
or former employee after his or her termination of employment with Seller.

 

3.20         Banks.  The
Disclosure Schedule sets forth:  (i) the name of every bank in
which an account or safe deposit box comprising part of the Assets is located; (ii) the identifying numbers of all such accounts
and safe deposit boxes and (iii) the names of
all persons having power to borrow, discount debt obligations, cash or draw
checks or otherwise act on behalf of Seller in connection with such accounts or
safe deposit boxes.

 

3.21         Capital Expenditures. 
The Disclosure Schedule sets forth a list of each of Seller’s approved
capital expenditure projects (including without limitation, each construction
project) involving in excess of $50,000 including:  (i) projects which have been
commenced but are not yet completed; (ii) projects
which have not been commenced and (iii) projects
which have been completed in respect of which payment has been made, within the
past twelve (12) months.

 

3.22         Products Liability and Personal Injury
Claims.  The Disclosure Schedule sets forth a list of
all claims for products liability or personal injury due to, resulting from or
associated with, any product manufactured or supplied by Seller now pending
against Seller or which have been pending against Seller at any time during the
past three years.

 

3.23         Product Warranties. 
The Disclosure Schedule sets forth the forms of Seller’s product
warranties that are currently applicable to products sold by Seller or in
respect of which Seller is obligated.

 

11

 

3.24         Absence of Certain Changes. 
Except as set forth in the Disclosure Schedule, since the Balance Sheet
Date, Seller has operated its business in the ordinary and usual course and in
a manner consistent with past practice, and without limiting the generality of
the foregoing, there has not been:

 

(a)           any change or any event, occurrence,
development or fact that alone or in the aggregate has had, or would reasonably
be expected to have, a Material Adverse Effect with respect to Seller;

 

(b)           any amendment to Seller’s Certificate of
Limited Partnership or Limited Partnership Agreement as such organizational
documents have been amended;

 

(c)           any employment contract or collective
bargaining agreement, written or oral, entered into or materially modified by
Seller, any increase in or agreement to increase the base compensation payable
to (except such increases which are in the ordinary course of the Business,
consistent with past practice, or as otherwise disclosed herein) or any other
material change in employment or compensation or benefits with respect to any
director, officer or employee, or adoption, repeal, amendment or modification
of any bonus, profit-sharing, retirement deferred compensation, incentive,
severance or other Benefit Plan, contract or commitment by Seller;

 

(d)           any incurrence or assumption by Seller of
any material Indebtedness;

 

(e)           the imposition of any material
Encumbrance upon any of the assets, tangible or intangible, of Seller;

 

(f)            any material damage, destruction or loss
with respect to the properties or assets of Seller, whether or not covered by
insurance;

 

(g)           any payment, loan or advance of any
amount to, or sale, transfer or lease of any of Seller’s assets to, or any
agreement or arrangement with, any shareholder of Seller or any of their
respective Affiliates;

 

(h)           any change in the Tax or accounting
principles, methods, practices or procedures followed by Seller or any change
in the depreciation or amortization policies or rates theretofore adopted by
Seller, except as required by Canadian GAAP and disclosed to Buyer;

 

(i)            any change or revocation by Seller of any
Tax election or any agreement or settlement with any Taxing Authority;

 

(j)            any acquisition by Seller by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or corporation, partnership, association or
other business organization or division thereof;

 

(k)           any sale, lease or other transfer or
disposition by Seller of a material amount of its assets, tangible or
intangible, other than for fair consideration in the ordinary course of
business in a manner consistent with past practice;

 

(l)            any contract (or series of related
contracts) entered into by Seller either involving more than $25,000
individually (or $50,000 in the aggregate) or outside the ordinary course of
business;

 

12

 

(m)          any acceleration, termination, material
modification or cancellation of any contract involving more than $25,000
individually (or $50,000 in the aggregate) to which Seller is a party or by
which it or its properties is bound;

 

(n)           any capital expenditure (or series of
related capital expenditures) by Seller either involving more than $25,000
individually (or $50,000 in the aggregate) or outside the ordinary course of
business;

 

(o)           any capital investment in, any loan to or
any acquisition of the securities or assets of, any other person;

 

(p)           any material delay or postponement of
payment of accounts payable or other liabilities of Seller outside the ordinary
course of business consistent with past practice;

 

(q)           any cancellation, compromise, waiver or
release of any material right or claim of Seller outside the ordinary course of
business;

 

(r)            any license or sublicense of any rights
of Seller under or with respect to its intellectual property Rights; or

 

(s)           any agreement, undertaking or legal
obligation, whether in writing or otherwise, by Seller to do any of the
foregoing.

 

3.25         Title to Property; Leases; Encumbrances.

 

(a)           Except as set forth on the Disclosure
Schedule, Seller has good and valid title to all assets (other than real
property or interests in real property) reflected on the Balance Sheet or thereafter
acquired, except for those since sold or otherwise transferred or disposed of
in the ordinary course of business consistent with past practice, in each cash
free and clear of Encumbrances other than Permitted Liens.

 

(b)           Seller does not own and has never owned
any fee interest in any real property. 
The Disclosure Schedule sets forth a complete list of all real property
and interests in real property leased by Seller (“Leased Real Property”).  Seller has a good and valid and binding
leasehold interest in the Leased Real Property, free and clear of all
Encumbrances except Permitted Liens. 
Seller has no obligations to perform any capital improvements and all
capital improvements required to be made by Seller under the leases are fully
paid for.

 

(c)           To the Knowledge of Seller, the plants,
buildings and structures leased by Seller are substantially free of defects,
are in good operating condition and repair and have been reasonably maintained
consistent with standards generally followed in the industry (giving due
account to the age and length of use of same, ordinary wear and tear excepted),
are substantially suitable for their present uses and are structurally sound
(including, without limitation, the roofs thereof).

 

(d)           The equipment owned and leased by Seller
is substantially free of defects, in good operating condition and repair, has
been reasonably maintained consistent with standards generally followed in the
industry (giving due account to the age and length of use of same, ordinary
wear and tear excepted), and is substantially suitable for its present uses.

 

3.26         Products.  Set forth on
the Disclosure Schedule is a list of all of Seller’s products.  Each of the products sold by Seller:  (a) is, and
at all times up to and including the sale thereof has been, in

 

13

 

compliance in all material respects with all applicable federal, state,
local and foreign laws and regulations and (b) is,
and at all relevant times has been, fit for the ordinary purposes for which it
is intended to be used and conforms in all material respects to any promises or
affirmations of fact made in all regulatory filings pertaining thereto and made
on the container or label for such product or in connection with its sale.  There is no design or manufacturing defect
with respect to any of such products. 
Except as set forth on the Disclosure Schedule, Seller has not received
written notice of any product warranty claims in excess of $1,000 in 2004 or in
2005 prior to the Closing Date.

 

3.27         Notes and Accounts Receivable. 
All notes and accounts receivable of Seller are reflected properly on
its books and records.  Seller did not
change its collection practices in contemplation of the Closing.  The accounts receivable included in the
Assets (the “Accounts Receivable”) are valid receivables subject (to Seller’s
Knowledge) to no setoff or counterclaims. 
The Accounts Receivable are current and collectible pursuant to the past
custom and practice of Seller in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth on the Balance
Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Seller.

 

3.28         Payments.  Neither
Seller, nor any of its officers, directors, employees or, to the Knowledge of
Seller, agents, has, directly or indirectly, within three years prior to the
date hereof, given or made or agreed to give or make any material political
contribution or any material questionable, improper or illegal commission,
payment, gratuity, gift, or similar benefit to any customer, supplier,
governmental employee or other person (foreign or domestic) who is or may be in
a position to help or hinder the Business (or assist Seller in connection with
any actual or proposed transaction). 
Seller, has not participated, during such period, directly or
indirectly, in any boycotts or similar practices in connection with the Assets.

 

3.29         Customers and Suppliers. 
The Disclosure Schedule hereto contains a list of Seller’s ten largest
customers and suppliers (measured by dollar volume in each case) during the
calendar year 2004 and during the first two months of 2005, showing with
respect to each, the name and address, dollar volume and nature of the
relationship (including the principal categories of products bought or
sold).  Seller is not required to provide
any bonding or other financial security arrangements in connection with any of
the transactions with any of its customers or suppliers in the ordinary course
of the Business.  Seller has not received
any direct communication (whether oral or written) of any intention of any
customer identified on the Disclosure Schedule to discontinue its relationship
as a customer of, or materially reduce its purchases from Seller (or,
post-Closing, from Buyer).

 

3.30         No Misstatements. 
Neither this Agreement or the Related Documents, nor any other document,
certificate or written statement prepared or furnished by Seller or its
representatives and furnished to Buyer or Buyer’s representatives in connection
herewith or therewith, contain any untrue statement of material fact or omits
to state a material fact necessary in order to make the statements contained
herein and therein not misleading as of the date hereof or thereof.

 

3.31         Section 167 Related Representations. 
In selling the Assets as set forth in this Agreement, Seller is making a
supply (i.e., a sale) of “a business” or “part of a business”.  Seller further represents that the Business
was carried on by Seller.  Buyer will be
acquiring ownership and use of “all or substantially all” of the property that
can reasonably be regarded as being “necessary” for Buyer to be capable of
carrying on the Business.  Seller will
make a joint election in prescribed form under Section 167 and assist Buyer in
filing such election.  Terms and phrases
in this Section 3.31 not otherwise defined shall have the meaning given under
Section 167 of the ETA.

 

14

 

ARTICLE 4

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Buyer
hereby represents and warrants to the Seller as follows:

 

4.1           Organization; Authority. 
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority to enter into this Agreement and perform its obligations
hereunder.

 

4.2           Authority Relative to Agreement. 
The execution, delivery and performance of this Agreement and the
Related Agreements by Buyer and the consummation of the transactions
contemplated hereby and therein, have been duly and validly authorized by all
necessary corporate action of Buyer. 
This Agreement and the Related Agreements have been duly executed and
delivered and constitute the legal, valid and binding obligations of Buyer,
each enforceable in accordance with their respective terms, except as limited
by bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditor’s rights.  Buyer
is not engaged in or a party to, or to Buyer’s knowledge, threatened with any
action, suit or other legal proceeding, and is not subject to any judgment,
order, writ, injunction, stipulation or decree of any court or governmental
agency restricting the execution, delivery and performance of this Agreement
and the Related Agreements or the consummation of the transactions contemplated
hereby and therein.

 

4.3           No Conflict with Other Instruments or
Agreements.  The execution, delivery and performance of
this Agreement or the Related Agreements by Buyer will not result in a material
breach or violation of, or constitute a material default under, Buyer’s
Certificate of Incorporation, Bylaws or any agreement to which Buyer is a party
or by which Buyer is bound or to which any of Buyer’s property is subject and,
to the best of Buyer’s knowledge, will not be in violation of any statute,
judgment, order, rule or regulation in effect at the date hereof of any court
or federal, state or other regulatory authority or governmental body having
jurisdiction over Buyer.

 

4.4           Brokers.  Neither Buyer
nor its Affiliates have employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders’ fees in connection with the
transactions contemplated hereby or the Related Documents that could result in
an obligation or liability to Seller.

 

4.5           Tax Matters.  Buyer is a
registrant for purposes of the ETA, with registration number 84573 6479
RT0001.  Buyer shall prior to Closing be
registered under the Social Services Tax Act
(British Columbia).

 

ARTICLE 5

 

CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF BUYER

 

Each
and every obligation of Buyer under this Agreement to be performed on or before
the Closing Date shall be subject to the satisfaction, on or before the Closing
Date, of the following conditions precedent, except to the extent that Buyer
shall have waived such satisfaction in writing:

 

5.1           Performance. 
Seller shall have performed and complied with all agreements, covenants
and conditions required by this Agreement to be performed and complied with by
Seller on or before the Closing Date. 
Buyer shall have received a certificate of either the President or Chief
Financial Officer of SHC dated as of the Closing Date and certifying to the fulfillment
of the conditions referred to in this

 

15

 

Section and the absence of any material adverse change, in a form
reasonably acceptable to Buyer and its counsel.

 

5.2           Non-Competition Agreements. 
Seller and Partners shall have each entered into the Non-Competition
Agreement (“Non-Competition Agreement”) in substantially the same form as
attached Exhibit E.

 

5.3           Certain Agreements. 
Seller and Buyer shall have entered into the Bill of Sale.

 

5.4           Opinion of Seller’s Counsel. 
Buyer shall receive an opinion of the Seller’s counsel, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer and its
counsel.

 

5.5           Escrow Agreement.  Seller shall have entered into the Escrow
Agreement.

 

5.6           Transition
Services Agreement.  Seller shall
have entered into the Transition Services Agreement.

 

5.7           Patent and Trademark License Agreements.  Seller shall have entered into each of the License Agreements.

 

5.8           Approval.  This
Agreement and the Related Documents and the transactions contemplated hereby
and thereby shall have been approved by the general partner of Seller, by the
Board of Directors of SBC and by Buyer’s Board of Directors.

 

5.9           Governmental Approvals. 
As of the Closing, all authorizations, approvals or permits of or
filings with any governmental authority that were required by law prior to and
in connection with the transfer of the Assets or the transactions contemplated
by this Agreement or the Related Documents shall have been duly obtained or
made and shall be effective as of the Closing.

 

5.10         Bulk Sales Compliance. 
Seller shall have complied with any applicable bulk sales laws and
regulations, or provided its indemnity for any Claims and Losses (as defined in
Section 7.1) resulting from failure to so comply in lieu thereof

 

5.11         Third Party Arrangements and Approvals. 
Seller shall have confirmed to Buyer’s satisfaction the continuation of
all Seller’s key employees and the receipt of approvals to assignment from the
parties to the material contracts identified in Exhibit L (the “Material
Contracts”) to the transactions contemplated herein such that all Material
Contracts and other rights of Seller remain in full force and effect after the
Closing.

 

5.12         Employee Agreements. 
The Buyer’s offers of employment made pursuant to Article 8 shall have
been accepted in writing by:  Ariel
Louwrier, Ping Cheng Ye, Lijuan Sun and fifteen (15) of the other Employees as
defined in Article 8 and each of the Transferring Employees as defined in
Article 8 shall have executed the Proprietary Information and Inventions
Agreement in the form provided by Buyer and its counsel.

 

5.13         Guaranty Agreement. 
Partners and Buyer shall have entered into the Guaranty Agreement in
substantially the same form attached hereto as Exhibit H.

 

5.14         License with Brookhaven. 
Seller shall have entered into a license or licenses with Brookhaven
National Laboratory or its affiliates providing all rights necessary under U.S.
Patents 4,952,496, 5,693,489 and 5,869,320 covering its use of the T7
technology for the production and sale of

 

16

 

proteins and antibodies to the research market in a manner acceptable
to Buyer, and shall use its commercially reasonable best efforts to effectively
assign such license or licenses to Buyer on or prior to Closing.

 

ARTICLE 6

 

CONDITIONS
PRECEDENT TO THE

OBLIGATIONS OF SELLER

 

Each
and every obligation of Seller under this Agreement to be performed on or
before the Closing Date shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions precedent, except to the
extent that the Seller shall have waived in writing such satisfaction.

 

6.1           Performance. 
Buyer shall have performed and complied with all agreements, covenants
and conditions required by this Agreement to be performed and complied with by
Buyer on or before the Closing Date. 
Seller shall have received a certificate of the President or Chief
Financial Officer of the Buyer dated as of the Closing Date and certifying to
the fulfillment of the foregoing, in a form reasonably acceptable to Seller and
its counsel.

 

6.2           Approval.  This
Agreement and the Related Documents and the transactions contemplated hereby
and thereby shall have been approved by the general partner of Seller, by the
Board of Directors of SBC and by Buyer’s Board of Directors.

 

6.3           Governmental Approvals. 
As of the Closing, all authorizations, approvals or permits of or
filings with any governmental authority that were required by law prior to and
in connection with the transfer of the Assets or the transactions contemplated
by this Agreement or the Related Documents shall have been duly obtained or
made and shall be effective as of the Closing.

 

ARTICLE 7

 

INDEMNIFICATION
AND ESCROW AGREEMENT

 

7.1           Grant of Indemnity.  After the
Closing, the indemnification rights provided in this Article 7 shall be the
exclusive remedy of Buyer, Seller and the Buyer Affiliates and Seller
Affiliates (as defined below) with respect to the matters contemplated by this
Agreement, other than non-monetary remedies sought with respect to the breach
of any agreement or covenant contained herein.

 

(a)           Indemnification by Seller and Partners. 
As an inducement to Buyer to enter into this Agreement and the Related
Documents, and acknowledging that Buyer is relying on the indemnification
provided in this Section 7 in entering into this Agreement and the Related
Documents, Seller and Partners agree to indemnify, defend and hold harmless
Buyer and its affiliates, parent corporation and subsidiaries, and their
respective employees, officers, directors, representatives, agents, counsel,
successors and assigns (collectively, “Buyer Affiliates”), from and against any
claims, losses, liability, obligations, lawsuits, judgments, settlements,
governmental investigations, deficiencies, damages, costs or expenses of
whatever nature, whether known or unknown, accrued, absolute, contingent or
otherwise including, without limitation, interest, penalties, attorneys’ fees,
costs of investigation and all amounts paid in defense or settlement of the
foregoing, reduced by and to the extent of any insurance proceeds received with
respect to any of the foregoing (collectively “Claims and Losses”), suffered or
incurred by Buyer or Buyer Affiliates as a result of or in connection with the
following: (i) any and all debts, liabilities and obligations of Seller not
expressly assumed by Buyer in

 

17

 

this Agreement or
any Related Document; (ii) a breach of any obligation, representation, warranty,
covenant or agreement of Seller in this Agreement or any Related Document, or
false statement by Seller in any representation or warranty contained in this
Agreement or any Related Document or any document furnished or required to be
furnished hereby or thereby; (iii) any litigation arising out of or based upon
events or operative facts to the extent such events or facts occurred prior to
or on the Closing Date in connection with the Seller or the Assets, whether or
not disclosed on the Disclosure Schedule, including without limitation, claims
made by employees or former employees of Seller; (iv) any and all claims,
including legal, administrative or creditor claims or actions, in connection
with the Seller or the Assets or the transfer of Assets hereunder, to the
extent facts material to any such claim or cause of action pleaded or stated
there occurred prior to or on the Closing Date; and (v) costs and expenses
(including reasonable attorneys’ fees) incurred by Buyer in connection with any
demand, action, suit, proceeding, assessment or judgment incident to any of the
foregoing (collectively, “Buyer’s Damages”).

 

(b)           Indemnification by Buyer. 
As an inducement to Seller to enter into this Agreement and the Related
Documents, and acknowledging that Seller is relying on the indemnification
provided in this Section 7 in entering into this Agreement and the Related
Documents, Buyer agrees to indemnify, defend and hold harmless Seller and its
affiliates and Partners and their respective employees, officers, directors,
representatives, agents, counsel, successors and assigns (collectively, “Seller
Affiliates”), from and against any Claims and Losses suffered or incurred by
Seller Affiliates as a result of or in connection with the following: (i) a
breach of any obligation, representation, warranty, covenant or agreement of
Buyer in this Agreement or any Related Document, or false statement by Buyer in
any representation or warranty contained in this Agreement or any Related
Document or any document furnished or required to be furnished hereby or
thereby; (ii) any and all debts, liabilities and obligations of Buyer of any
nature arising out of the Assets or the conduct of the Business after the
Closing Date except for matters which are the subject of indemnification
pursuant to Section 7.1(a); (iii) any litigation arising out of or based upon
events or operative facts to the extent such events or facts occurred after the
Closing Date, in connection with the Buyer or the Assets or in relation to the
Transferring Employees as set forth in and subject to Article 8; (iv) any and
all claims, including legal, administrative or creditor claims or actions, in
connection with the Buyer or the Assets or the transfer of Assets hereunder, to
the extent facts material to any such claim or cause of action pleaded or
stated there occurred after the Closing Date; and (v) costs and expenses
(including reasonable attorneys’ fees) incurred by Seller Affiliates in
connection with any demand, action, suit, proceeding, assessment or judgment
incident to any of the foregoing (collectively, “Seller Damages”).

 

7.2           Cooperation, Notice, Defense and
Settlement.  

 

(a)           Each party shall reasonably cooperate in
the defense of Claims and Losses. 
Without limitation, the cooperation shall include making available
documents and or witnesses as may be within the control of the party, assisting
the other party to determine all particulars of the Claim and Loss, and
identifying and proving counterclaims against the third party.  Each party shall strictly observe all conduct
and communication rules that litigation counsel shall impose with respect to
the claim or litigation, including, but not limited to, issuance of press
releases, public statements and even to statements to individuals within the employ
of a party who either do not have a strict need to know, or, to whom
communication would be restricted by reason of any protective order in
effect.  Each party agrees to use its
reasonable efforts to minimize the cost to the other party of its obligation to
indemnify for Claims and Losses in accordance with this Article 7, including
taking reasonable steps to mitigate all Claims and Losses upon and after
becoming aware of any event which could reasonably be expected to give rise to
Claims and Losses.

 

(b)           Each party agrees to give prompt notice
to the other, of any claim against the other, which might give rise to a claim
based on the indemnity contained in Sections 7.1(a) and (b),

 

18

 

stating the nature
and basis of the claim and the amount thereof. 
Failure to so notify a party will relieve it of liability only to the
extent that such failure adversely affects such party’s ability to defend such
claim.

 

(c)           In the event any claims, action, suit or
proceeding is brought against a party (the “Indemnified Party”) with respect to
which the other party (the “Indemnifying Party”) may have liability under the
indemnity contained in Sections 7.1(a) and (b) hereof, the Indemnified
Party shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting from such claim at the Indemnifying Party’s
cost, provided that Buyer shall not be required to permit Seller to assume the
defense of any third party claim which if not first paid, discharged, or
otherwise complied with would result in a material interruption or cessation of
the conduct of Buyer’s business or any material part thereof or materially
impair the value of the Assets.  Failure
by the Indemnifying Party to notify the Indemnified Party of its election to
defend any such claim or action by a third party within thirty (30) days after
notice thereof shall have been given by the Indemnified Party, shall be deemed
a waiver of any such election.  If the
Indemnifying Party shall not assume the defense of any such claim by a third
party or litigation resulting therefrom, the Indemnified Party may defend
against such claim or litigation in such manner as it deems appropriate.
Whether or not the Indemnifying Party assumes the defense of such claim or
litigation, the defending party shall take all steps reasonably necessary in
the defense or settlement of such claim or litigation resulting therefrom,
including the retention of competent counsel satisfactory to both parties and
allowing the other party to participate in at its own cost (but not control the
conduct of) all matters pertaining to the defense or settlement of such claim
or litigation.

 

(d)           The defending party shall not, except at
its own cost, make any settlement with respect to any such claim, suit or
proceeding without the prior consent of Indemnifying Party, unless (and to the
extent that) such settlement only requires the payment of a monetary amount for
which the defending party has agreed to be solely responsible.  The Indemnifying Party’s consent to the
settlement of any such claim, suit or proceeding by the defending party shall
not be unreasonably withheld.

 

(e)           To the extent an Indemnifying Party
discharges any claim, the Indemnifying Party shall be subrogated to the rights
of the Indemnified Party against third parties.

 

7.3           Interest.  In the case
of payments to third parties (including federal, state, local or other tax
authorities) which are indemnifiable hereunder, the amount of the indemnifying
party’s liability under this Article 7 with respect thereto shall include
interest on the amount of such payment from the effective date of the
indemnified party’s notice of such payment to the indemnifying party or the
date on which such payment is made (whichever is later) through the date on
which the indemnified party shall have been indemnified therefor, at a simple
rate of interest equal to eight percent (8%) per annum; provided, in no event
shall such rate exceed the maximum rate permitted by law.

 

7.4           Limitations on Indemnification.

 

7.4.1        Notwithstanding the other provisions of
Section 7 hereof, the Buyer agrees that with respect to demands by Buyer for
indemnification for Claims and Losses relating to breaches of representations
or warranties by the Seller:

 

(a)   The Seller shall indemnify Buyer only to
the extent that the aggregate of all Claims actually suffered exceeds Sixty
Thousand Dollars ($60,000.00), at which point recovery shall be for all damages
incurred up to the full amount.

 

(b)   The maximum total liability for all Claims shall be
the total Purchase Price.

 

19

 

7.4.2        Notwithstanding the other provisions of
Section 7 hereof, the Buyer agrees that with respect to demands by Buyer for
indemnification for any Claims hereunder against the Seller:

 

(a)   No demand for indemnification under Section 7 shall be
made with respect to any claim to the extent the Claim arises wholly as a
result of the passing or amending after the Closing Date of a statute, rule or
other government regulation with retroactive effect.

 

(b)   The amount of any Claim subject to indemnification
shall be determined after taking into account the present value of any tax
benefits (net of tax detriments) accruing to Buyer (or any member of its
consolidated group) as a result of such Claim, but only to the extent that the
present value of the tax benefits can be estimated based upon assumptions
reasonable under the circumstances.

 

7.5           Escrow Agreement. 
The Holdback shall be maintained in an interest bearing escrow account (“Escrow
Account”) established pursuant to the Escrow Agreement until the expiration of
the Escrow Period for the purpose of satisfying claims by Buyer Indemnified
Parties for indemnification under Section 7.1(a).  Upon expiration of the Escrow Period, and
subject to the terms of this Section 7.5 and the Escrow Agreement, the escrow
agent shall deliver or cause to be delivered to the Partners the balance, if
any, remaining in the Escrow Account.  If,
upon expiration of the Escrow Period, any Buyer Indemnified Party shall have
asserted a claim for indemnity pursuant to Section 7.1(a) and such claim is
pending or unresolved at the time of such expiration, the escrow agent shall
retain in escrow an amount of cash equal to the value of the asserted claim
until such matter is resolved.

 

7.6           Survival of Representations, Warranties and
Indemnification Obligation.  The
indemnification obligations contained in this Article 7 relating to the
representations and warranties of the Seller contained in Article 3 and of the
Buyer in Article 4 above shall survive the Closing hereunder and shall continue
in full force and effect after such Closing for a period of 12 months after the
Closing Date; provided, however, that the indemnification obligations contained
in this Article 7 relating to the representations and warranties in:

 

(a)           Sections 3.3, 3.13 and 3.15 shall
continue to survive after the Closing Date until the expiration of all
applicable statutes of limitations, and

 

(b)           Sections 3.14 and 3.31 shall continue to
survive after the Closing Date until the date which is 60 days after the date
on which the last applicable limitation period (i) with respect to Section
3.14, under applicable Regulations relating to Tax matters expires with respect
to any taxation year that is relevant in determining any liability with respect
to those Tax matters, and (ii) with respect to 3.31, under applicable ETA
election regulations.

 

ARTICLE 8

 

EFFECT
OF CLOSING ON EMPLOYMENT MATTERS

 

8.1           Employment by Buyer. 
Seller and Buyer shall co-operate to effect an orderly transfer to the
employ of Buyer of only those employees of Seller whose names are set forth on Exhibit
I attached hereto (the “Employees”).

 

(a)           Notice of Termination and Offer. 
No later than ten (10)
business days prior to the Closing Date, Seller shall notify the Employees in
writing, in a form acceptable to Buyer, of the pending sale of the Business to
the Buyer and that, upon Closing, as a result of the sale, their employment
will continue with Buyer on terms offered by Buyer and that their employment
with Seller

 

20

 

will
terminate.  On the same day, Buyer shall
make to the Employees written offers of employment which shall include the
following terms and conditions:

 

(i)            The job description and terms and
conditions of employment will be substantially similar to those then in effect;

 

(ii)           The salary will be the same as that
currently offered by Seller to such Employees; and

 

(iii)          The balance of the remuneration package
(including bonus; RRSP and group extended health, long-term disability and life
insurance; but, for the avoidance of doubt, excluding pension or retirement
benefits and future equity incentives which will be determined by Buyer) will
be substantially similar to that offered by Seller.

 

(b)           Transferring Employees and
Non-Transferring Employees.  No later than four (4)
business days prior to the Closing Date, Buyer shall deliver to Seller a list
of the names of the Employees who have accepted as of that date Buyer’s offer
of employment (the “Transferring Employees”) and of the names of the Employees
who have not accepted Buyer’s offer of employment (the “Non-Transferring
Employees”).  To the extent any of the
Non-Transferring Employees subsequently accept Buyer’s offer prior to the
Closing Date, they shall, for the purposes of this Agreement, be considered to
be Transferring Employees.

 

(c)           Non-Transferring Employees. 
Seller shall be wholly responsible for all pay in lieu of notice and
other severance payments, wrongful dismissal damages and all other costs and
expenses (including legal fees) related to the termination of employment of the
Non-Transferring Employees and the employees of Seller not listed on Exhibit
I and hereby indemnifies Buyer with respect to the same.

 

(d)           Absent Employees. 
Notwithstanding anything else in this Article 8, in respect of any
Employee who is absent from work immediately prior to and on the Closing Date
on an approved leave of absence, including pregnancy, parental, jury, medical
or disability leave, Buyer shall offer employment to such Employee in
accordance with the terms of this Article 8, except that for any Employee who
is absent from work on such a leave of absence the date of termination of
employment with Seller and the date of commencement of employment with Buyer
shall be the day after the expiry of the leave.

 

8.2           Continued Obligations of Seller.

 

8.2.1        Seller
will be responsible and liable for all wages, salary, bonuses, severance pay,
notice or pay in lieu of notice, vacation pay and all other benefits in respect
of every employee of Seller payable before the Closing Date.

 

8.2.2        Seller
will retain responsibility under its insured Benefit Plans for all amounts
payable by reason of, or in connection with, any and all claims incurred before
the Closing Date by any Transferring Employee. 
For the purposes of this Section 8.2, a claim shall be deemed to have
been incurred on the date of occurrence of any injury or the diagnosis of an
illness or condition.

 

8.2.3        Seller
will retain responsibility to the Employees for all amounts payable by reason
of, or in connection with, any and all claims relating to Seller’s
noncompliance with applicable laws respecting employment and employment
practices, terms and conditions of

 

21

 

employment and wages and
hours for the period before the Closing Date, regardless of amount, character
or description, or whether accrued, contingent, determined, undetermined, known
or unknown or otherwise.

 

8.3           Effect of Closing on Buyer Obligations. 
Buyer will be responsible and liable for all wages, salary, bonuses or
severance pay, notice or pay in lieu of notice, vacation pay and all other
benefits in respect of every Transferring Employee payable after the Closing
Date, and hereby indemnifies Seller with respect to same.  Buyer will recognize past service with Seller
and SBC of all Transferring Employees for all purposes under the laws of
British Columbia, including, without limitation, for the purposes of
determining wages, salary, bonuses or severance pay, notice or pay in lieu of
notice, vacation pay and all other benefits in respect of any Transferring
Employee.

 

8.4           Limitation on Buyer Obligations. 
Buyer shall not assume and shall under no circumstances be responsible
for, and Seller shall retain and be responsible for, any liabilities or
obligations of Seller related to the employees, consultants and contractors of
Seller not listed on Exhibit I, and any Non-Transferring Employees,
regardless of amount, character or description, or whether accrued, contingent,
determined, undetermined, known or unknown or otherwise, including (without
limitation) any obligation or liability whatsoever arising from any employment
event or from any employment, consulting or contracting agreement related to
the periods or entered into prior to or after the Closing.  Buyer shall not assume and shall under no
circumstances be responsible for, and Seller shall retain and be responsible
for, all amounts payable by reason of, or in connection with, any and all
claims relating to Seller’s noncompliance with applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours for the period before the Closing Date, regardless of amount,
character or description, or whether accrued, contingent, determined,
undetermined, known or unknown or otherwise.

 

ARTICLE
9

 

COVENANTS; TERMINATION

 

9.1           Conduct of Business by Seller. 
Except for matters specifically contemplated by this Agreement, from the
Effective Date to the Closing Seller shall conduct the Business in light of the
existing circumstances in such a manner as to permit the Seller to perform its
obligations under this Agreement and to maintain the ongoing operations of the
Business.  In addition, and without
limiting the generality of the foregoing, from the Effective Date to the
Closing, the Seller shall not do any of the following without the prior written
consent of Buyer:

 

(a)   sell, lease (as lessor), license or otherwise dispose
of or subject to any Encumbrances (other than Permitted Liens) any of the
Assets or any properties or assets that are material, individually or in the
aggregate, to the Seller;

 

(b)   modify or terminate any contract being assumed by
Seller as part of this Agreement or enter into, modify or terminate any such
contract that if it had been entered into prior to the date of this Agreement,
would have had to be listed on Exhibit D;

 

(c)   authorize any of, or commit or agree to take any of,
the foregoing actions.

 

9.2           Other Actions. 
Seller and Buyer shall not, and shall not permit any of their respective
Affiliates to take any action that would, or that is reasonably likely to,
result in (i) any of the representations and warranties of such party set
forth in this Agreement becoming untrue, other than for such failures to be
true and correct that, individually or in the aggregate, have not resulted and
are not

 

22

 

reasonably likely to result in the condition in Section 5.1 (in the
case of the Seller) or Section 6.1 (in the case of Buyer) not being satisfied
or (ii) any condition to the Closing set forth in Article 5 and Article
6  not being satisfied.

 

9.3           Termination.

 

(a)   This Agreement may be terminated at any time prior to
the Closing Date:

 

(i)                                     by written agreement of both Buyer and
Seller;

 

(ii)           by Seller by written notice to Buyer if
the general partner of Seller and the Board of Directors of SBC withholds or
withdraws their approval and adoption of this Agreement, in response to a
Superior Proposal (as defined below); or

 

(iii)          subject to Section 9.3(b) below, by
written notice from either Seller or Buyer if the Closing shall not have
occurred on or prior to May 15, 2005.

 

(b)   Seller shall pay to Buyer $250,000 in cash (“Termination
Fee”) in the event that this Agreement (i) is terminated by Seller pursuant to
Section 9.3(a)(ii), or (ii) is otherwise unilaterally terminated by Seller or
does not close on or before May 15, 2005 because of Seller’s non-compliance
with any one or more of Sections 5.1 through 5.8, 5.13 or 5.14 if Buyer has
otherwise performed and complied with its covenants, agreements or conditions
to be performed or complied with by it under this Agreement, regardless of the
occurrence or non-occurrence of any condition set forth in Section 6.2.  Seller shall be required to pay the
Termination Fee to Buyer within ten (10) business days after any such
termination.

 

(c)   “Superior Proposal” shall mean any inquiry, offer or
proposal (other than this Agreement or any other inquiry, offer or proposal by
Buyer) relating to any transaction or series of related transactions for the
sale, merger or other business combination involving Seller on terms that the
Board of Directors of Seller concludes in good faith, after consultation with
its outside financial advisors, to be more favorable to Seller’s stockholders
from a financial point of view than the terms of this Agreement, taking into
account all the terms and conditions of such proposal and this Agreement
(including any proposal by either party to amend the terms of this Agreement),
and reasonably capable of being consummated.

 

(d)   In the event that this Agreement is terminated, each
of the parties shall return (without retaining copies) all documents and papers
containing confidential information (including without limitation technical
information, customer lists, financial data and any similar information
developed by another party pursuant to this Agreement or in contemplation of
the transactions contemplated by this Agreement).  In the event of termination of this Agreement
pursuant to this Section 9.3, neither party shall have any obligation to the
other whatsoever with respect to this Agreement, the transactions provided for
herein or the expenses either of them incurred in connection with or in
contemplation of such transactions, except for the Seller’s obligation to pay
the Termination Fee to the Buyer as set forth in Section 9.3 (b) and the
obligation to return confidential information as set forth in this Section 9.3
(d).

 

23

 

ARTICLE 10

 

TRANSACTIONS
SUBSEQUENT TO THE CLOSING DATE

 

10.1         Collection of Accounts Receivable After Closing. 
Any amounts received as payments on the Accounts Receivable by
Seller on or after the Closing Date shall be held by Seller as custodian for
Buyer and, further, shall be paid by Seller to Buyer promptly.  Seller shall cooperate, at Buyer’s request
and expense or as provided in the Transition Services Agreement, in collecting
the Accounts Receivable.

 

10.2         Further Assurances. 
Both before and after the Closing, each party will cooperate in good
faith with the other and will take all appropriate action and execute any
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out the transactions contemplated
hereunder.  From time to time after the
Closing Date, the parties shall execute, deliver and acknowledge all such
further instruments of transfer and conveyance and shall perform all such other
acts as any other party may reasonably request to more effectively transfer the
Assets and to otherwise carry out the transactions contemplated by this
Agreement and the Related Documents.

 

10.3         Sales and Use Taxes. 
As required by the Social Services Tax Act
(British Columbia), any sales, use or other transfer tax which is payable under
such act as the result of the transactions contemplated by this Agreement shall
be paid by Buyer in full compliance with applicable law.

 

10.4         Continued Cooperation. 
Each of the parties hereto shall continue to cooperate after the Closing
to effect the substance and intent of the transactions described in this
Agreement.

 

10.5         Full Access. 
Subsequent to the Closing, Seller shall, upon request, provide Buyer and
Buyer’s representatives with any information as Buyer may reasonably request in
order to verify performance of and compliance with the representations,
warranties, covenants and conditions applicable to Seller hereunder or the
Related Documents.

 

10.6         Preservation of Records.  Subsequent to
the Closing, Buyer shall, upon request, provide Seller and Seller’s
representatives with any information with respect to the Business as Seller may
reasonably request in connection with a business purpose, including but not
limited to compliance with Seller’s tax and legal obligations.  The parties shall retain until the applicable
statutes of limitation have expired (including any extensions), copies of tax
returns, supporting work schedules and other records or information which may
be relevant for all tax periods or portions thereof ending before and including
the Closing Date.

 

10.7         Transition Services Agreement. 
Pursuant to the terms of the Transition Services Agreement, Seller shall
(a) provide specified facility and other administrative and support services to
the Buyer and (b) make available designated assets for the Buyer’s part time,
reasonable use, including specified laboratory equipment, computer hardware and
computer software, and (c) upon request, work with the Buyer to help it obtain
software licenses equivalent to those of Seller, then duplicate Seller’s
information into databases that will be owned by Buyer.  The term of the Transition Services Agreement
shall commence on the Closing Date and shall end on December 31, 2005.

 

24

 

ARTICLE 11

 

MISCELLANEOUS
PROVISIONS

 

11.1         Investigations and Survival. 
The respective representations, warranties, covenants and agreements of
Seller and Buyer herein and in the Related Documents, or in any certificates or
other documents delivered prior to or at the Closing, shall not be deemed
modified, waived or otherwise affected by any investigation made by any party
or its representatives hereto.

 

11.2         Successors and Assigns. 
This Agreement may not be assigned by a party without the prior written
consent of the parties hereto which consent shall not be unreasonably withheld
or delayed; provided, however, this Agreement may be assigned and the
obligations hereunder delegated by the Buyer to a purchaser or acquiror of all
or substantially all of the business, stock or assets of Buyer in whatever form
of corporate transaction or to any other corporation or entity that, directly
or indirectly, through one or more intermediaries, controls, is controlled by
or under common control with Buyer without the consent of Seller.  Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors, assigns, heirs, legatees, executors and
administrators of the parties.

 

11.3         Governing Law; Jurisdiction and Venue;
Severability.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to principles of conflicts of law.  The
parties agree that any dispute regarding the interpretation or validity of this
Agreement shall be subject to the exclusive jurisdiction of the state and
federal courts in and for the County of San Diego, California, and each party
hereby agrees to submit to the personal and exclusive jurisdiction and venue of
such courts.  If any term, covenant or
condition of this Agreement is held to be to any extent invalid, void, or otherwise
unenforceable by any court or arbitrator, the remainder of this Agreement shall
not be affected thereby and each term, covenant and condition of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.

 

11.4         Entire Agreement; Modification and Waiver. 
This Agreement, together with the agreements and documents referred to
herein, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings. 
All Exhibits and Schedules attached hereto are incorporated herein by
this reference.  This Agreement may be
modified, amended or supplemented only by a written instrument duly executed by
all parties hereto.  No covenant, term or
condition or the breach thereof shall be deemed waived, unless it is waived in
writing and signed by the party against whom the waiver is claimed.  Any waiver of breach of any covenant, term or
condition shall not be deemed to be a waiver of any preceding or succeeding
breach of the same or any other covenant, term or condition.  The failure of any party to insist upon
strict performance of any covenant, term or condition hereunder shall not
constitute a waiver of such party’s right to demand strict compliance therewith
in the future.  Time is of the essence
for purposes of each and every provision of this Agreement.

 

11.5         Notices.  All payments,
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be delivered personally (which shall
include delivery by courier or overnight delivery service) or sent by certified
or registered mail postage prepaid, certified or return receipt requested, or
sent by facsimile transmission, to the parties at their respective address set
forth below or at such other address as shall be given in writing by a party to
the other party.  Items delivered
personally or by facsimile transmission shall be deemed delivered on the date
of actual delivery; items sent by certified or regular mail shall be deemed delivered
three (3) days after mailing.

 

25

 

	
  If to Buyer:

  	
   

  	
  Stressgen
  Bioreagents Corporation

  
	
   

  	
   

  	
  c/o David J.
  Parker

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
  Ampersand
  Ventures

  
	
   

  	
   

  	
  55 William
  Street, Suite 240

  
	
   

  	
   

  	
  Wellesley, MA
  02181

  
	
   

  	
   

  	
  (F) 781-239-0824

  
	
   

  	
   

  	
   

  
	
  If to Seller:

  	
   

  	
  Stressgen Biotechnologies,
  Inc.

  
	
   

  	
   

  	
  Attn: Chief
  Financial Officer

  
	
   

  	
   

  	
  6055 Lusk
  Boulevard

  
	
   

  	
   

  	
  San Diego, CA
  92121

  
	
   

  	
   

  	
  (F) 858-450-6849

  

 

11.6         Payment of Fees and Expenses. 
Each party to this Agreement shall be responsible for, and shall pay,
all of its own legal, accounting and other transactional fees and expenses
incurred in the negotiation and preparation of this Agreement and the Related
Documents and the transactions contemplated herein and therein.

 

11.7         Drafting Party. 
The provisions of this Agreement, and the documents and instruments
referred to herein, have been examined, negotiated, drafted and revised by
counsel for each party hereto and no implication shall be drawn nor made
against any party hereto by virtue of the drafting of this Agreement.

 

11.8         Publicity.  Except as
required by law, the timing and content of all press releases and public
statements regarding this Agreement, the Related Documents and the transactions
contemplated herein and therein, shall be made only by the mutual agreement of
Buyer and Seller.

 

11.9         Counterparts. 
This Agreement may be executed in multiple copies, each of which shall
be deemed an original and all of which shall constitute a single agreement
binding on all parties.

 

ARTICLE 12

 

CERTAIN
DEFINITIONS

 

12.1         Definitions.  The following
terms as used in this Agreement shall have the meaning indicated below:

 

“Affiliate”
means, with respect to any Person, any other person controlling, controlled by
or under common control with, such Person.

 

“Affiliated
Group” means any affiliated group within the meaning of Section 1504 of the
Code (or any similar group defined under a similar provision of state, local or
foreign law).

 

“Approvals”
means, collectively, permits, approvals, authorizations, consents, clearances,
licenses, franchises, concessions, orders, exemptions or other permits of all
governmental or regulatory agencies, whether federal, state, local or foreign.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

26

 

“Encumbrances”
means all mortgages, deeds of trust, claims, security interests, liens,
pledges, leases, subleases, charges, escrows, options, proxies, rights of
occupancy, rights of first refusal, preemptive rights, covenants, conditional
limitations, hypothecations, prior assignments, easements, title retention
agreements, indentures, security agreements or other encumbrances of any kind.

 

“Environmental
Costs and Liabilities” means any and all liabilities, obligations, damages
(including diminution of property value), deficiencies, losses, fines,
penalties, judgments, assessments, costs and expenses (including, without
limitation, reasonable fees, costs and disbursements of legal counsel, experts,
engineers and consultants, costs of obtaining a certificate of compliance or
other similar approval, fees of Governmental Authorities, ongoing monitoring
costs, costs of acquiring security) arising from, relating to or in respect of;
(a) any violation by Seller of Environmental Laws; (b) any Remedial
Action with respect to any property currently or formerly owned by Seller;
(c) damage to property or natural resources resulting from the Release of
Hazardous Materials by Seller or at any property currently or formerly owned or
leased by Seller; (d) human exposure to Hazardous Materials in connection
with Seller’s operations; and (e) the Release of Hazardous Materials at
any property at which any Hazardous Material generated by Seller was disposed
of.

 

“Environmental
Law” means any and all common law, statutes, laws, regulations, orders,
bylaws, standards, policies, directions, guidelines, protocols, (provided that
such standards, policies, directions, guidelines and protocols have the force
of law), and lawful requirements of any Governmental Authority having
jurisdiction over the Assets or the Business relating to the environment,
environmental assessment, health, occupational health and safety, protection of
any form of plant or animal life or transportation of dangerous goods and which
are applicable to the Business and the Assets.

 

“Environmental
Permits” means any permit, Approval, authorization, license, variance,
registration or permission required under any applicable Environmental Law.

 

“ETA”
means Part IX of the Excise Tax Act (Canada), as amended from time to time.

 

“Governmental
Authority” means any federal, provincial, municipal government or other
governmental or regulatory department, commission, administration, board,
bureau, agency or instrumentality.

 

“GAAP”
means generally accepted accounting principles.

 

“Hazardous
Material” means any explosives, radioactive materials,
asbestos material, urea formaldehyde, hydrocarbon contaminants, underground
tanks, pollutants, contaminants, hazardous, corrosive or toxic substances,
hazardous waste or special waste of any kind (including, without limitation,
compounds known as chlorobiphenyls) and any substance the storage, manufacture,
disposal, treatment, handling, generation, use, transport, remediation or
Release into the environment of which is prohibited, controlled, regulated or
licensed under any Environmental Laws.

 

“Indebtedness”
means, with respect to any Person, any indebtedness, secured or unsecured,
(a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), and evidenced by bonds, notes, debentures or similar instruments or
letters of credit, to the extent of the face value thereof (or, in the case of
evidence of indebtedness issued at a discount, the current accredit value
thereof) or (b) representing the balance deferred and unpaid of the
purchase price of property or services (other than accounts payable (including
trade payables) in the ordinary course of business) and shall also include, to
the extent not otherwise included, (i) any capitalized lease obligations
and (ii) the face value of guaranties of items of other

 

27

 

Persons which would be included within this definition
for such other Persons (whether or not such items would appear upon the balance
sheet of the guarantor).

 

“IRS”
means the United States Internal Revenue Service.

 

“Key
Employees” means Gregory McKee and Ariel Louwrier.

 

“knowledge”
means the actual knowledge of Gregory McKee, Daniel Korpolinski and Ariel
Louwier.

 

“Knowledge
of Seller” or to “Seller’s Knowledge” means to the knowledge of the
Key Employees after reasonable inquiry and investigation.

 

“Legal
Proceeding” means any judicial, administrative or arbitral actions, suits,
investigations, proceedings (public or private) or governmental proceedings.

 

“Material
Adverse Effect” means with respect to any Person, any change or effect that
has or that would have a material adverse effect on the condition (financial or
otherwise), results of operations, business, prospects or assets of such Person
and its Subsidiaries taken as a whole (other than as a result of changes in
general economic or political conditions generally or in general economic or political
conditions applicable to the health care industry generally).

 

“Permitted
Lien” means (i) any encumbrances disclosed on any Financial Statement;
(ii) Tax Liens which are not yet due and payable and, with respect to
which have adequately been provided for on applicable financial statements
(whether or not required to be disclosed under Canadian GAAP); (iii) liens
incurred in the ordinary course of business in connection with workers
compensation, unemployment insurance and other types of social security
benefits; (iv) mechanics’, carriers’, workmen’s, repairmen’s or other like
liens arising out of or incurred in the ordinary course of business;
(v) liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business; (vi) liens created by or existing from any litigation
or legal proceeding that is being contested and (vii) with respect to real
property and interests therein) easements (including, without limitation,
reciprocal easement agreements and utility agreements), zoning requirements,
rights of way, covenants, consents, agreements, reservations, encroachments,
variances and other similar restrictions, charges or encumbrances (whether or
not recorded) that do not, individually or in the aggregate, impair the
continued use and operation of the assets to which they relate the applicable
business.

 

“Person”
and “person” means any natural person and any corporation, trust,
partnership, limited liability partnership, limited liability company, limited
liability corporation, venture or business entity.

 

“Regulated
Environmental Activity” means any emission, generation, treatment, storage,
recycling, discharge, transportation or disposal of any Hazardous Material.

 

“Release”
means any discharge, emission, spill, leakage, deposit, injection or migration
on or into the indoor or outdoor environment or into or out of any property, or
any similar action defined in any applicable Environmental Law.

 

“Remedial
Action” means all actions, including any capital expenditures, required by
any Governmental Authority or under any Environmental Laws or which a
reasonable Person would undertake voluntarily to (i) clean up, remove,
treat, or in any other way address any Hazardous Materials

 

28

 

or other substance; (ii) prevent the Release or
threat of Release, or minimize the further Release, of any Hazardous Materials;
(iii) perform pre-remedial studies and investigations or post-remedial
monitoring, operations, maintenance and care; or (iv) bring facilities on
any property owned, operated or leased by Seller and its Affiliates into
compliance with all Environmental Laws and Environmental Permits.

 

“Subsidiary”
means with respect to any Person, (a) each corporation, partnership, joint
venture or other legal entity of which such Person owns, either directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity, (b) each partnership in which such Person or another
Subsidiary of such Person is the general or managing partner and (c) each
limited liability company in which such Person or another Subsidiary of such
Person is the managing member or otherwise controls (by contract, through
ownership of membership interests or otherwise).

 

“Tax”
or “Taxes” means all taxes, charges, fees, imposts, duties, levies or
other assessments by any Taxing Authority, including (without limitation), all
net income, alternative or add-on minimum, gross receipts, capital, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property, estimated, together with any
interest and any penalties, fines, additions to tax or additional amounts
(whether disputed or not) imposed by any Taxing Authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes.

 

“Tax
Act” means the Income Tax Act (Canada),
as amended from time to time and all Regulations thereto.

 

“Tax
Asset” means any net operating loss, net capital loss, investment tax
credit or tax attribute which could reduce Taxes (including, without
limitation, deductions and credits related to alternative minimum Taxes).

 

“Tax
Authority” means any Canadian Federal, provincial or other governmental
authority.

 

“Tax
Lien” or “Tax Liens” means any Encumbrance relating to Taxes, other
than a lien of the type described in clause (ii) of the definition of Permitted
Liens.

 

“Tax
Return” or “Tax Returns” means any return, report, declaration,
election, notice, filing, form, statement and other document (whether in
tangible, electronic or other form) and including any amendment, schedule,
attachment, supplement, appendix and exhibit thereto, made, prepared, filed or
required to be made, prepared or filed by Regulations in respect of Taxes.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

29

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

 

	
  “Buyer”

  	
  “Seller”

  
	
   

  	
   

  
	
  Stressgen Bioreagents Corporation ,
  a Delaware

  corporation

  	
  Stressgen Bioreagents Limited
  Partnership, a

  British Columbia Limited Partnership

  

  By: Stressgen Holdings Corporation, its general

  partner

  
	
   

  	
   

  
	
  By:

  	
  /s/
  David J. Parker

  	
   

  	
  By:

  	
  /s/
  Gregory M. McKee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Chief
  Executive Officer

  	
   

  	
  Its:

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
								

 

 

Accepted and Agreed on
behalf of the limited partner of Seller:

 

	
   

  	
  Stressgen Biotechnologies
  Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gregory M. McKee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
					

 

[COUNTERPART
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

 

 

Each of the following
attachments to this agreement have been omitted but will be provided
supplementarily to the Securities and Exchange Commission if requested:

 

	
  EXHIBIT A:

  	
   

  	
  Bill of Sale

  
	
   

  	
   

  	
   

  
	
  Schedule 2(a):

  	
   

  	
  List of Physical
  Assets

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B:

  	
   

  	
  Excluded Assets

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C:

  	
   

  	
  Assumed
  Liabilities

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
   

  	
  Disclosure
  Schedules

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E:

  	
   

  	
  Form of
  Non-Competition Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT F

  	
   

  	
  Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT G

  	
   

  	
  Transition
  Services Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT H

  	
   

  	
  Guaranty
  Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT I

  	
   

  	
  Eligible
  Employees

  
	
   

  	
   

  	
   

  
	
  EXHIBIT J

  	
   

  	
  Patent License
  Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT K

  	
   

  	
  Trademark
  License Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT L

  	
   

  	
  Material ContractsEXHIBIT 10.2

 

[STRESSGEN
LETTERHEAD]

 

April 12, 2005

 

 

Dan
Korpolinski

c/o Stressgen
Biotechnologies Inc.

6055 Lusk
Boulevard

San Diego,
CA  92121

 

 

Dear Dan:

 

Re:                             Termination of Employment with Stressgen Biotechnologies Inc. and
Stressgen Biotechnologies Corporation

 

Further to our previous discussions, we write to
confirm that the Board of Directors of Stressgen Biotechnologies Corporation
has decided to terminate your employment as President and Chief Executive
Officer with Stressgen Biotechnologies Inc. and Stressgen Biotechnologies
Corporation (collectively, “Stressgen”) without just cause effective April 14,
2005, in accordance with the terms of your employment agreement dated September
1, 2004 (“Employment Agreement”).

 

However, in exchange for you agreeing to the terms and
conditions set out below, in addition to the contractual obligations set out in
the Employment Agreement, Stressgen is prepared to offer you the following:

 

1.               In lieu of the salary
continuance provided for in paragraph 4.2 of the Employment Agreement, in
addition to our paying you up to your last day of work, Stressgen shall pay you
a lump sum of US$672,400.00 (“Severance Amount”), less all appropriate
statutory deductions.  Payment of this
amount shall be made seven (7) days following the execution of the Confidential
General Release of All Claims attached as Schedule “B” to this letter.  On your instructions, Stressgen is prepared,
to the extent it is permitted by law to do so, pay a portion of the Settlement
Amount into your 401K account.

 

2.               Stressgen shall pay you
the sum of US$48,817.00, representing your accrued but unused vacation pay.

 

3.               In addition to the
Severance Amount, Stressgen shall also pay you a further sum of US$9,900.00,
less appropriate statutory deductions, representing reimbursement of any
supplemental life insurance premiums you potentially would have incurred during
the 18 month severance period, as contemplated in section 4.2 of the Employment
Agreement.

 

 

4.               Stressgen agrees to pay
the premiums required to continue your medical, dental and vision coverage for
an 18 month period commencing April 14, 2005, under the applicable provisions
of the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”) provided that you elect to continue and remain eligible
for these benefits under COBRA, and you do not obtain health coverage through
another employer during this period.

 

5.               Stressgen will allow
you to continue to reside in its corporate condominium in San Diego, California
until the current lease for that condominium expires in August 2005.  In the event that you decide to continue
residing at that location following the expiration of the current lease, you
will be required to enter into a new lease agreement with the landlord and will
be personally responsible for all costs associated with leasing that
condominium.

 

In exchange for the consideration set out above,
Stressgen requires the following:

 

1.               You agree to provide
consulting services to Stressgen, in accordance with the terms and conditions
set out in the Consulting Services Agreement attached as Schedule “A” to this
letter.

 

2.               You confirm that you
remain bound by the obligations set out in sections 7, 8, 9, 10 and 11 of the
Employment Agreement and acknowledge that those terms and conditions survive
the termination of your employment with Stressgen.

 

3.               You agree to cancel all
stock options granted to you, including those set out below:

 

	
  Date

  	
   

  	
  Number of Options Granted

  	
   

  	
  Exercise Price

  	
   

  
	
  3/31/2000

  	
   

  	
  1,000,000

  	
   

  	
  CDN $6.20

  	
   

  
	
  01/11/2002

  	
   

  	
  100,000

  	
   

  	
  CDN $5.21

  	
   

  
	
  02/05/2003

  	
   

  	
  150,000

  	
   

  	
  CDN $1.63

  	
   

  

 

4.               You shall execute a
Confidential General Release of All Claims you may have against Stressgen in
the form attached as Schedule “B” to this letter.

 

Please consider these additional terms set out herein
carefully and take whatever legal advice you require.

 

2

 

We would like to take this opportunity to thank you
for the contributions you have made to Stressgen, and wish you the best in your
future endeavours.

 

	
   

  	
  Yours very
  truly,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ian Lennox

  
	
   

  	
  Chairman of
  the Board

  
	
   

  	
  Stressgen
  Biotechnologies Corporation

  

 

 

Acknowledged
and agreed to this           
day of April, 2005.

 

 

	
   

  	
   

  
	
  Dan
  Korpolinski

  	
   

  

 

3

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