SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 30th day of November, 1998, BETWEEN:
XXXXXX XXXXXXX,
of the City of Richmond Hill, in the Regional Municipality of York
(hereinafter called "Xxxxxx"),
XXXX XXXX,
of the City of Toronto, in the Municipality of Metropolitan Toronto
(hereinafter called "Rhys"),
LAUDERDALE CAPITAL CORP.,
a corporation incorporated under the laws of the Province of Ontario
(hereinafter called "Lenco"),
XXXXX XXXXXXX,
of the City of Toronto, in the Municipality of Metropolitan Toronto
(hereinafter called "Xxxxx")
(Victor, Rhys, Lenco and Xxxxx being hereinafter collectively called
the "Vendors")
OF THE FIRST PART,
- and -
INTERNATIONAL MENU SOLUTIONS INC.,
a corporation incorporated under the laws of the Province of Ontario,
(hereinafter called the "Purchaser")
OF THE SECOND PART,
- and -
INTERNATIONAL MENU SOLUTIONS CORPORATION,
a corporation incorporated under the laws of the State of Nevada
(hereinafter called "IMSC")
OF THE THIRD PART.
WHEREAS the Purchaser wishes to acquire (a) all of the issued and
outstanding shares of Transcontinental Gourmet Foods Inc. (herein called the
"Corporation" and "TGF"), and (b) 59% of the issued and outstanding shares of
Norbakco Ltd. (herein called "Norbakco");
2
AND WHEREAS Xxxxxx is the sole shareholder of 1069924 Ontario Limited
(herein called "Victorco") and Xxxxxx owns 30 common shares in the capital stock
of Victorco (herein called the "Victorco Shares") and 1,068 Class A Special
shares in the capital of the Corporation (the "Xxxxxx Preferred Shares");
AND WHEREAS Victorco is the owner of (a) 5,143.2 common shares in the
capital stock of the Corporation (herein called the "Victorco Corp Shares"), and
(b) 80 common shares (herein called the "Victorco VLRL Shares") in the capital
stock of VLRL Holdings Ltd. (herein called "VLRL");
AND WHEREAS VLRL is the legal and beneficial owner of 50% of the issued and
outstanding common shares in the capital stock of Norbakco being 100 common
shares in the capital stock of Norbakco (herein called the "VLRL Norbakco
Shares");
AND WHEREAS Rhys is the sole shareholder of 1069923 Ontario Limited (herein
called "Rhysco") and Rhys owns 30 common shares in the capital stock of Rhysco
(herein called the "Rhysco Shares") and 129 Class A Special shares in the
capital of the Corporation (the "Rhys Preferred Shares");
AND WHEREAS Rhysco is the owner of (a) 2,571.6 common shares in the capital
stock of the Corporation (herein called the "Rhysco Corp Shares"), and (b) 40
common shares in the capital stock of VLRL (herein called the "Rhysco VLRL
Shares");
AND WHEREAS Lenco is the owner of (a) 2,571.6 common shares in the capital
stock of the Corporation (herein called the "Lenco Corp Shares"), and (b) 40
common shares in the capital stock of VLRL (herein called the "Lenco VLRL
Shares");
AND WHEREAS Xxxxx is owner of (a) 2,571.6 common shares in the capital
stock of the Corporation (herein called the "Xxxxx Corp Shares"), and (b) 40
common shares in the capital stock of VLRL (herein called the "Xxxxx VLRL
Shares");
AND WHEREAS Xxxxx is the beneficial owner of 9% of the issued and
outstanding common shares in the capital stock of Norbakco being 18 common
shares in the capital stock of Norbakco (herein called the "Xxxxx Norbakco
Shares"), legal title to such Xxxxx Norbakco Shares being held by VLRL in trust
for Xxxxx;
AND WHEREAS the VLRL Norbakco Shares and the Xxxxx Norbakco Shares are
collectively referred to herein as the "Norbakco Shares");
AND WHEREAS the Xxxxxx Preferred Shares and the Rhys Preferred Shares
constitute all of the issued and outstanding Class A Special shares in the
capital stock of TGF, the Xxxxxx
3
Preferred Shares and the Rhys Preferred Shares being collectively referred to
herein as the "Preferred Shares";
AND WHEREAS the Purchaser wishes to purchase the Victorco Shares, the
Rhysco Shares, the Lenco Corp Shares, the Lenco VLRL Shares, the Xxxxx Corp
Shares, the Xxxxx VLRL Shares, the Xxxxx Norbakco Shares and the Preferred
Shares (herein collectively called the "Purchased Shares") from the respective
owners thereof and such respective owners wish to sell the Purchased Shares to
the Purchaser on the terms and conditions herein set forth;
AND WHEREAS the parties hereto wish to complete the said sale and purchase
of the Purchased Shares as herein this Agreement provided;
AND WHEREAS for ease of reference the Corporation, Norbakco, Victorco,
Rhysco and VLRL are herein collectively called the "Corporate Entities".
THIS AGREEMENT WITNESS THAT in consideration of the respective covenants,
agreements, representations, warranties and indemnities herein contained and for
other good and valuable consideration (the receipt and sufficiency of which are
acknowledged by each party,) the parties covenant and agree as follows:
ARTICLE I
INTERPRETATION
1.01 Defined Terms
All capitalized terms used in this Agreement and not defined above shall have
meanings set forth in Schedule A to this Agreement.
1.02 Currency
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are expressed in Canadian funds.
1.03 Sections and Headings
The division of this Agreement into sections and the insertion of headings
are for convenience of reference only and shall not affect the interpretation of
this Agreement. Unless otherwise indicated, any reference in this Agreement to a
section or a Schedule refers to the specified section of or Schedule to this
Agreement.
4
1.04 Number, Gender and Persons
In this Agreements, words importing the singular number only shall include
the plural and vice versa, words importing gender shall include all genders and
words importing persons shall include individuals, corporations, partnerships,
associations, trusts, unincorporated organizations, governmental bodies and
other legal or business entities.
1.05 Accounting Principles
Any reference in this Agreement to generally accepted accounting principles
refers to generally accepted accounting principles as approved from time to time
by the Canadian Institute of Chartered Accountants or any successor institute.
1.06 Entire Agreement
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties or other
provisions, express or implied, collateral, statutory or otherwise, relating to
the subject matter hereof except as herein provided.
1.07 Time of Essence
Time shall be of the essence of this Agreement.
1.08 Applicable Law
This Agreements shall be constructed, interpreted and enforced in
accordance with, and the respective rights and obligations of the parties shall
be governed by, the laws of the Province of Ontario and the federal laws of
Canada applicable therein, and each party hereby irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the courts of such province and all
courts competent to hear appeals therefrom.
1.09 Severability
If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision in hereby
declared to be separate, severable and distinct.
5
1.10 Successors and Assigns
This Agreement shall enure to the benefit of and shall be binding on and
enforceable by the parties and, where the context so permits, their respective
successors and permitted assigns. Subject to section 3.03, no party may assign
any of its rights or obligations hereunder without the prior written consent of
the other parties.
1.11 Amendment and Waivers
No amendment or waiver of any provision of this Agreement shall be binding
on any party unless consented to in writing by such party. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision,
nor shall any waiver constitute a continuing waiver unless otherwise expressly
provided.
1.12 Schedules
The following Schedules are attached to and form part of this Agreement:
Schedule A - Defined Terms
Schedule B - Representations and Warranties of the Vendors with respect
to the Corporation
- Representations and Warranties of the Vendors with respect
to Norbakco
- Representations and Warranties of the Vendors with respect
to VLRL
Schedule C - Representations and Warranties of Xxxxxx
Schedule D - Representations and Warranties of Rhys
Schedule E - Representations and Warranties of Lenco
Schedule F - Representations and Warranties of Xxxxx
Schedule G - Representations and Warranties of the Purchaser
Schedule H - Representations and Warranties of IMSC
Schedule 2.03 - Allocation of Purchase Price
Schedule 4.01(i) - Non-Competition and Non-Solicitation Agreement
Schedule 4.01(j) - Form of Opinion of Vendors' Counsel
Schedule 4.01(l) - Form of Release
Schedule 4.02(j) - Form of Opinion of Purchaser's Counsel
Schedule A1.01(d) - Audited Corporation Financial Statements
Schedule A1.01(y) - Interim Corporation Financial Statements
Schedule A1.01(z) - Interim Norbakco Financial Statements
Schedule A1.01(gg) - Norbakco Permitted Encumbrances
Schedule A1.01(ll) - Rhysco Financial Statements
6
Schedule A1.01(yy) - Victorco Financial Statements
Schedule A1.01(tt) - TGF Permitted Encumbrances
Schedule A1.02 - Shareholder Loans and Purchased Loans
Schedule B1.07 - Location of TGF Assets
Schedule B1.11 - TGF Leased Real Property
Schedule B1.14 - TGF Intellectual Property
Schedule B1.15 - TGF Insurance Policies
Schedule B1.17 - TGF Contracts
Schedule B1.18 - TGF Licenses and Permits
Schedule B1.19 - TGF Regulatory Consents
Schedule B1.19 - TGF Third Party Consents
Schedule B1.23 - TGF Tax Matters
Schedule B1.27 - TGF Accounts and Attorneys
Schedule B1.28 - TGF Directors and Officers
Schedule B1.32 - TGF Employee Matters
Schedule B1.36 - TGF Major Customers
Schedule B2.07 - Location of Norbakco Assets
Schedule B2.11 - Norbakco Leased Real Property
Schedule B2.14 - Norbakco Intellectual Property
Schedule B2.15 - Norbakco Insurance Policies
Schedule B2.17 - Norbakco Contracts
Schedule B2.18 - Norbakco Licenses and Permits
Schedule B2.19 - Norbakco Regulatory Consents
Schedule B2.19 - Norbakco Third Party Consents
Schedule B2.23 - Norbakco Tax Matters
Schedule B2.27 - Norbakco Accounts and Attorneys
Schedule B2.28 - Norbakco Directors and Officers
Schedule B2.32 - Norbakco Employee Matters
Schedule B2.36 - Norbakco Major Customers
Schedule B3.13 - VLRL Directors and Officers
Schedule C1.13 - Victorco Directors and Officers
Schedule D1.13 - Rhysco Directors and Officers
1.13 Best of Knowledge
Any reference in this Agreement to "the best of the knowledge of the
Vendors" or "the best of the knowledge and belief of the Vendors" will mean the
actual knowledge of the Vendors (which shall be the knowledge of Xxx Xxxxxxxx in
the case of Lenco) and the knowledge which they would have had if they had
conducted a reasonably prudent inquiry into the subject matter.
7
1.14 Materiality
In this Agreement, "material" when used to describe a contract, lease or
other agreement, means:
(a) in the case of Norbakco, a contract, lease or other agreement with a
term in excess of six (6) months or pursuant to which one or more
payments in excess of $5,000.00 in the aggregate become due; and
(b) in the case of the Corporation, a contract, lease or other agreement
with a term in excess of six (6) months or pursuant to which one or
more payments in excess of $20,000.00 in the aggregate become due.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
2.01 Purchase and Sale of Purchased Shares
Subject to the terms and conditions hereof, each of Victor, Rhys, Lenco and
Xxxxx covenant and agree to sell, assign and transfer to the Purchaser and the
Purchaser covenants and agrees to purchase from each of the Vendors all but not
less than all of:
(a) the Victorco Shares, the Rhysco Shares, the Lenco Corp Shares, the
Lenco VLRL Shares, the Xxxxx Corp Shares, the Xxxxx VLRL Shares, the
Xxxxx Norbakco Shares and the Preferred Shares; and
(b) all shareholder advances and other indebtedness owing by TGF, Norbakco
or VLRL to Xxxxx or Lenco and all shareholder advances, loans or other
indebtedness owing by Victorco to Xxxxxx or by Rhysco to Rhys as at
the Closing Date other than accrued salaries, bonuses or other
compensation incurred in the ordinary course of business (collectively
the "Purchased Loans");
2.02 Purchase Price
The aggregate purchase price payable by the Purchaser to the Vendors for
the Purchased Shares and the Purchased Loans (the "Purchase Price") shall be
equal to the sum of the following:
(a) 5 x Adjusted EBITDA of TGF (unconsolidated, excluding Norbakco's
operations) for the twelve (12) month period ending February 28, 1999
(to be based on audited financial statements or at the Purchaser's
option on internal management prepared
8
financial statements);
(b) 1 x Adjusted EBITDA of TGF (unconsolidated, excluding Norbakco's
operations) for the twelve (12) month period ending February 28, 2000
(to be based on audited financial statements or at the Purchaser's
option on internal management prepared financial statements);
(c) 4 x 0.59 x Adjusted EBITDA of Norbakco for the twelve (12) month
period ending February 28, 2000 (to be based on audited financial
statements or at the Purchaser's option on internal management
prepared financial statements).
For purposes hereof "Adjusted EBITDA" shall mean earnings before interest,
income taxes, depreciation and amortization, as calculated in accordance with
generally accepted accounting principles consistent with the policies used to
prepare the financial statements of TGF and Norbakco in the past adjusted by
adding back any inter-company management fees or allocations of overhead
expenses that are expensed subsequent to the Closing Date in either of TGF or
Norbakco for the relevant period and otherwise adjusting for any other
reorganizational transactions undertaken subsequent to the Closing Date
affecting TGF or Norbakco, the intent of the parties being that the Purchase
Price should be based on a "normalized" EBITDA of the businesses carried by TGF
and Norbakco. In that regard, to the extent that any of Larry's remuneration is
no longer expensed in TGF or Norbakco by virtue of his becoming chief financial
officer of the Purchaser, such expense shall be included as an expense to TGF
and/or Norbakco in determining Adjusted EBITDA at the same cost as is currently
incurred by TGF and Norbakco less the amount of any corresponding new expenses
incurred by TGF or Norbakco to replace Xxxxx. In addition, in the event that the
Purchaser requires an audit to be done as at February 28 (in addition to the
December 31 audit required for its year end) only the costs applicable to TGF
and Norbakco for the December 31 audit shall be expensed through TGF and
Norbakco. Inter-company management fees charged to TGF and Norbakco which are
true operating expenses shall be included for the purpose of determining
Adjusted EBITDA. Any extraordinary expenses due directly to the sale of the
Corporation as contemplated herein shall be deemed to be excluded as an expense
to TGF and/or Norbakco for the purpose of determining Adjusted EBITDA.
2.03 Payment of Purchase Price
The Purchase Price shall be paid partly in cash (herein called the "Cash
Amount" and partly through the issuance of Class B Shares, Class C Shares and
Class D Shares of the Purchaser and Class N Shares of IMSC, (herein called the
"Share Amount") to the Vendors in accordance with Schedule 2.03 hereof.
(a) The Cash Amount. The Cash Amount shall be paid by cash or certified cheque
by two payments, the first payment to be paid on the Closing Date (herein called
the "Closing Cash
9
Amount", and the second payment to be paid on or before July 31, 1999 herein
called the "Second Cash Payment").
The "Cash Amount" is an amount equal to the book value of TGF as at February 28,
1999 (calculated in accordance with Canadian generally accepted accounting
principles and verified by the audited financial statements of TGF for the
fiscal year ending February 28, 1999) as determined by the auditors of the
Purchaser, Deloitte & Touche, plus the aggregate of all shareholder advances,
loans or other indebtedness owing by TGF or Norbakco to any of the Vendors,
Victorco, Rhysco, Xxx Xxxxxxxx or VLRL as at the Closing Date (other than
accrued salaries, bonuses or other compensation incurred in the ordinary course
of business ) (collectively the "Shareholder Loans").
The "Closing Cash Amount" is the sum of One Million Dollars ($1,000,000.00)
forthwith.
The Second Cash Payment, being the difference between the Cash Amount and the
Closing Cash Amount shall be made forthwith following completion of the
financial statements of TGF for the period ending February 28, 1999 and in the
event that the Purchaser does not require such statements to be audited, then
such statements shall be completed by no later than April 30, 1999, and in the
event that the Purchaser requires such statements to be audited, then such
statements shall be completed no later than (8) weeks after the necessary
internal information has been made available to the Purchaser's auditors,
provided that such payment shall be made by no later than July 31, 1999. Any
balance of the Cash Payment remaining unpaid after May 31, 1999 shall bear
interest at Prime plus 2% per annum until July 31, 1999 and thereafter if still
unpaid at 20% per annum until paid in full.
(b) The Share Amount. The "Share Amount" means the difference between the
Purchase Price and the Cash Amount.
The Share Amount shall be satisfied by the issuance on Closing of an aggregate
of 300,000 Class B Shares, 100,000 Class C Shares and 59,000 Class D Shares
provided that the number of common stock in the capital of IMSC into which such
Class B Shares, Class C Shares and Class D Shares shall be exchangeable shall be
as follows:
(i) the number of common stock of IMSC into which the Class B Shares are
exchangeable shall be determined by the following calculation:
B = 5 x Adjusted EBITDA of TGF for the 12 month period ending
February 28, 1999 (CDN$) - Cash Amount (CDN$)
----------------------------------------------------------
(US$1.40)
(ii) the number of common stock of IMSC into which the Class C Shares are
exchangeable shall be determined by the following calculation:
10
C = 1 x Adjusted EBITDA of TGF for the 12 month period ending
February 28, 2000 (US$)
---------------------------------------------------------
Z
(iii) the number of common stock of IMSC into which the Class D Shares are
exchangeable shall be determined by the following calculation:
D = 4 x 59% of Adjusted EBITDA of Norbakco for the 12 month period
ending February 28, 2000 (US$)
--------------------------------------------------------------
Z
The shares issued pursuant to this Section 2.03 are herein called the "Purchase
Price Shares".
For purposes hereof, Z equals the lower of US$2.00 or the average of the closing
price for the IMSC common shares for the ten (10) trading days prior to the
February 28, 2000 (ie. as determined in accordance with the definition of the
Current Market Price contained in the Articles of Amendment).
The exchange rate to be applied for any U.S. Dollar/Cdn. Dollar conversion shall
be set at the average of the five day Bank of Canada published rate prior to the
relevant transaction closing date.
(c) Application of the Purchase Price. The Purchase Price shall be allocated in
accordance with Schedule 2.03.
(d) In addition to the foregoing, the Vendors (pro rata to their common
shareholdings in TGF) have the option to purchase common shares in the capital
stock of IMSC at a cost per share equal to Z (as defined above but with
reference to the trading days prior to December 31, 1999 instead of February 28,
2000) as determined pursuant to Section 2.03 hereof. The maximum number of
common shares the Vendors may purchase shall be determined by dividing the
amount of the Adjusted EBITDA of TGF in excess of One Million Dollars
($1,000,000.00) for the twelve (12) month period ending December 31, 1999 (the
"Excess Amount") by Z. Any of the Vendors having such right to purchase must
elect to purchase such common shares during the one (1) year period following
the date of final determination of the Excess Amount after which, the Vendors
shall have no further rights to purchase pursuant to this Section. The Vendors
shall provide fifteen (15) days notice to IMSC of their intention to purchase
such shares.
(e) Issuance of Class N Shares. Upon determination of the number of common stock
of IMSC into which the Vendors are entitled to exchange their Class B Special
Shares, Class C Special Shares and Class D Special Shares respectively, IMSC
shall issue to each of the Vendors at the time of each such determination an
equivalent number of Class N Shares in the capital of IMSC provided that the
Vendors agree that at the time of conversion of Class B Special Shares, Class D
Special Shares or
11
Class E Special Shares into common stock of IMSC, an equivalent number of Class
N Shares will be surrendered to IMSC for cancellation by the relevant Vendor or
Vendors, as applicable.
2.04 Escrow of Shares
On the Closing Date the Vendors will enter into an escrow agreement with
the Purchaser which will provide that the Class B Shares, Class C Shares and
Class D Shares, including any shares exchanged therefore, shall be held in
escrow and released as follows:
Class B - 1/3 released December 31, 1999,
1/3 released December 31, 2000, and
1/3 released December 31, 2001
Class C and D - 1/3 released December 31, 2000,
1/3 released December 31, 2001, and
1/3 released December 31, 2002
The Vendors further agree that on the Closing Date the Vendors will enter into
an agreement with the Purchaser granting to the Purchaser or the Purchaser's
designee a right of first refusal to Purchase any of the Vendors' Class B
Shares, Class C Shares and/or Class D Shares, or any shares in IMSC into which
such shares are exchanged upon any disposition by any Vendor other than for
estate and/or tax planning purposes and such shares shall have a legend to such
effect.
2.05 Intentionally Deleted
2.06 Arbitration
Any dispute between the parties with respect to the calculation of the
Purchase Price, the Cash Amount, the Share Amount and/or the Excess Amount shall
be submitted to arbitration in accordance with the following provisions:
(a) the arbitrator shall be a professional accountant who is a partner
with Ernst & Young or its successor who is appointed by mutual
agreement of the parties, or in the event the parties are unable to
agree upon an arbitrator within ten (10) days, any party may apply to
a Judge of the Ontario Court (General Division) to appoint a partner
of Ernst & Young as the arbitrator. The arbitrator shall be at
arm's-length from the parties;
(b) the arbitrator shall be instructed that time is of the essence in
proceeding with the determination of the dispute and, in any event,
the arbitration award must be rendered within thirty (30) days of the
submission of such dispute to arbitration;
(c) the arbitration shall take place in Toronto, Ontario;
12
(d) the arbitration shall be given in writing and shall be final and
binding on all parties, shall not be subject to any appeal and shall
deal with the question of cost of the arbitration and all matters
related thereto;
(e) judgment upon the arbitration award rendered may be entered in any
Court having jurisdiction, or, application may be made to such Court
for a judicial recognition of the arbitration award or any order of
enforcement thereof, as the case may be; and
(f) the law to be applied in connection with the arbitration will be the
law applicable to this Agreement.
ARTICLE III
COVENANTS
3.01 Access to the Corporate Entities
The Vendors shall forthwith make available to the Purchaser and its
authorized representatives and, if requested by the Purchaser, provide a copy to
the Purchaser of, all title documents, contracts, financial statements, minute
books, share certificate books, share registers, plans, reports, licenses,
orders, permits, books of account, accounting records, constating documents and
all other documents, information or data relating to each of the Corporate
Entities and the TGF Business and the Norbakco Business. The Vendors shall
afford the Purchaser and its authorized representatives every reasonable
opportunity to have free and unrestricted access to the TGF Business and the
property, assets, undertaking, records and documents of the Corporation and the
Norbakco Business and the property, assets, undertaking, records and documents
of Norbakco. At the request of the Purchaser, the Vendors shall executed or
cause to be executed such consents, authorizations and directions as may be
necessary to permit any inspection of the TGF Business, the Norbakco Business,
and any property of the Corporation and Norbakco or to enable the Purchaser or
its authorized representatives to obtain full access to all files and records
relating to any of the assets of the Corporation and Norbakco maintained by
governmental or other public authorities. At the Purchaser's request, the
Vendors shall co-operate with the Purchaser in arranging any such meetings as
the Purchaser should reasonably request with:
(a) employees of the Corporation and Norbakco;
(b) customers, suppliers, distributors or others who have or have had a
business relationship with the Corporation and Norbakco; and
(c) auditors, solicitors or any other persons engaged or previously
engaged to provide services to the Corporation and Norbakco who have
knowledge of matters relating
13
to the Corporation, Norbakco and the TGF Business and the Norbakco Business.
In particular, without limitation, the Vendors shall permit the Purchaser's
representatives or consultants to conduct such testing and inspection in respect
of environmental matters at such location of the TGF Business and the Norbakco
Business as the Purchaser may determine, in its sole discretion, as may be
required to satisfy the Purchaser in respect of such matters, and the Vendors
shall cause the Corporation and Norbakco to conduct, and the Corporation and
Norbakco shall conduct, in co-operation with the representatives or consultants
of the Purchaser, such physical review of the equipment of the TGF Business and
the Norbakco Business as is necessary so as to enable the confirmation of the
values carried on the respective balance sheets of the Corporation and Norbakco
in respect of such assets, to the reasonable satisfaction of the Purchaser. The
exercise of any rights of inspection by or on behalf of the Purchaser under this
section 3.01 shall not mitigate or otherwise affect the representations and
warranties of the Vendor and the Corporation hereunder, which shall continue in
full force and effect as provided herein.
3.02 Delivery of Books and Records
At the Time of Closing there shall be delivered to the Purchaser, by the
Vendors all of the books and records of and relating to each of the Corporate
Entities and the TGF Business and the Norbakco Business. The Purchaser agrees
that it will preserve the books and records so delivered to it for a period of
two (2) years from the Closing Date, or for such longer period as is required by
any applicable law, and will permit the Vendors or their authorized
representatives reasonable access thereto in connection with the affairs of the
Vendors relating to its matters, but the Purchaser shall not be responsible or
liable to the Vendors for or as a result of any accidental loss or destruction
of or damage to any such books or records.
3.03 Delivery of Documents
The Vendors shall deliver to the Purchaser at the Time of Closing all
necessary transfer, assignments and other documentation reasonably required to
transfer the Purchased Shares to the Purchaser with a good and marketable title,
free and clear of all Encumbrances.
3.04 Delivery of Vendors' Closing Documentation
The Vendors shall deliver to the Purchaser all such documents relevant to
the closing of the transaction as contemplated hereby as the Purchaser acting
reasonably may request.
14
3.05 Delivery of Purchaser's Closing Documentation
The Purchaser shall deliver to each of the Vendors all such documents
relevant to the closing of the transactions contemplated hereby as the Vendors,
acting reasonably, may request.
3.06 Conduct After Closing
The Purchaser acknowledges that the Purchase Price (including the quantum
of the Cash Amount) is significantly affected by the performance of the
Corporation and Norbakco after Closing and accordingly the Purchaser covenants
and agrees to use its best efforts in good faith to cause the Corporation and
Norbakco to conduct the TGF Business and the Norbakco business after Closing in
accordance with prudent business practice and in a manner so as to permit
Adjusted EBITDA to be earned for the relevant period on the basis of the normal
course of business of the TGF Business and the Norbakco Business. Without
limiting the generality of the foregoing, or the intent expressed in section
2.02, the Purchaser covenants and agrees to preserve intact the book value of
TGF so as to ensure that the determination of the Cash Amount shall be
reflective of the book value of TGF as at the date hereof as subsequently
impacted by the ordinary course operations of TGF from the date hereof to
February 28, 1999.
3.07 IMSC Shares
IMSC covenants and agrees to set aside and reserve for issuance to the
Vendors 2,200,000 Class N and 2,200,000 common stock in the capital of IMSC in
connection with the issuance thereof in accordance with subsection 2.03(e) and
pursuant to the exchange and other rights relating to the conversion of the
Class B, Class C and Class D shares in the capital of the Purchaser to be issued
to the Vendors as contemplated herein and in the Articles of the Purchaser.
Should such reservation be determined to be insufficient at the time of
determination of the exchange as set forth herein, IMSC undertakes to issue or
reserve sufficient Class N and common stock in the capital of IMSC to give
effect to such exchange. This covenant includes a covenant to obtain an
amendment to the Articles of IMSC to increase the authorized capital, if
necessary. IMSC further covenants and agrees to fulfil its obligations under the
Registration Rights Agreement dated December 1, 1998 among the Vendors and IMSC.
3.08 Co-Operation
The parties agree to co-operate in good faith with each other and their
respective legal advisors, accountants and other representatives in connection
with any steps required to be taken in connection with this Agreement,
including, without limitation, in connection with any filing necessary pursuant
to the Income Tax Act (Canada).
15
ARTICLE IV
CONDITIONS OF CLOSING
4.01 Conditions of Closing in Favour of the Purchaser
The sale and purchase of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Purchaser, to be fulfilled
or performed at or prior to the Time of Closing:
(a) Representations and Warranties. The representations and warranties of
the Vendors contained in this Agreement shall be true and correct at the Time of
Closing, with the same force and effect as if such representations and
warranties were made at and as of such time, and certificates of the Vendors
dated the Closing Date to that effect shall have been delivered to the
Purchaser, such certificates to be in form and substance satisfactory to the
Purchaser, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Vendors at or before the Time of Closing
shall have been complied with or performed and certificates of the Vendors dated
the Closing Date to that effect shall have been delivered to the Purchaser, such
certificates to be in form and substance satisfactory to the Purchaser, acting
reasonably;
(c) Regulatory Consents. There shall have been obtained, from all
appropriate federal, provincial, municipal or other governmental or
administrative bodies, such licenses, permits, consents, approvals,
certificates, registrations and authorizations as are required to be obtained by
the Vendors to permit the change of ownership of the Purchased Shares
contemplated hereby including, without limitation, those described in the
Schedules hereto;
(d) Contractual Consents. The Vendors shall have given or obtained the
notices, consents and approvals described in the Schedules hereto, in each case
in form and substance satisfactory to the Purchaser, acting reasonably;
(e) Material Adverse Change. There shall have been no material adverse
changes in the condition (financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of any of the Corporate Entities
since the date of the most recent financial statements delivered by the relevant
entity pursuant to the provisions of this Agreement.
(f) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or prohibit the
purchase and sale of the Purchased Shares contemplated hereby;
16
(g) No Material Damage. No material damage by fire or other hazard to the
whole or any material part of the property or assets of the Corporation or
Norbakco shall have occurred from the date hereof to the Time of Closing;
(h) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, and all legal
matters relating to the purchase of the Purchased Shares, including title of the
Vendors to the Purchased Shares, shall have been approved as to form and
legality by XxXxxxxx Grespan Xxxxxx Xxxxxx, counsel for the Purchaser, acting
reasonably;
(i) Non-Competition Agreement. The Vendors shall each have executed and
delivered to the Purchaser a non-competition and non-solicitation agreement in
the form of the non-competition agreement annexed hereto as Schedule 4.01(i);
(j) Legal Opinion. The Vendors shall have delivered to the Purchaser a
favorable opinion of Minden Gross Xxxxxxxxx & Xxxxxxxxxx, counsel to the
Vendors, in the form annexed hereto as Schedule 4.01(j);
(k) Resignation of Directors and Officers. Such directors and officers of
the Corporation, Norbakco (to the extent such director or officer is a nominee
of the Vendors), VLRL, Victorco and Rhysco as the Purchaser may specify shall
have resigned in favour of nominees of the Purchaser effective as of the Time of
Closing;
(l) Release by Vendor, Directors and Officers. The Vendors and such
directors and officers of the Corporation, Norbakco (to the extent such director
or officer is a nominee of the Vendors), VLRL, Victorco and Rhysco as the
Purchaser may specify shall have executed and delivered, at the Time of Closing,
releases in favour of the Corporation and the Purchaser in the form annexed
hereto as Schedule 4.01(l);
(m) Employment Agreements. The Purchaser shall have entered into employment
agreements with each of Xxxxxx, Rhys and Xxxxx;
(n) Share Escrow Agreement. The Vendors shall have entered into an escrow
agreement as required by Section 2.04;
(o) Purchase of Preference Shares and Purchased Loans. All of the issued
and outstanding Preferred Shares shall have been delivered up to the Purchaser
and all of the Purchased Loans shall have been assigned to the Purchaser;
(p) First Right of Refusal. The Vendors shall have entered into an
agreement granting a first right of refusal as required by Section 2.04; and
17
(q) Option on Norbakco Shares. The Purchaser shall have entered into an
option agreement with respect to the balance of the shares in the capital of
Norbakco which are not being purchased pursuant to the provisions of this
Agreement.
If any of the conditions contained in this section 4.01 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Purchaser, acting reasonably, the Purchaser may, by notice to the Vendors,
terminate this Agreement and the obligations of the Vendors and the Purchaser
under this Agreement shall be terminated Any such condition may be waived in
whole or in part by the Purchaser without prejudice to any claims it may have
for breach of covenant, representation or warranty.
4.02 Conditions of Closing in Favour of the Vendors
The purchase and sale of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Vendors, to be fulfilled
or performed at or prior to the Time of Closing:
(a) Representations and Warranties. The representations and warranties of
the Purchaser and IMSC contained in this Agreement shall be true and correct in
all material respects at the Time of Closing, with the same force and effect as
if such representations and warranties were made at and as of such time, and a
certificate of the President of the Purchaser and IMSC dated the Closing Date to
that effect shall have been delivered to the Vendors, such certificate to be in
form and substance satisfactory to the Vendors, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Purchaser and IMSC at or before the Time
of Closing shall have been complied with or performed in all material respects
and certificates of the President of the Purchaser and IMSC dated the Closing
Date to that effect shall have been delivered to the Vendors, such certificate
to be in form and substance satisfactory to the Vendors, acting reasonably;
(c) Regulatory Consents. There shall have been obtained, from all
appropriate federal, provincial, municipal or other governmental or
administrative bodies, such licenses, permits, consents, approvals,
certificates, registrations and authorizations as are required by law to be
obtained by the Purchaser or IMSC to permit the change of ownership of the
Purchased Shares and payment of the Purchase Price contemplated hereby including
those described in Schedules B1.19 and B2.19 hereto, in each case in form and
substance satisfactory to the Vendors, acting reasonably;
(d) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or prohibit the
purchase and sale of the Purchased Shares contemplated hereby;
18
(e) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, shall have been
approved as to form and legality by Minden Gross Xxxxxxxxx & Xxxxxxxxxx, counsel
for the Vendors, acting reasonably;
(f) Nominee to the Board of IMSC and the Purchaser. Len shall have been
elected as a director of IMSC and the Purchaser;
(g) Legal Opinion. The Purchaser shall have delivered to the Vendors a
favourable opinion of XxXxxxxx Grespan Xxxxxx Xxxxxx, Canadian counsel to the
Purchaser, and U.S. Counsel to the Purchaser in the forms annexed hereto as
Schedule 4.02(j); and
(h) Guarantee. The Vendors shall have been released from all guarantees
with respect to the indebtedness of any of the Corporate Entities;
(i) Support Agreement. The Purchaser and IMSC shall have entered into and
delivered a support agreement;
(j) Employment Agreements. The Purchaser shall have entered into employment
agreements with each of Xxxxxx, Rhys and Xxxxx; and
(k) Side Agreement. IMSC and Xxxxxxx Xxxxxx shall have entered into an
agreement in favour of the Vendors with respect to the ongoing appointment of a
nominee of the Vendors to the board of the Purchaser and IMSC for a period of
not less than three (3) years following Closing.
If any of the conditions contained in this section 4.02 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Vendors, acting reasonably, the Vendors may, by notice to the Purchaser,
terminate this Agreement and the obligations of the Vendors and the Purchaser
under this Agreement shall be terminated. Any such condition may be waived in
whole or in part by the Vendors without prejudice to any claims they may have
for breach of covenant, representation or warranty.
ARTICLE V
CLOSING ARRANGEMENTS
5.01 Place of Closing
The closing shall take place at the Time of Closing at the offices of
Minden Gross Xxxxxxxxx & Xxxxxxxxxx, counsel for the Vendors, 000 - 000 Xxxxxxxx
Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx.
19
5.02 Closing
At the Time of Closing, upon fulfillment of all the conditions set out in
Article IV that have not been waived in writing by the Purchaser or the Vendors,
the Vendors shall deliver to the Purchaser certificates respecting all the
Purchased Shares, duly endorsed in blank for transfer, with all exigible
security transfer taxes paid, and will cause transfers of such shares to be duly
and regularly recorded in the name of the Purchaser, or its nominee(s), and will
cause a meeting of the board of directors of each of the Corporate Entities to
be held, at which the directors and officers of the Corporate Entities specified
by the Purchaser pursuant to section 4.01(k) will resign in favor of nominees of
the Purchaser whereupon, subject to all other terms and conditions hereof being
complied with, payment of the part of the Purchase Price payable at the Time of
Closing shall be paid and satisfied in the manner provided in Article II.
5.03 Further Assurances
Each party to this Agreement covenants and agrees that, from time to time
subsequent to the Closing Date, it will at the request and expense of the
requesting party, execute and deliver all such documents, including, without
limitation, all such additional conveyance, transfers, consents and other
assurances and do all such other acts and things as any other party hereto,
acting reasonably, may from time to request be executed or done in order to
better evidence or perfect or effectuate any provision of this Agreement or of
any agreement or other document executed pursuant to this Agreement or any of
the respective obligations intended to be created hereby or thereby.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.01 Survival of Representations and Warranties of the Vendor
To the extent that they have not been fully performed at a prior to the
Time of Closing, the covenants, representations and warranties of the Vendors
contained in this Agreement and any agreement, instrument, certificate or other
document executed or delivered pursuant hereto shall survive the closing of the
transactions contemplated hereby until the third anniversary of the Closing Date
and, notwithstanding such closing, nor any investigation made by or on behalf of
the Purchaser, shall continue in full force and effect for the benefit of the
Purchaser during such period, except that:
(a) the covenant of the Vendors contained in subsection 2.03(e) and the
representations and warranties set out in sections 1.01, 1.03, 1.04, 1.05, 2.01,
2.03, 2.04, 2.05, 3.01, 3.03, 3.04, 3.05 and 3.06 of Section B, sections 1.01,
1.02, 1.03, 1.04, 1.05 and 1.06 of Schedule C, sections 1.01, 1.02, 1.03, 1.04,
1.05 and 1.06 of Schedule D, sections 1.01, 1.02 and 1.03 of Schedule E and
sections 1.01, 1.02, 1.03 and 1.05 of Schedule F (and the corresponding
representations and warranties set
20
out in the certificates to be delivered pursuant to subsection 4.01(a) (the
"Closing Certificates")) shall survive and continue in full force and effect
without limitation of time;
(b) the representations and warranties contained in sections 1.23, 2.23 and
3.10 of Schedule B, 1.10 of Schedule C and 1.10 of Schedule D shall, in the
absence of fraud or negligent or wilful misrepresentation, survive until the
expiration of any applicable limitation periods imposed by law; and
(c) a claim for any breach of any of the representations and warranties
contained in this Agreement or in any agreement, instrument, certificate or
other document executed or delivered pursuant hereto involving fraud or
fraudulent misrepresentation may be made at any time following the Closing Date,
subject only to applicable limitation periods imposed by law.
6.02 Expiry of the Representations and Warranties of the Purchaser and IMSC
The representations and warranties of the Purchaser and IMSC contained in
this Agreement or in any document, certificate or undertaking given pursuant
hereto shall terminate on the third anniversary of the Closing Date other than
the representations contained in xxxxxxxx0.01 and 1.08 of Schedule G and
sections 1.01 and 1.06 of Schedule H, which sections shall survive and continue
in full force and effect without limitation of time. For greater certainty, all
covenants and agreements of the Purchaser or IMSC contained in this Agreement
and any agreement, instrument, certificate or other document executed or
delivered pursuant hereto shall survive the closing of the transactions
contemplated hereby until the third anniversary of the Closing Date or in the
case of any such covenants and agreements which by their terms are to be
performed subsequent to the Closing Date until the third anniversary of the date
on which such covenant and agreement is to be performed and, notwithstanding
such closing shall continue in full force and effect for the benefit of the
Vendors for such period.
ARTICLE VII
INDEMNIFICATION
7.01 Indemnification by the Vendors
Subject to Section 7.08, each of the Vendors agrees to indemnify and save
harmless the Purchaser from all Losses suffered or incurred by the Purchaser as
a result of or arising directly or indirectly out of or in connection with:
(a) any breach by such Vendor of or any inaccuracy of any representation or
warranty of such Vendor contained in this Agreement or in any agreement,
certificate or other document delivered pursuant hereto (provided that no Vendor
shall be required to indemnify or save harmless the Purchaser in respect of any
breach or inaccuracy of any representation or warranty unless the Purchaser
shall have provided notice to such Vendor in accordance with section 7.03 on or
prior to
21
the expiration of the applicable time period related to such representation and
warranty set out in section 6.01);
(b) any breach or non-performance by such Vendor of any covenant to be
performed by it that is contained in this Agreement or in any agreement,
certificate or other document delivered pursuant hereto;
(c) all debts, liabilities or contracts whatsoever (whether accrued,
absolute contingent or otherwise) of VLRL, TGF and Norbakco existing at the Time
of Closing, including any liabilities for federal, provincial, sales excise,
income, corporate or any other taxes of VLRL, TGF and Norbakco for any period up
to and including the Time of Closing, and not disclosed on, provided for or
included in the balance sheets forming part of the Financial Statements, except
those liabilities accruing or incurred subsequent to the balance sheet date of
such Financial Statements in the ordinary course of the TGF Business and the
Norbakco Business, respectively;
(d) any claims, demands, judgments, orders, duties imposed by law or by
administrative action or other obligations or liabilities of any kind whatsoever
suffered or incurred by VLRL, TGF or Norbakco in respect of pollution,
contamination or other environmental matters, caused or arising or otherwise
existing at or prior to the Time of Closing, whether or not disclosed in this
Agreement or any Schedule hereto or otherwise known to the Purchaser or to its
representatives or within the power of the Purchaser or its representatives to
discover.
Without limiting the obligations of contained above in this Section 7.01,
Rhys further agrees to indemnify and save harmless the Purchaser from all Losses
suffered or incurred by the Purchaser as a result of or arising directly or
indirectly out of or in connection with:
(a) all debts, liabilities or contracts whatsoever (whether accrued,
absolute contingent or otherwise) of Rhysco existing at the Time of Closing,
including any liabilities for federal, provincial, sales excise, income,
corporate or any other taxes of Rhysco for any period up to and including the
Time of Closing, and not disclosed on, provided for or included in the balance
sheets forming part of the Financial Statements, except those liabilities
accruing or incurred subsequent to the Closing Date in the ordinary course of
the business of Rhysco or those liabilities that form part of the Purchased
Loans;
(b) any claims, demands, judgments, orders, duties imposed by law or by
administrative action or other obligations or liabilities of any kind whatsoever
suffered or incurred by Rhysco in respect of pollution, contamination or other
environmental matters, caused or arising or otherwise existing at or prior to
the Time of Closing, whether or not disclosed in this Agreement or any Schedule
hereto or otherwise known to the Purchaser or to its representatives or within
the power of the Purchaser or its representatives to discover.
22
Without limiting the obligations of Xxxxxx contained above in this Section
7.01, Xxxxxx further agrees to indemnify and save harmless the Purchaser from
all Losses suffered or incurred by the Purchaser as a result of or arising
directly or indirectly out of or in connection with:
(a) all debts, liabilities or contracts whatsoever (whether accrued,
absolute contingent or otherwise) of Victorco existing at the Time of Closing,
including any liabilities for federal, provincial, sales excise, income,
corporate or any other taxes of Victorco for any period up to and including the
Time of Closing, and not disclosed on, provided for or included in the balance
sheets forming part of the Financial Statements, except those liabilities
accruing or incurred subsequent to the Closing Date in the ordinary course of
the business of Victorco or those liabilities that form part of the Purchased
Loans;
(b) any claims, demands, judgments, orders, duties imposed by law or by
administrative action or other obligations or liabilities of any kind whatsoever
suffered or incurred by Victorco in respect of pollution, contamination or other
environmental matters, caused or arising or otherwise existing at or prior to
the Time of Closing, whether or not disclosed in this Agreement or any Schedule
hereto or otherwise known to the Purchaser or to its representatives or within
the power of the Purchaser or its representatives to discover.
7.02 Indemnification by the Purchaser and IMSC
(a) The Purchaser agrees to indemnify and save harmless the Vendors from all
Losses suffered or incurred by the Vendors as a result of or arising directly or
indirectly out of or in connection with:
(i) any breach by the Purchaser of or any inaccuracy of any representation
or warranty contained in this Agreement or in any agreement, instrument,
certificate or other document delivered pursuant hereto; and
(ii) any breach or non-performance by the Purchaser of any covenant to be
performed by it that is contained in this Agreement or in any agreement,
certificate or other document delivered pursuant hereto.
(b) IMSC agrees to indemnify and save harmless the Vendors from all Losses
suffered or incurred by the Vendors as a result of or arising directly or
indirectly out of or in connection with:
(i) any breach by IMSC of or any inaccuracy of any representation or
warranty contained in this Agreement or in any agreement, instrument,
certificate or other document delivered pursuant hereto; and
(ii) any breach or non-performance by IMSC of any covenant to be performed
by it that is contained in this Agreement or in any agreement, certificate or
other document delivered pursuant
23
hereto.
7.03 Notice of Claim
In the event that a party (the "Indemnified Party") shall become aware of
any claim, proceeding or other matter (a "Claim") in respect of which another
party (the "Indemnifying Party") agreed to indemnify the Indemnified Party
pursuant to this Agreement, the Indemnified Party shall promptly give written
notice thereof to the Indemnifying Party. Such notice shall specify whether the
Claim arises as a result of a claim by a person against the Indemnified Party (a
"Third Party Claim") or whether the Claim does not so arise (a "Direct Claim"),
and shall also specify with reasonable particularity (to the extent that the
information is available) the factual basis for the Claim and the amount of the
Claim, if known.
7.04 Direct Claims
With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have thirty (30)
days to make such investigation of the Claim as is considered necessary or
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such thirty (30) day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim, failing which the matter shall be referred
to binding arbitration in such manner as the parties may agree or shall be
determined by a court of competent jurisdiction.
7.05 Third Party Claims
With respect to any Third Party Claim, the Indemnifying Party shall have
the right, at its expense, to participate in or assume control of the
negotiation, settlement or defence of the Claim and, in such event, the
Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified
Party's out-of-pocket expenses as a result of such participation or assumption.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf. provided that
the fees and disbursements of such counsel shall be paid by the Indemnified
Party unless the Indemnifying Party consents to the retention of such counsel or
unless the named parties to any action or proceeding include both the
Indemnifying Party and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to the actual or potential differing interests between them
(such as the availability of different defences). If the Indemnifying Party,
having elected to assume such control, thereafter fails to defend the Third
Party Claim within a reasonable time, the
24
Indemnified Party shall be entitled to assume such control, and the Indemnifying
Party shall be bound by the results obtained by the Indemnified Party with
respect to such Third Party Claim. If any Third Party Claim is of a nature such
that the Indemnified Party is required by applicable law to make a payment to
any person (a "Third Party") with respect to the Third Party Claim before the
completion of settlement negotiations or related legal proceedings, the
Indemnified Party may make such payment and the Indemnifying Party shall,
forthwith after demand by the Indemnified Party, reimburse the Indemnified Party
for such payment. If the amount of any liability of the Indemnified Party under
the Third Party Claim in respect of which such payment was made, as finally
determined, is less than the amount that was paid by the Indemnifying Party to
the Indemnified Party, the Indemnified Party shall, forthwith after receipt of
the difference from the Third Party, pay the amount of such difference to the
Indemnifying Party.
7.06 Settlement of Third Party Claims
If the Indemnifying Party fails to assume control of the defence of any
Third Party Claim, the Indemnified Party shall have the exclusive right to
contest, settle or pay the amount claimed. Whether or not the Indemnifying Party
assumes control of the negotiation, settlement or defence of any Third Party
Claim, the Indemnifying Party shall not settle any Third Party Claim without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that the liability of the
Indemnifying Party shall be limited to the proposed settlement amount if any
such consent is not obtained for any reason.
7.07 Co-operation
The Indemnified Party and the Indemnifying Party shall co-operate fully
with each other with respect to Third Party Claims, and shall keep each other
fully advised with respect thereto (including supplying copies of all relevant
documentation promptly as it becomes available).
7.08 Proportionate Liability of the Vendors
Where the liability of the Vendors to indemnify the Purchaser hereunder is
in relation to the breach or inaccuracy of any representation or warranty which
has been given by all of the Vendors or any breach or non-performance of any
covenant of all of the Vendors or is otherwise in relation to any of the matters
set out in subsection 7.01 (c) or (d) or otherwise stated to be several, each
Vendor shall be liable only for the percentage of such claim for indemnification
by the Purchaser equal to such Vendor's proportionate share of the Purchase
Price (ie. pro rata to their common shareholdings in the Corporation).
7.09 Threshold Amount
The Purchaser shall not be entitled to indemnification hereunder until the
aggregate of all
25
claims for indemnification made by the Purchaser hereunder, whether individually
or collectively, exceeds $40,000.00 in which event the Purchaser shall be
indemnified for the full amount of such claims for indemnification.
7.10 Set-Off
Any amounts becoming owing by any of the Vendors to the Purchaser hereunder
shall be set-off against amounts among by the Purchaser to such Vendor as
follows:
(a) firstly against that portion of the Cash Amount to which such Vendor is
entitled the extent it is not paid as at the date of such claim or claims
for indemnification;
(b) secondly against that portion of the Share Amount to which such Vendor
is entitled by reducing the number of common shares in the capital of IMSC
into which the Class B Shares, the Class C Shares and the Class D Shares
held by such Vendor may be exchanged to the extent that such Class B
Shares, Class C Shares and Class D Shares have not been exchanged at the
time of such claim or claims for indemnification.
To the extent that the Purchaser has not been fully indemnified after utilizing
its rights of set-off as set forth in this Section 7.01, nothing contained
herein shall preclude the Purchaser from taking any action permitted at law to
recover such deficiency.
7.11 Exclusivity
The provision of this Article VII shall apply to any Claim for breach of
any covenant, representation, warranty or other provision of this Agreement or
any agreement, certificate or other document delivered pursuant hereto (other
than a claim for specific performance or injunctive relief) with the intent that
all such Claims shall be subject to the limitations and other provisions
contained in this Article VII.
ARTICLE VIII
MISCELLANEOUS
8.01 Confidentiality of Information
In the event that the transactions contemplated herein are not consummated
for any reason, the Purchaser covenants and agrees that, except as otherwise
authorized by the Vendors, neither the Purchaser nor its representatives, agents
or employees will disclose to third parties, directly or indirectly, any
confidential information or confidential data relating to the Corporate Entities
discovered by the Purchaser or its representatives as a result of the Vendors
and the Corporation making available to the Purchaser and its representatives
the information requested by them in
26
connection with the transactions contemplated herein.
8.02 Notices
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered in person, transmitted by
telecopy or similar means of recorded electronic communication or sent by
registered mail, charges prepaid, addressed as follows:
(i) if to the Vendors:
Xxxxxx
000 Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
Rhys
000 Xxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
Lenco
00 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
Xxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
with a copy to Xxxxxxx Xxxxxx:
Minden, Gross, Xxxxxxxxx & Xxxxxxxxxx
600 - 000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No.: (000) 000-0000
27
(ii) if to the Purchaser:
International Menu Solutions Inc.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
XxXxxxxx Grespan Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxxxx, Q.C.
Telecopier No.: (000) 000-0000
(iii) if to IMSC:
International Menu Solutions Corporation
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
XxXxxxxx Grespan Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxxxx, Q.C.
Telecopier No.: (000) 000-0000
(b) Any such notice or other communication shall be deemed to have been
given and
28
received on the day on which it was delivered or transmitted (or, if such day is
not a Business Day, on the next following Business Day) or, if mailed, on the
third Business Day following the date of mailing; provided, however, that if at
the time of mailing or within three Business Days thereafter there is or occurs
a labor dispute or other event that might reasonably be expected to disrupt the
delivery of documents by mail, any notice or other communication hereunder shall
be delivered or transmitted by means of recorded electronic communication as
aforesaid.
(c) Any party may at any time change its address for service from time to
time by giving notice to the other parties in accordance with this section 8.02.
8.03 Commissions, etc.
The Vendors agree to indemnify and save harmless the Purchaser from and
against all Losses suffered or incurred by the Purchaser in respect of any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for or on behalf
of any of the Vendors.
8.04 Consultation
The parties shall consult with each other before issuing any press release
or making any other public announcement with respect to this Agreement or the
transactions contemplated hereby and, except as required by any applicable law
or regulatory requirement, none of the Vendors nor the Purchaser shall issue any
such press release or make any such public announcement without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed.
8.05 Disclosure
Prior to any public announcement of the transaction contemplated hereby
pursuant to section 8.04, neither party shall disclose this Agreement or any
aspect of such transaction except to its board of directors, its senior
management, its legal, accounting, financial or other professional advisors, any
financial institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be
required by any applicable law or any regulatory authority or stock exchange
having jurisdiction.
8.06 Public Announcements
No public announcement or press release not required by law or by
applicable stock exchange rule concerning the purchase sale of the Purchased
Shares shall be made by the Vendor, the Corporation or the Purchaser without the
consent and joint approval of the Vendor and the Purchaser.
29
8.07 Assignment by Purchaser
The Purchaser may assign its rights under this Agreement in whole or in
part to any other person; provided, however, that any such assignment shall not
relieve the Purchaser from any of its obligations hereunder.
8.08 Counterparts
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties.
[ILLEGIBLE] /s/ Xxxxxx Xxxxxxx
------------------------------------- --------------------------------------
Witness Xxxxxx Xxxxxxx
[ILLEGIBLE] /s/ Xxxx Xxxx
------------------------------------- --------------------------------------
Witness Xxxx Xxxx
[ILLEGIBLE] /s/ Xxxxx Xxxxxxx
------------------------------------- --------------------------------------
Witness Xxxxx Xxxxxxx
LAUDERDALE CAPITAL CORP.
Per: /s/ Xxx Xxxxxxxx
-----------------------------
Title: President
-----------------------------
INTERNATIONAL MENU SOLUTIONS
INC.
Per: /s/ Xxxxxxx Xxxxxx
-----------------------------
Title: President
-----------------------------
30
INTERNATIONAL MENU SOLUTIONS
CORPORATION
Per: [ILLEGIBLE]
-----------------------------
Title: President
-----------------------------
THIS IS SCHEDULE A TO THE SHARE PURCHASE AGREEMENT
--------------------------------------------------------------------------------
INTERPRETATION
1.01 Defined Terms
For the purpose of this Schedule A to the Share Purchase Agreement, unless
the context otherwise requires, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
(a) "Act" means the Business Corporations Act (Ontario) as in effect on
the date hereof;
(b) "Affiliate" has the meaning attributed to that term in the Act;
(c) "Associate" has the meaning attributed to that term in the Act;
(d) "Audited Corporation Financial Statements" means the audited financial
statements of the Corporation as at the financial years ended February
28, 1997 and February 28, 1998, including the notes thereto and the
report of the Corporation's auditors thereon, a copy of which is
annexed hereto as Schedule A1.01(d);
(e) "Business Day" means any day (other than a Saturday or a Sunday) on
which the main branch of the Toronto-Dominion Bank in Toronto, is open
for business;
(f) "Cash Amount" has the meaning set out in section 2.03;
(g) "Claim" has the meaning set out in section 7.03;
(h) "Class X Shares" means the class X shares in the capital stock of the
Purchaser;
(i) "Closing Cash Amount" has the meaning set out in section 2.03;
(j) "Closing Certificates" has the meaning set out in subsection 5.01(a);
(k) "Closing Date" means November 30, 1998 or such other date as may be
mutually agreed upon by the Vendors and the Purchaser;
(l) "Closing Time" means 10 o'clock in the forenoon on the Closing Date;
(m) "Contract" means any material agreement, indenture, contract, lease,
deed of trust, license, option, instrument or other commitment,
whether written or oral;
(n) "Direct Claim" has the meaning set out in section 7.03;
(o) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature,
adverse claim, any matter capable of registration against title,
option, right of pre-emption, privilege or any Contract to create any
of the foregoing;
(p) "Environmental Laws" has the meaning set out in subsection 1.31(a) of
Schedule B;
(q) "Environmental Permits" has the meaning set out in subsection 1.31(b)
of Schedule B;
(r) "GST" means any and all taxes payable under Part IX of the ETA or
under any provincial legislation similar to Part IX of the ETA;
(s) "Hazardous Substances" has the meaning set out in subsection 1.31(a)
of Schedule B;
(t) "IMSC" means International Menu Solutions Corporation, a Nevada
corporation which owns all of the issued and outstanding common shares
of the Purchaser;
(u) "IMSC Common Shares" means common shares in the capital stock of IMSC;
(v) "Indemnified Party" has the meaning set out in section 7.03;
(w) "Indemnifying Party" has the meaning set out in section 7.03;
(x) "Intellectual Property" has the meaning set out in section 1.14 of
Schedule B;
(y) "Interim Corporation Financial Statements" means the unaudited
financial statements of the Corporation as at and for the six month
period ended August 31, 1998 copies of which financial statements are
annexed hereto as Schedule A1.01(y);
(z) "Interim Norbakco Financial Statements" means the unaudited financial
statements of Norbakco as at and for the six month period ended August
31, 1998 copies of which financial statements are annexed hereto as
Schedule A1.01(z);
(aa) "Leases" has the meaning set out in section 1.11 of Schedule B;
(bb) "Losses", in respect of any matter, means all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlements) arising directly or indirectly as a consequence
of such matter;
(cc) "Norbakco Business" means the business currently and heretofore
carried on by Norbakco Ltd. consisting of manufacturing, marketing and
sale of raw dough, baked frozen and fresh baked sweet goods;
(dd) "Norbakco Employee Plans" has the meaning set out in section 2.32 of
Schedule B;
(ee) "Norbakco Leased Property" has the meaning set out in section 2.09 of
Schedule B;
(ff) "Norbakco Licenses" has the meaning set out in section 2.18 of
Schedule B;
(gg) "Norbakco Permitted Encumbrances" means:
(i) liens for taxes, assessments and governmental charges not
yet due or due and being contested in good faith and
diligently by appropriate proceedings (and for the payment
of which adequate provision has been made);
(ii) assignments of insurance provided to landlords (or their
mortgagees) pursuant to the terms of any lease and liens or
rights reserved in any lease for rent or for compliance with
the terms of such lease;
(iii) security given in the ordinary course of the business to any
public utility, municipality or government or to any
statutory or public authority in connection with the
operations of the Norbakco Business, other than security for
borrowed money;
(iv) the Permitted Encumbrances described in Schedule A1.01(gg);
(hh) "Norbakco Shareholders' Agreement" means the shareholders'
agreement made as of April 13, 1998 among Elililco Ltd.,
Xxxxxxxx Bennague, Xxxxx Xxxxx, VLRL, 1276396 Ontario Inc.,
Xxxxx Xxxxxxxxx and Norbakco;
(ii) "Prime" means the commercial lending rate of interest, expressed as an
annual rate, which The Bank of Nova Scotia quotes in Toronto as the
reference rate of interest (commonly known as "Prime") for determining
the rate of interest that it charges to its commercial customers for
loans in Canadian funds;
(jj) "Purchase Price" has the meaning set out in section 2.02;
(kk) "Purchased Shares" has the meaning set out in section 2.01;
(ll) "Rhysco Financial Statements" means the unaudited financial statements
of Rhysco as at and for the year ended March 31, 1998 copies of which
financial statements are annexed hereto as Schedule A1.01(ll);
(mm) "Second Cash Amount" has the meaning set out in section 2.03;
(nn) "Shareholder Loans" has the meaning set out in section 2.05;
(oo) "Tax Act" means the Income Tax Act (Canada), as amended from time to
time;
(pp) "TGF Business" means the business currently and heretofore carried on
by the Corporation consisting of the distribution of specialty baked
products and the manufacture and sale of frozen raw dough, frozen
appetizers and hors d'oevres;
(qq) "TGF Employee Plans" has the meaning set out in section 1.32 of
Schedule B;
(rr) "TGF Leased Property" has the meaning set out in section 1.09 of
Schedule B;
(ss) "TGF Licenses" has the meaning set out in section 1.18 of Schedule B;
(tt) "TGF Permitted Encumbrances" means:
(i) liens for taxes, assessments and governmental charges not
yet due or due and being contested in good faith and
diligently by appropriate proceedings (and for the payment
of which adequate provision has been made);
(ii) assignments of insurance provided to landlords (or their
mortgagees) pursuant to the terms of any lease and liens or
rights reserved in any lease for rent or for compliance with
the terms of such lease;
(iii) security given in the ordinary course of the TGF Business to
any public utility, municipality or government or to any
statutory or
public authority in connection with the operations of the
TGF Business, other than security for borrowed money;
(iv) the Permitted Encumbrances described in Schedule A1.01(tt);
(uu) "TGF Shareholders' Agreement" means the shareholders' agreement made
as of March 31, 1997 among Lenco, Victor, Rhys, Len Xxxxxxxx, Xxxxx,
Rhysco, Victorco and TGF;
(vv) "Third Party" has the meaning set out in section 7.05;
(ww) "Third Party Claim" has the meaning set out in section 7.03; and
(xx) "Victorco Financial Statements" means the unaudited financial
statements of Victorco as at and for the year ended March 31, 1998
copies of which financial statements are annexed hereto as Schedule
A1.01(xx).
THIS IS SCHEDULE B TO THE SHARE PURCHASE AGREEMENT
--------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
WITH RESPECT TO THE CORPORATION
The Vendors severally represent and warrant to the Purchaser as follows and
acknowledge that the Purchaser is relying on such representations and warranties
in connection with its purchase of the Purchased Shares:
1.01 Organization
The Corporation is duly incorporated and organized and validly subsisting
under the laws of Ontario and has the corporate power to own or lease its
property, to carry on the Business as now being conducted by it, to enter into
this Agreement and perform its obligations hereunder. The Corporation is duly
qualified as a corporation to do business in each jurisdiction in which the
nature of the Business or the property and assets owned or leased by it makes
such qualification necessary.
1.02 Intentionally Deleted
1.03 Authorized and Issued Capital
The authorized capital of the Corporation consists of an unlimited number
of Common Shares, an unlimited number of Class A Special Shares and an unlimited
number of Class B Special Shares of which 12,858 Common Shares (and no more) and
1,197 Class A Special Shares have been duly issued and are outstanding as fully
paid non-assessable.
1.04 Options
No person, firm or corporation has any agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, including convertible securities, warrants or convertible obligations
of any nature, for the purchase, subscription, allotment or issuance of any
unissued shares or other securities of the Corporation.
1.05 No Subsidiaries
The Corporation does not own and does not have any agreement of any nature
to acquire, directly or indirectly, any shares in the capital of or other equity
or proprietary interests in any person, firm or corporation, and the Corporation
does not have any agreements to acquire or lease any other business operations.
1.06 No Violation
The execution and delivery of this Agreement by the Vendors and the
consummation of the transactions herein provided for will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any obligation of
the Vendors or the Corporation under:
(i) any Contract to which the Vendors or the Corporation is a party or
by which any of them is, or either of their properties are, bound other
than its banking arrangements with The Bank of Nova Scotia and Business
Development Bank of Canada in respect of which consents are being obtained
and the Shareholders' Agreement which by their execution hereof each of the
Vendors, Rhysco, Victorco and TGF acknowledge and agree shall be terminated
on Closing without further act or document;
(ii) any provision of the constating documents, by-laws or resolutions
of the board of directors (or any committee thereof) or shareholders of the
Corporation;
(iii) any judgement, decree, order or award of any court, governmental
body or arbitrator having jurisdiction over the Vendors or the Corporation;
(iv) any license, permit, approval, consent or authorization held by
the Vendors or the Corporation or necessary to the ownership of the
Purchased Shares or the operation of the TGF Business; or
(v) any applicable law, statute, ordinance, regulation or rule; or
(b) the creation or imposition of any Encumbrance on any the Purchased
Shares, the Victorco Corp Shares, the Rhysco Corp Shares, the Lenco Corp Shares
or the Xxxxx Corp Shares or any of the property or assets of the Corporation.
1.07 Business of the Corporation
The TGF Business is the only business operation carried on by the
Corporation, and the property and assets owned or leased by the Corporation are
sufficient to carry on the TGF Business. Except for the new phyllo pastry
production line which is not yet operating at full capacity, all of the material
property and assets owned and used by the Corporation are in good operating
condition and are in a state of good repair and maintenance, reasonable wear and
tear excepted. During the two years preceding the date of this Agreement, there
has not been any significant interruption of operations (being a interruption of
more than one day) of the TGF Business due to inadequate maintenance of any of
the property and assets owned and used by the Corporation. With
the exception of inventory in transit, all the tangible assets of the
Corporation are situate at the locations set out in Schedule B1.07 or B2.07.
1.08 Title to Personal and Other Property
The property and assets of the Corporation (other than the TGF Leased
Property as defined herein) are owned beneficially by the Corporation as the
beneficial owner thereof with a good and marketable title thereto, free and
clear of all Encumbrances other than the TGF Permitted Encumbrances.
1.09 Location of Real Property
Schedule B1.11 sets forth a municipal address of the real property leased
by the Corporation (the "TGF Leased Property"). The Corporation does not own or
lease and has not agreed to acquire or lease any real property or interest in
real property other than the TGF Leased Property.
1.10 Title to Real Property
To the knowledge of the Vendors all buildings, structures, improvements and
appurtenances situated on the TGF Leased Property to the extent occupied by TGF
are in good operating condition and in a state of good maintenance and repair
reasonable wear and tear excepted, are adequate and suitable for the purposes
for which they are currently being used and the Corporation has adequate rights
of ingress and egress for the operation of the TGF Business in the ordinary
course. Without limiting the generality of the foregoing:
(a) the current uses of the TGF Leased Property by TGF and the conduct of
the TGF Business comply in all material respects with all regulations, statues,
enactments, laws and by-laws including, without limitation, those dealing with
zoning, parking, access, loading facilities, landscaped areas, building
construction, fire and public health and safety and Environmental Laws;
(b) to the knowledge of the Vendors, no alteration, repair, improvement or
other work has been ordered, directed or requested in writing to be done or
performed to or in respect of the TGF Leased Property or to any of the plumbing,
heating, elevating, water, drainage or electrical systems, fixtures or works by
any municipal, provincial or other competent authority, which alteration,
repair, improvement or other work has not been completed, and the Vendors know
of no written notification having been given to it of any such outstanding work
being ordered, directed or requested, other than those that have been complied
with;
(c) all account for work and services performed and materials placed or
furnished upon or in respect of the TGF Leased Property at the request of the
Corporation have been fully paid and satisfied, and no person is entitled to
claim a lien under the Construction Lien Act against the TGF Leased Property or
any part thereof in respect of
any such matters requested by the Corporation other than current accounts in
respect of which the payment due date has not yet passed;
(d) there is nothing owing in respect of the TGF Leased Property by the
Corporation to any municipal corporation or to any other corporation or
commission owning or operating a public utility for water, gas, electrical power
or energy, steam or hot water, or for the use thereof, other than current
accounts in respect of which the payment due date has not yet passed;
(e) to the knowledge of the Vendors no part of the TGF Leased Property has
been taken or expropriated by any federal, provincial, municipal or other
competent authority nor to the knowledge of the Vendors has any notice or
proceeding in respect thereof been given or commenced; and
(f) the TGF Leased Property (including all buildings, improvements and
fixtures) is fit for its present use by TGF, and, to the knowledge of the
Vendors, there are no material or structural repairs or replacements that are
necessary or advisable and, without limiting the foregoing, there are no repairs
to, or replacements of, the roof or the mechanical, electrical, heating,
ventilating, air-conditioning, plumbing or drainage equipment or systems that
are necessary or advisable, and the TGF Leased Property is not currently
undergoing any alteration or renovation nor is any such alteration or renovation
contemplated.
1.11 Real Property Leases
The Corporation is not a party to any lease or agreement in the nature of a
lease in respect of any real property, whether as lessor or lease, other than
the lease (the "TGF Lease") described in Schedule B1.11 relating to the TGF
Leased Property. Schedule B1.11 sets out the parties to the TGF Lease, its date
of execution and expiry date, any options to renew, the location of the leased
lands and premises and the rent payable thereunder. The Corporation occupies and
has the exclusive right to occupy and use the TGF Leased Property. To the
knowledge of the Vendors, the TGF Lease is in good standing and in full force
and effect without amendment thereto. Neither the Corporation nor, to the
knowledge of the Vendors, any other party thereto is in material breach of any
covenants, conditions or obligations contained therein. The Vendors have
provided a true copy of the TGF Lease to the Purchaser.
1.12 Inventories
The inventories of the Corporation do not include any material items that
are slow moving, below standard quality or of a quality or quantity not useable
or saleable in the normal course of business, the value of which has not been
written down on its books of account to net realizable market value in
accordance with prudent business practice in the industry. The inventory levels
of the Corporation have been maintained at such amounts as are required for the
operation of the TGF Business as previously conducted and as proposed to
conducted, and such inventory levels are adequate therefor.
1.13 Accounts Receivable
All accounts receivable, book debts and other debts due or accruing to the
Corporation are bona fide and good and, subject to an allowance for doubtful
accounts that has been reflected on the books of the Corporation in accordance
with generally accepted accounting principles, are collectible without set-off
or counterclaim.
1.14 Intellectual Property
The Vendors shall cause to be delivered within ninety (90) days subsequent
to the Closing Date a complete and accurate list of all trade marks, trade
names, business names, patents, labels, products, recipes and know-how with
respect to the production of the products of the Corporation owned or used by
the Corporation in carrying on the TGF Business and all applications therefor
and all goodwill connected therewith, including, without limitation, all
licenses, registered user agreements and all like rights used by or granted to
the Corporation in connection therewith and all right to register or otherwise
apply for the protection on any of the foregoing (collectively, the "TGF
Intellectual Property"). Schedule B1.14 annexed hereto also includes complete
and accurate particulars of all registrations or applications for registration
of the TGF Intellectual Property. The TGF Intellectual Property comprises all
trade marks, trade names, business names, patents, inventions, know-how,
copyrights, service marks, brand marks, industrial designs and all other
industrial or intellectual property reasonably necessary to conduct the TGF
Business. The Corporation is the beneficial owner of the TGF Intellectual
Property, free and clear of all Encumbrances other than TGF Permitted
Encumbrances, and is not a party to or bound by any Contract or other obligation
whatsoever that limits or impairs its ability to sell, transfer, assign or
convey, or that otherwise affects, the TGF Intellectual Property. No person has
been granted any interest in or right to use all or any portion of the TGF
Intellectual Property. The Vendors are not aware of any claim of any
infringement or breach of any industrial or intellectual property rights of any
other person by the Corporation, nor have the Vendors or the Corporation
received any notice that the conduct of the TGF Business any industrial or
intellectual property rights of any other person, and the Vendors after due
inquiry have no knowledge of any infringement or violation of any of the rights
of the Corporation in the TGF Intellectual Property. The conduct of the TGF
Business does not infringe upon the patents, trade marks, licenses, trade names,
business names, copyright or other industrial or intellectual property rights,
domestic or foreign, of any other person. The Vendors are not aware of any state
of facts that casts doubt on the validity or enforceability of any of the TGF
Intellectual Property. The Vendors have provided to the Purchaser a true and
complete copy of all Contracts and amendments thereto that comprise or relate to
the TGF Intellectual Property.
1.15 Insurance
The Corporation has all of its property and assets insured against loss or
damage by all insurable hazards or risks on a replacement cost basis and such
insurance coverage will be continued in full force and effect to and including
the Time of Closing. Schedule
B1.15 sets out all insurance policies (specifying the insurer, the amount of the
coverage, the type of insurance, the policy number and any depending claims
thereunder) maintained by the Corporation on its property and assets or
personnel as of the date hereof and true and complete copies of the most recent
inspection reports, if any, received from insurance underwriters or others as to
the condition of the property and assets of the Corporation. The Corporation is
not in default with respect to any of the provisions contained in any such
insurance policy and has not failed to give any notice or present any claim
under any such insurance policy in a due and timely fashion. The Vendors have
provided to the Purchaser a true copy of each insurance policy referred to in
Schedule B1.15.
1.16 No Expropriation
No property or asset of the Corporation has been taken or expropriated by
any federal, provincial, state, municipal or other authority nor has any notice
or proceeding in respect thereof been given or, to the knowledge of the Vendors,
commenced nor are the Vendors aware of any intent or proposal to give any such
notice or commence any such proceeding.
1.17 Agreements and Commitments
Except as described on Schedule B1.17 or elsewhere in this Agreement or in
any Schedules hereto the Corporation is not a party to or bound by any Contract.
The Corporation has performed all of the material obligations required to
be performed by it and is entitled to all benefits under, and is not in default
in any material respect or alleged to be in default in any material respect in
respect of, any Contract relating to the Business to which it is a party or by
which it is bound; all such Contracts are in good standing and in full force and
effect, and no event, condition or occurrence exists that, after notice or lapse
of time or both, would constitute a material default under any of the foregoing.
The Vendors have provided to the Purchaser a true and complete copy of each
Contract listed or described on Schedule B1.17 and all amendments thereto.
1.18 Compliance with Laws; Governmental Authorization
The Corporation has complied in all material respects with all laws,
statutes, or ordinances regulations, rules, judgments, decrees or orders
applicable to the TGF Business or the Corporation. Schedule B1.18 sets out a
complete and accurate list of all licenses, permits, approvals, consents,
certificates, registrations and authorizations (whether governmental, regulatory
or otherwise) (the "TGF Licenses") held by or granted to the Corporation, and
there are no other licenses, permits, approvals, consents, certificates,
registrations or authorizations necessary to carry on the Business or to own or
lease any of the property or assets utilized by the Corporation. Each TGF
License is valid, subsisting and in good standing and the Corporation is not in
default or breach of any TGF License in any material respect and, to the
knowledge of the Vendor, no proceeding is pending or threatened to revoke or
limit any TGF License. The Vendor has
provided a true and complete copy of each TGF License and all amendments thereto
to the Purchaser.
1.19 Consents and Approvals
There is no requirement for the Vendors to make any filing with, give any
notice to or obtain any license, permit, certificate, registration,
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation of the transactions contemplated by
this Agreement, except for the filings, notifications, licenses, permits,
certificates, registrations, consents and approvals described in Schedule B1.19.
There is no requirement under any Contract relating to the TGF Business or the
Corporation to which the Vendors or the Corporation is a party or by which it is
bound to give any notice to, or to obtain the consent or approval of, any party
to such agreement, instrument or commitment relating to the consummation of the
transactions contemplated by this Agreement except for the notifications,
consents and approvals described in Schedule B1.19.
1.20 Financial Statements
The Audited Corporation Financial Statements and the Interim Corporation
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods and
present fairly the assets, liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Corporation as at the respective dates
of the Corporation for the respective periods covered by such financial
statements. The financial position and condition of the Corporation is now at
least as good as that shown on or reflected in the Interim Corporation Financial
Statements.
1.21 Books and Records
The books and records of the Corporation fairly and correctly set out and
disclose in all material respects in accordance with generally accepted
accounting principles the financial position of the Corporation as at the date
hereof and all financial transactions of the Corporation have been accurately
recorded in such books and records in all material respects.
1.22 Absence of Changes
Since August 31, 1998, the Corporation has carried on the TGF Business and
conducted its operations and affairs only in the ordinary and normal course
consistent with past practice and there has not been:
(a) any material adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings, business or prospects of the
Corporation;
(b) any damage, destruction or loss (whether or not covered by insurance)
affecting any material component of the property or assets of the Corporation;
(c) any material obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Corporation, other than those incurred in the ordinary and normal course and
consistent with past practice;
(d) any payment, discharge or satisfaction of any Encumbrance, liability or
obligation of the Corporation (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) other than payment of accounts
payable and tax liabilities incurred in the ordinary course of business
consistent with past practice and other than capital lease and operating line
payments;
(e) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares in the capital of the Corporation or any
direct or indirect redemption, purchase or other acquisition of any such shares
other than dividends declared in respect of the Class A Special shares in the
capital of the Corporation and redemptions in respect of certain of such Class A
Special shares;
(f) any issuance or sale by the Corporation, or any Contract entered into
by the Corporation, for the issuance or sale by the Corporation, of any shares
in the capital of or securities convertible into or exercisable for shares in
the capital of the Corporation;
(g) any labour trouble materially adversely affecting the Corporation;
(h) any license, sale, assignment, transfer, disposition, pledge, mortgage
or granting of a security interest or other Encumbrance on or over any property
or assets of the Corporation, other than sales of inventory to customers in the
ordinary and normal course of the TGF Business;
(i) any general increase in the compensation of employees of the
Corporation (including, without limitation, any increase pursuant to any
Employee Plan or commitment), or any increase in any such compensation or bonus
payable to any officer, employee, consultant or agent thereof or the execution
of any employment contract with any officer or employee or the making of any
loan to, or engagement in any transaction with, any employee, officer or
director of the Corporation;
(j) other than equipment with respect to the new phyllo pastry line, any
capital expenditures or commitments of the Corporation in excess of $5,000.00 in
the aggregate;
(k) any forward purchase commitments in excess of the requirements of the
Corporation for normal operating inventories or at prices higher than the
current market prices;
(l) any forward sales commitments other than in the ordinary and normal
course of the TGF Business or any failure to satisfy any accepted order for
goods or services;
(m) any change in the accounting or tax practices followed by the
Corporation other than with respect to certain accruals of salary and bonus
owing to some or all of the Vendors which accruals have been disclosed to the
Purchaser;
(n) any change adopted by the Corporation in its depreciation or
amortization policies or rates; or
(o) any adverse change in the credit terms offered to customers of, or by
suppliers to, the Corporation.
1.23 Taxes
(a) The Corporation has filed on a timely basis all tax returns required to
be filed by it in all applicable jurisdictions and other than approximately
Thirty-Three Thousand Dollars ($33,000.00) owing in respect of corporate income
tax has paid all taxes that are due and payable, and all assessments,
governmental charges, penalties, interest and fines due and payable by it.
Adequate provision has been made in the Audited Corporation Financial Statements
and the Interim Corporation Financial Statements for all taxes, governmental
charges and assessments, whether relating to income, sales, real or personal
property, or other types of taxes, governmental charges or assessments,
including interest and penalties thereon, payable in respect of the business or
assets of the Corporation or otherwise for all periods up to the date of the
balance sheet comprising part of the unaudited financial statements and whether
or not assessed.
(b) Canadian federal and provincial income tax assessments have been issued
to the Corporation covering all past periods up to and including the fiscal year
ended February 28, 1997 and these assessment, if any amounts were owing in
respect thereof, have been paid. Assessments for all other applicable federal
and provincial taxes and levies have been issued and any amounts owing
thereunder have been paid.
(c) There are no actions, suits, proceedings, investigations or claims
pending or, to the knowledge of the Vendors, threatened against, the Corporation
in respect of taxes, governmental charges or assessments, nor are any material
matters under discussion with any governmental authority relating to taxes,
governmental charges, assessments or reassessments asserted by any such
authority.
(d) The Corporation has withheld from each amount paid or credited to any
person the amount of all taxes, governmental charges, assessments or other
deductions required to be withheld therefrom and has remitted the amounts
withheld therefrom and has remitted the amounts withheld to the proper tax or
other receiving authorities within the time required under applicable
legislation. The Corporation has collected and remitted to the appropriate tax
authority when required by law to do so all amounts to be collected by them on
account of the goods and services tax or other taxes or governmental charges.
(e) There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or payment of
any tax, governmental charges or deficiency against, or the period for any
assessment or reassessment of any government charges or deficiency of, the
Corporation with respect to any other matters.
(f) The Vendors have provided to the Purchaser a true copy of all tax
returns and all federal goods and services tax returns filed by the Corporation,
and all written communications relating thereto, in respect of the five last
completed fiscal years of the Corporation.
(g) The Corporation is and has always been a Canadian-controlled private
corporation, as defined in the Income Tax Act (Canada), and has been since its
incorporation.
1.24 Litigation
There are no actions, suits or proceedings (whether or not purportedly on
behalf of the Corporation) pending or, to the knowledge of the Vendors, after
due inquiry, threatened against or affecting, the Corporation at law or in
equity, or before or by any federal, provincial, municipal or other governmental
department, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, or by or before an arbitrator or arbitration board. The
Vendors are not aware of any ground on which any such action, suit or proceeding
might be commenced with any reasonable likelihood of success.
1.25 Residency
The Vendors are each residents of Canada for the purposes of the Tax Act.
1.26 GST Registration
The Corporation is a registrant for purpose of the ETA whose registration
number is 125342428RT001.
1.27 Accounts and Attorneys
Schedule B1.27 sets forth a true and complete list showing:
(a) the name of each bank, trust company or similar institution in which
the Corporation has accounts or safe deposit boxes, the number or designation of
each such account and safe deposit box and the names of all persons authorized
to draw thereon or to have access thereto; and
(b) the name of each person, firm, corporation or business organization
holding a general or special power of attorney from the Corporation and a
summary of the terms thereof.
1.28 Directors and Officers
Schedule B1.28 sets forth the names and titles of all the officers and
directors of the Corporation.
1.29 Dividends
Since August 31, 1998 the Corporation has not, directly or indirectly,
declared or paid any dividends or declared or made any other distribution on any
of its shares of any class and has not, directly or indirectly, redeemed,
purchased or otherwise acquired any of its outstanding shares of any class or
agreed to do so other than dividends paid on and redemption of the Class A
Special shares in the capital of the Corporation which have been paid and
redeemed in accordance with the articles of the Corporation relating thereto.
1.30 Non-Arm's Length Transactions
The Corporation has not since March 1, 1998 made any payment or loan to, or
borrowed any moneys from or is otherwise indebted to, any officer, director,
employee, shareholder or any other person not dealing at arm's length with the
Corporation (within the meaning of the Tax Act), except as disclosed in the
Interim Corporation Financial Statements and except for usual employee
reimbursements and compensation paid in the ordinary and normal course of the
TGF Business including the provision of management services by VLRL Management
Ltd. to the Corporation and except loans made to the Corporation by its
shareholders and/or directors from time to time and which shall have been repaid
in full on or before the Closing Date or shall otherwise form part of the
Shareholder Loans. Except for Contracts of employment and the foregoing
arrangements with VLRL Management Ltd., the Corporation is not a party to any
Contract with any officer, director, employee, shareholder or any other person
not dealing at arm's length with the Corporation (within the meaning of the Tax
Act). No officer, director or shareholder of the Corporation and no entity that
is an Affiliate or Associate of one or more of such individuals:
(a) owns, directly or indirectly, any interest in (except for shares
representing less than one per cent of the outstanding shares of any class or
series of any publicly traded company), or is an officer, director, employee or
consultant of, any person which is, or is engaged in business as, a competitor
of the TGF Business or the Corporation or a lessor, lessee, supplier,
distributor, sales agent or customer of the TGF Business or the Corporation
other than Xxxxxx who has an interest in Albert's Bakery, a customer and
supplier of the Corporation;
(b) owns, directly or indirectly, in whole or in part, any property that
the Corporation uses in the operation of the TGF Business; or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, the Corporation in connection with the TGF Business, except for any
liabilities reflected in the Interim Corporation Financial Statements and claims
in the ordinary and normal course of business, such as for accrued vacation pay
and accrued benefits under the Employee Plans, the Purchased Loans and
Shareholder Loans and other than the accruals of salary and bonuses referred to
in Subsection 1.22(m) of this Schedule B.
1.31 Environmental
(a) The Corporation has been and is in compliance in all material respects
with all applicable federal, provincial, state, municipal laws, statutes,
ordinances, by-laws and regulations and orders, directives and decisions
rendered by any ministry, department or administrative or regulatory agency
("Environmental Laws") relating to the protection of the environment,
occupational health and safety or the manufacture, processing, distribution,
use, treatment, storage, disposal, discharge, transport or handling of any
pollutants, contaminants, chemicals or industrial, toxic or hazardous wastes or
substances ("Hazardous Substances");
(b) The Corporation has obtained all licenses, permits, approvals,
consents, certificates, registrations and other authorizations under
Environmental Laws (the "Environmental Permits") required for the operation of
the TGF Business. Each Environmental Permit is valid, subsisting and in good
standing and the Corporation is not in default or breach in any material respect
of any Environmental Permit and no proceeding is pending, or threatened, to
revoke or limit any Environmental Permit;
(c) The Corporation has not used or permitted to be used, except in
compliance with all Environmental Laws, the TGF Leased Property or facilities or
any property or facility that it previously owned or leased, to generate,
manufacture, process, distribute, use, treat, store, dispose of, transport or
handle any Hazardous Substance;
(d) The Corporation has never received any notice of, nor been prosecuted
for an offence alleging, non-compliance with any Environmental Laws, and neither
the Vendors nor the Corporation has settled any allegation of non-compliance
short of prosecution. There are no orders or directions relating to
environmental matters requiring any work, repairs, construction or capital
expenditures with respect to the TGF Business or any property of the
Corporation, nor has the Corporation received notice of any of the same;
(e) To the best of the Vendors' knowledge, there are no pending or proposed
changes to Environmental Laws that would render illegal or restrict the
manufacture or sale any product manufactured or sold or service provided by the
Corporation;
(f) The Corporation has not caused or permitted, nor does it have any
knowledge of, the release, in any manner whatsoever, of any Hazardous Substance
on or from any of
its properties (including the TGF Leased Property) or assets or any property or
facility that it previously owned or leased, or any such release on or from a
facility owned or operated by third parties but with respect to which the
Corporation is or may reasonably be alleged to have liability. All Hazardous
Substances and all other wastes and other materials and substances used in whole
or in part by the Corporation or resulting from the TGF Business have been
disposed of, treated and stored in compliance with all Environmental Laws;
(g) The Corporation has not received any notice that it is potentially
responsible for a federal, provincial, municipal or local clean-up site or
corrective action under any Environmental Laws. The Corporation has not received
any request for information in connection with any federal, provincial,
municipal or local inquiries as to disposal sites.
1.32 Employee Plans
The Corporation does not have any retirement, pension, stock purchase,
profit sharing, stock option or deferred compensation plans. Schedule B1.32
identifies each insurance, medical, hospital, dental, vision care, drug, sick
leave, disability, salary continuation, legal benefits, unemployment benefits,
vacation, incentive or other compensation plan or arrangement or other employee
benefit that is maintained or otherwise contributed to, or required to be
contributed to, by the Corporation for the benefit of employees or former
employees of the Corporation (the "TGF Employee Plans") and a true and complete
copy of each TGF Employee Plan has been furnished to the Purchaser. Each TGF
Employee Plan has been maintained in all material respects in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulation that are applicable to such TGF Employee Plan.
(a) all contributions to, and payments from, each TGF Employee Plan that
may have been required to be made in accordance with the terms of any such TGF
Employee Plan, or with the recommendation of the actuary for such TGF Employee
Plan, and, where applicable, the laws of the jurisdictions that govern such TGF
Employee Plan, have been made in a timely manner;
(b) all material reports, returns and similar documents (including
applications for approval of contributions) with respect to any TGF Employee
Plan required to be filed with any governmental agency or distributed to any TGF
Employee Plan participant have been duly filed on a timely basis or distributed;
(c) to the knowledge of the Vendors, there are no pending investigations by
any governmental or regulatory agency or authority involving or relating to a
TGF Employee Plan, no threatened or pending claims (except for claims for
benefits payable in the normal operation or the TGF Employee Plans), suits or
proceedings against any TGF Employee Plan or asserting any rights or claims to
benefits under the TGF Employee Plan that could give rise to a liability nor, to
the knowledge of the Vendor and the Corporation, are there any facts that could
give rise to any liability in the event of such investigation, claim, suit or
proceeding; and
(d) no notice has been received by the Corporation of any complaints or
other proceedings of any kind involving the Corporation or, to the Vendor's or
the knowledge, any of the employees of the Corporation before any pension board
or committee relating to any TGF Employee Plan or to the Corporation.
1.33 Collective Agreements
Except as described in Schedule B1.32, the Corporation has not made any
Contracts with any labour union or employee association nor made commitments to
or conducted negotiations with any labour union or employee association with
respect to any future agreements and, except as set out in Schedule B1.33,
neither the Vendor nor the Corporation is aware of any current attempts to
organize or establish any labour union or employee association with respect to
any employees of the Corporation, nor is there any certification of any such
union with regard to a bargaining unit.
1.34 Employees
Schedule B1.32 contains a complete and accurate list of the names of all
individuals who are employees or sales or other agents or representatives of the
Corporation specifying:
(a) with respect to the unionized employees, the rate of hourly pay,
whether or not such employee is absent for any reason such as lay off, leave of
absence or worker's compensation; and
(b) with respect to salaried employees and sales or other agents or
representatives, the length of service, age, title, rate of salary and
commission structure for each such employee, agent or representative,
it being acknowledged that those employees listed under the heading VLRL
Management Ltd. are being employed by VLRL management Ltd. and are providing
services to both TGF and Norbakco and that such arrangement with VLRL Management
Ltd. is to be terminated on closing and such personnel to be fixed by TGF and
Norbakco.
No notice has been received by the Corporation of any complaint filed by
any of the employees against the Corporation claiming that the Corporation has
violated the Employment Standards Act (Ontario) or the Human Rights Code
(Ontario) (or any applicable employee or human rights or similar legislation in
the other jurisdictions in which the TGF Business is conducted or the
Corporation operates) or of any complaints or proceedings of any kind involving
the Corporation or, to the Vendor's and the Corporation's knowledge, after due
inquiry, any of the employees of the Corporation before any labour relations
board, except as disclosed in Schedule B1.33. There are no outstanding orders or
charges against the Corporation under the Occupational Health and Safety Act
(Ontario). All levies, assessments and penalties made against the Corporation
pursuant to the Worker's Compensation Act (Ontario) have been paid by the
Corporation
and the Corporation has not been reassessed under any such legislation during
the past two (2) years.
1.35 Employee Accruals
All accruals for unpaid vacation pay, premiums for unemployment insurance,
health premiums, Canada Pension Plan premiums, accrued wages, salaries and
commissions and employee benefit play payments have been reflected in the books
and records of the Corporation.
1.36 Customers and Suppliers
Schedule B1.36 sets out the major customers of the Corporation (being those
customers of the Corporation accounting for more than 75% of sales for the
twelve (12) month period ending August 31, 1998 and there has been no
termination or cancellation of, and no modification or change in, the
Corporation's business relationship with any major customer or group of major
customers. The Corporation has no reason to believe that the benefits of any
relationship with any of the major customers or suppliers of the Corporation
will not continue after the Closing Date in substantially the same manner as
prior to the date of the Agreement.
1.37 Full Disclosure
The Vendors have disclosed to the Purchaser all facts known to them
relating to the TGF Business and the Corporation, its assets and operations,
which could reasonably be expected to be material to an intending purchaser of
the Purchased Shares.
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
WITH RESPECT TO NORBAKCO
The Vendors severally represent and warrant to the Purchaser as follows and
acknowledge that the Purchaser is relying on such representations and warranties
in connection with its purchase of the Purchased Shares:
2.01 Organization
Norbakco is duly incorporated and organized and validly subsisting under
the laws of Ontario and has the corporate power to own or lease its property, to
carry on the Business as now being conducted by it, to enter into this Agreement
and perform its obligations hereunder. The Norbakco is duly qualified as a
Norbakco to do business in each jurisdiction in which the nature of the Business
or the property and assets owned or leased by it makes such qualification
necessary.
2.02 Intentionally Deleted
2.03 Authorized and Issued Capital
The authorized capital of the Norbakco consists of an unlimited number of
Common Shares of which 200 common shares (and no more) have been duly issued and
are outstanding as fully paid non-assessable.
2.04 Options
Other than as set forth in the Norbakco Shareholders' Agreement, no person,
firm or corporation has any agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an agreement,
including convertible securities, warrants or convertible obligations of any
nature, for the purchase, subscription, allotment or issuance of any unissued
shares or other securities of the Norbakco.
2.05 No Subsidiaries
Norbakco does not own and does not have any agreement of any nature to
acquire, directly or indirectly, any shares in the capital of or other equity or
proprietary interests in any person, firm or corporation, and Norbakco does not
have any agreements to acquire or lease any other business operations.
2.06 No Violation
The execution and delivery of this Agreement by the Vendors and the
consummation of the transactions herein provided for will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any obligation of
the Vendors or Norbakco under:
(i) any Contract to which the Vendors or the Norbakco is a party or by
which any of them is, or either of their properties are, bound other than
its banking arrangements with The Bank of Nova Scotia in respect of which a
consent is being obtained and the Norbakco Shareholders' Agreement;
(ii) any provision of the constating documents, by-laws or resolutions
of the board of directors (or any committee thereof) or shareholders of the
Norbakco;
(iii) any judgement, decree, order or award of any court, governmental
body or arbitrator having jurisdiction over the Vendors or the Norbakco;
(iv) any license, permit, approval, consent or authorization held by
the Vendors or Norbakco or necessary to the ownership of the Purchased
Shares or the operation of the Norbakco Business; or
(v) any applicable law, statute, ordinance, regulation or rule; or
(b) the creation or imposition of any Encumbrance on any the Purchased
Shares, any of the issued and outstanding shares in the capital of Norbakco, the
Victorco VLRL Shares, the Rhysco VLRL Shares, the Lenco VLRL Shares or the Xxxxx
VLRL Shares or any of the property or assets of the Norbakco.
2.07 Business of the Norbakco
The Norbakco Business is the only business operation carried on by the
Norbakco, and the property and assets owned or leased by Norbakco are sufficient
to carry on the Norbakco Business. All of the material property and assets owned
and used by Norbakco are in good operating condition and are in a state of good
repair and maintenance. Since June 1, 1998, there has not been any significant
interruption of operations (being a interruption of more than one day) of the
Norbakco Business due to inadequate maintenance of any of the property and
assets owned and used by the Norbakco. With the exception of inventory in
transit, all the tangible assets of Norbakco are situate at the location set out
in Schedule B2.07.
2.08 Title to Personal and Other Property
The property and assets of Norbakco (other than the Norbakco Leased
Property) are owned beneficially by Norbakco as the beneficial owner thereof
with a good and marketable title thereto, free and clear of all Encumbrances
other than the Norbakco Permitted Encumbrances.
2.09 Location of Real Property
Schedule B2.11 sets forth a municipal address of the Real Property leased
by the Norbakco (the "Norbakco Leased Property"). Norbakco does not own or lease
and has not agreed to acquire or lease any real property or interest in real
property other than the Norbakco Leased Property.
2.10 Title to Real Property
To the knowledge of the Vendors all buildings, structures, improvements and
appurtenances situated on the Norbakco Leased Property to the extent occupied by
TGF are in good operating condition and in a state of good maintenance and
repair, reasonable wear and tear excepted are adequate and suitable for the
purposes for which they are currently being used and Norbakco has adequate
rights of ingress and egress for the operation of the Norbakco Business in the
ordinary course. Without limiting the generality of the foregoing:
(a) the current uses of the Norbakco Leased Property by Norbakco and the
conduct of the Norbakco Business comply, in all material respects with all
regulations, statues, enactments, laws and by-laws including, without
limitation, those dealing with zoning, parking, access, loading facilities,
landscaped areas, building construction, fire and public health and safety and
Environmental Laws;
(b) to the knowledge of the Vendors, no alteration, repair, improvement or
other work has been ordered, directed or requested in writing to be done or
performed to or in respect of the Norbakco Leased Property or to any of the
plumbing, heating, elevating, water, drainage or electrical systems, fixtures or
works by any municipal, provincial or other competent authority, which
alteration, repair, improvement or other work has not been completed, and the
Vendors know of no written notification having been given to it of any such
outstanding work being ordered, directed or requested, other than those that
have been complied with;
(c) all account for work and services performed and materials placed or
furnished upon or in respect of the Norbakco Leased Property at the request of
Norbakco have been fully paid and satisfied, and no person is entitled to claim
a lien under the Construction Lien Act against the Norbakco Leased Property or
any part thereof in respect of any such matters requested by the Corporation,
other than current accounts in respect of which the payment due date has not yet
passed;
(d) there is nothing owing in respect of the Norbakco Leased Property by
Norbakco to any municipal corporation or to any other corporation or commission
owning or operating a public utility for water, gas, electrical power or energy,
steam or hot water, or for the use thereof, other than current accounts in
respect of which the payment due date has not yet passed;
(e) to the knowledge of the Vendors, no part of the Norbakco Leased
Property has been taken or expropriated by any federal, provincial, municipal or
other competent authority nor to the knowledge of the Vendors has any notice or
proceeding in respect thereof been given or commenced; and
(f) the Norbakco Leased Property (including all buildings, improvements and
fixtures) is fit for its present use by Norbakco, and there are no material or
structural repairs or replacements that are necessary or advisable and, without
limiting the foregoing, there are no repairs to, or replacements of, the roof or
the mechanical, electrical, heating, ventilating, air-conditioning, plumbing or
drainage equipment or systems that are necessary or advisable, and the Norbakco
Leased Property is not currently undergoing any alteration or renovation nor is
any such alteration or renovation contemplated.
2.11 Real Property Leases
Norbakco is not a party to any lease or agreement in the nature of a lease
in respect of any real property, whether as lessor or lease, other than the
lease (the "Norbakco Lease") described in Schedule B1.11 relating to the
Norbakco Leased Property. Schedule B1.11 sets out the parties to the Norbakco
Lease, its date of execution and expiry date, any options to renew, the location
of the leased lands and premises and the rent payable thereunder. Norbakco
occupies and has the exclusive right to occupy and use the Norbakco Leased
Property. To the knowledge of the Vendors, the Norbakco Lease is in good
standing and in full force and effect without amendment thereto. Neither
Norbakco nor, to the knowledge of the Vendors, any other party thereto is in
material breach of any covenants, conditions or obligations contained therein.
The Vendors have provided a true copy of the Norbakco Lease to the Purchaser.
2.12 Inventories
The inventories of Norbakco do not include any material items that are slow
moving, below standard quality or of a quality or quantity not useable or
saleable in the normal course of business, the value of which has not been
written down on its books of account to net realizable market value in
accordance with prudent business practice in the industry. The inventory levels
of Norbakco have been maintained at such amounts as are required for the
operation of the Norbakco Business as previously conducted and as proposed to
conducted, and such inventory levels are adequate therefor.
2.13 Accounts Receivable
All accounts receivable, book debts and other debts due or accruing to
Norbakco are bona fide and good and, subject to an allowance for doubtful
accounts that has been reflected on the books of Norbakco in accordance with
generally accepted accounting principles, are collectible without set-off or
counterclaim.
2.14 Intellectual Property
The Vendors shall cause to be delivered within ninety (90) days subsequent
to the Closing Date a complete and accurate list of all trade marks, trade
names, business names, patents, labels, products, recipes and know-how with
respect to the production of the products of the Corporation owned or used by
Norbakco in carrying on the Norbakco Business and all applications therefor and
all goodwill connected therewith, including, without limitation, all licenses,
registered user agreements and all like rights used by or granted to Norbakco in
connection with the Norbakco Business and all right to register or otherwise
apply for the protection on any of the foregoing (collectively, the "Norbakco
Intellectual Property"). Schedule B2.14 annexed hereto includes complete and
accurate particulars of all registrations or applications for registration of
the Norbakco Intellectual Property. The Norbakco Intellectual Property comprises
all trade marks, trade names, business names, patents, inventions, know-how,
copyrights, service marks, brand marks, industrial designs and all other
industrial or intellectual property reasonably necessary to conduct the Norbakco
Business. Norbakco is the beneficial owner of the Norbakco Intellectual
Property, free and clear of all Encumbrances other than Norbakco Permitted
Encumbrances, and is not a party to or bound by any Contract or other obligation
whatsoever that limits or impairs its ability to sell, transfer, assign or
convey, or that otherwise affects, the Norbakco Intellectual Property. No person
has been granted any interest in or right to use all or any portion of the
Norbakco Intellectual Property. The Vendors are not aware of any claim of any
infringement or breach of any industrial or intellectual property rights of any
other person by Norbakco, nor have the Vendors or Norbakco received any notice
that the conduct of the Norbakco Business any industrial or intellectual
property rights of any other person, and the Vendors after due inquiry have no
knowledge of any infringement or violation of any of the rights of Norbakco in
the Norbakco Intellectual Property. The conduct of the Norbakco Business does
not infringe upon the patents, trade marks, licenses, trade names, business
names, copyright or other industrial or intellectual property rights, domestic
or foreign, of any other person. The Vendors are not aware of any state of facts
that casts doubt on the validity or enforceability of any of the Norbakco
Intellectual Property. The Vendors have provided to the Purchaser a true and
complete copy of all Contracts and amendments thereto that comprise or relate to
the Norbakco Intellectual Property.
2.15 Insurance
Norbakco has all of its property and assets insured against loss or damage
by all insurable hazards or risks on a replacement cost basis and such insurance
coverage will be continued in full force and effect to and including the Time of
Closing. Schedule B2.15 sets out all insurance policies (specifying the insurer,
the amount of the coverage, the type of insurance, the policy number and any
depending claims thereunder) maintained by Norbakco on its property and assets
or personnel as of the date hereof and true and complete copies of the most
recent inspection reports, if any, received from insurance underwriters or
others as to the condition of the property and assets of Norbakco. Norbakco is
not in default with respect to any of the provisions contained in
any such insurance policy and has not failed to give any notice or present any
claim under any such insurance policy in a due and timely fashion. The Vendors
have provided to the Purchaser a true copy of each insurance policy referred to
in Schedule B2.15.
2.16 No Expropriation
No property or asset of Norbakco has been taken or expropriated by any
federal, provincial, state, municipal or other authority nor has any notice or
proceeding in respect thereof been given or, to the knowledge of the Vendors,
commenced nor is the Vendor or Norbakco aware of any intent or proposal to give
any such notice or commence any such proceeding.
2.17 Agreements and Commitments
Except as described on Schedule B2.17 or elsewhere in this Agreement or in
any Schedules hereto Norbakco is not a party to or bound by any Contract.
Norbakco has performed all of the material obligations required to be
performed by it and is entitled to all benefits under, and is not in default or
alleged to be in default in any material respect or alleged to be in default in
any material respect in respect of, any Contract relating to the Norbakco
Business to which it is a party or by which it is bound; all such Contracts are
in good standing and in full force and effect, and no event, condition or
occurrence exists that, after notice or lapse of time or both, would constitute
a material default under any of the foregoing. The Vendors have provided to the
Purchaser a true and complete copy of each Contract listed or described on
Schedule B2.17 and all amendments thereto.
2.18 Compliance with Laws; Governmental Authorization
Norbakco has complied in all material respects with all laws, statutes, or
ordinances regulations, rules, judgments, decrees or orders applicable to the
Norbakco Business or Norbakco. Schedule B2.18 sets out a complete and accurate
list of all licenses, permits, approvals, consents, certificates, registrations
and authorizations (whether governmental, regulatory or otherwise) (the
"Licenses") held by or granted to Norbakco, and there are no other licenses,
permits, approvals, consents, certificates, registrations or authorizations
necessary to carry on the Norbakco Business or to own or lease any of the
property or assets utilized by Norbakco. Each Norbakco License is valid,
subsisting and in good standing and Norbakco is not in default or breach of any
Norbakco License in any material respect and, to the knowledge of the Vendor, no
proceeding is pending or threatened to revoke or limit any Norbakco License. The
Vendor has provided a true and complete copy of each Norbakco License and all
amendments thereto to the Purchaser.
2.19 Consents and Approvals
There is no requirement for the Vendors to make any filing with, give any
notice to or obtain any license, permit, certificate, registration,
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation of the transactions contemplated by
this Agreement, except for the filings, notifications, licenses, permits,
certificates, registrations, consents and approvals described in Schedule B2.19.
There is no requirement under any Contract relating to the Norbakco Business or
Norbakco to which the Vendors or Norbakco is a party or by which it is bound to
give any notice to, or to obtain the consent or approval of, any party to such
agreement, instrument or commitment relating to the consummation of the
transactions contemplated by this Agreement except for the notifications,
consents and approvals described in Schedule B2.19.
2.20 Financial Statements
The Interim Norbakco Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
prior periods and present fairly the assets, liabilities (whether accrued,
absolute, contingent or otherwise) and financial condition of Norbakco as at the
respective dates of Norbakco for the respective periods covered by such
financial statements. The financial position and condition of Norbakco is now at
least as good as that shown on or reflected in the Interim Norbakco Financial
Statements.
2.21 Books and Records
The books and records of Norbakco fairly and correctly set out and disclose
in all material respects in accordance with generally accepted accounting
principles the financial position of Norbakco as at the date hereof and all
financial transactions of Norbakco have been accurately recorded in such books
and records in all material respects.
2.22 Absence of Changes
Since August 31, 1998, Norbakco has carried on the Norbakco Business and
conducted its operations and affairs only in the ordinary and normal course
consistent with past practice and there has not been:
(a) any material adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings, business or prospects of Norbakco;
(b) any damage, destruction or loss (whether or not covered by insurance)
affecting any material component of the property or assets of Norbakco;
(c) any material obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by Norbakco,
other than those incurred in the ordinary and normal course and consistent with
past practice;
(d) any payment, discharge or satisfaction of any Encumbrance, liability or
obligation of Norbakco (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) other than payment of accounts payable and tax
liabilities incurred in the ordinary course of business consistent with past
practice and other than capital lease and operating line payments;
(e) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares in the capital of Norbakco or any direct
or indirect redemption, purchase or other acquisition of any such shares;
(f) any issuance or sale by Norbakco, or any Contract entered into by
Norbakco, for the issuance or sale by Norbakco, of any shares in the capital of
or securities convertible into or exercisable for shares in the capital of
Norbakco;
(g) any labour trouble materially adversely affecting Norbakco;
(h) any license, sale, assignment, transfer, disposition, pledge, mortgage
or granting of a security interest or other Encumbrance on or over any property
or assets of Norbakco, other than sales of inventory to customers in the
ordinary and normal course of the Norbakco Business;
(i) any general increase in the compensation of employees of Norbakco
(including, without limitation, any increase pursuant to any Employee Plan or
commitment), or any increase in any such compensation or bonus payable to any
officer, employee, consultant or agent thereof or the execution of any
employment contract with any officer or employee or the making of any loan to,
or engagement in any transaction with, any employee, officer or director of
Norbakco;
(j) any capital expenditures or commitments of Norbakco in excess of
$5,000.00 in the aggregate;
(k) any forward purchase commitments in excess of the requirements of
Norbakco for normal operating inventories or at prices higher than the current
market prices;
(l) any forward sales commitments other than in the ordinary and normal
course of the Norbakco Business or any failure to satisfy any accepted order for
goods or services;
(m) any change in the accounting or tax practices followed by Norbakco
other than with respect to certain accruals of salary and bonus owing to some or
all of the Vendors which accruals have been disclosed to the Purchaser;
(n) any change adopted by Norbakco in its depreciation or amortization
policies or rates; or
(o) any adverse change in the credit terms offered to customers of, or by
suppliers to Norbakco.
2.23 Taxes
(a) Other than in respect of those periods pre-dating Norbakco commencing
carrying on business, Norbakco has filed on a timely basis all tax returns
required to be filed by it in all applicable jurisdictions and has paid all
taxes that are due and payable, and all assessments, governmental charges,
penalties, interest and fines due and payable by it. Adequate provision has been
made in the Interim Norbakco Financial Statements for all taxes, governmental
charges and assessments, whether relating to income, sales, real or personal
property, or other types of taxes, governmental charges or assessments,
including interest and penalties thereon, payable in respect of the business or
assets of Norbakco or otherwise for all periods up to the date of the balance
sheet comprising part of the unaudited financial statements and whether or not
assessed.
(b) There are no actions, suits, proceedings, investigations or claims
pending or, to the knowledge of the Vendors, threatened against, Norbakco in
respect of taxes, governmental charges or assessments, nor are any material
matters under discussion with any governmental authority relating to taxes,
governmental charges, assessments or reassessments asserted by any such
authority.
(c) Norbakco has withheld from each amount paid or credited to any person
the amount of all taxes, governmental charges, assessments or other deductions
required to be withheld therefrom and has remitted the amounts withheld
therefrom and has remitted the amounts withheld to the proper tax or other
receiving authorities within the time required under applicable legislation.
Norbakco has collected and remitted to the appropriate tax authority when
required by law to do so all amounts to be collected by them on account of the
goods and services tax or other taxes or governmental charges.
(d) There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or payment of
any tax, governmental charges or deficiency against, or the period for any
assessment or reassessment of any government charges or deficiency of, Norbakco
with respect to any other matters.
(e) The Vendors have provided to the Purchaser a true copy of all tax
returns and all federal goods and services tax returns filed by Norbacko, and
all written communications relating thereto, in respect of the five last
completed fiscal years of Norbakco.
(f) Norbakco is and has always been a Canadian-controlled private
corporation, as defined in the Income Tax Act (Canada), and has been since its
incorporation.
2.24 Litigation
There are no actions, suits or proceedings (whether or not purportedly on
behalf of Norbakco) pending or, to the knowledge of the Vendors, after due
inquiry, threatened against or affecting, Norbakco at law or in equity, or
before or by any federal, provincial, municipal or other governmental
department, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, or by or before an arbitrator or arbitration board. The
Vendors are not aware of any ground on which any such action, suit or proceeding
might be commenced with any reasonable likelihood of success.
2.25 Residency
The Vendors are each residents of Canada for the purposes of the Tax Act.
2.26 GST Registration
Norbakco is a registrant for purpose of the ETA whose registration number
is 872622998RT001.
2.27 Accounts and Attorneys
Schedule B2.27 sets forth a true and complete list showing:
(a) the name of each bank, trust company or similar institution in which
Norbakco has accounts or safe deposit boxes, the number or designation of each
such account and safe deposit box and the names of all persons authorized to
draw thereon or to have access thereto; and
(b) the name of each person, firm, corporation or business organization
holding a general or special power of attorney from Norbakco and a summary of
the terms thereof.
2.28 Directors and Officers
Schedule B2.28 sets forth the names and titles of all the officers and
directors of Norbakco.
2.29 Dividends
Since May 1, 1998 Norbakco has not, directly or indirectly, declared or
paid any dividends or declared or made any other distribution on any of its
shares of any class and has not, directly or indirectly, redeemed, purchased or
otherwise acquired any of its outstanding shares of any class or agreed to do
so.
2.30 Non-Arm's Length Transactions
Norbakco has not since May 1, 1998 made any payment or loan to, or borrowed
any moneys from or is otherwise indebted to, any officer, director, employee,
shareholder or any other person not dealing at arm's length with Norbakco
(within the meaning of the Tax Act), except as disclosed in the Interim Norbakco
Financial Statements and except for usual employee reimbursements an
compensation paid in the ordinary and normal course of the Norbakco Business
including the provision of management services by VLRL Management Ltd. to
Norbakco. Except for Contracts of employment and the foregoing arrangements with
VLRL Management Ltd., Norbakco is not a party to any Contract with any officer,
director, employee, shareholder or any other person not dealing at arm's length
with Norbakco (within the meaning of the Tax Act). No officer, director or
shareholder of Norbakco and no entity that is an Affiliate or Associate of one
or more of such individuals:
(a) owns, directly or indirectly, any interest in (except for shares
representing less than one per cent of the outstanding shares of any class or
series of any publicly traded company), or is an officer, director, employee or
consultant of, any person which is, or is engaged in business as, a competitor
of the Norbakco Business or Norbakco or a lessor, lessee, supplier, distributor,
sales agent or customer of the Norbakco Business or Norbakco;
(b) owns, directly or indirectly, in whole or in part, any property that
Norbakco uses in the operation of the Norbakco Business; or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, Norbakco in connection with the Norbakco Business, except for any
liabilities reflected in the Interim Norbakco Financial Statements and claims in
the ordinary and normal course of business, such as for accrued vacation pay and
accrued benefits under the Norbakco Employee Plans, the Purchased Loans and
Shareholders Loans and other than the accruals of salary and bonuses referred to
in Subsection 2.22(m) of this Schedule B.
2.31 Environmental
(a) Norbakco has been and is in compliance in all materials respects with
all applicable Hazardous Substances;
(b) Norbakco has obtained all Environmental Permits required for the
operation of the Norbakco Business. Each Environmental Permit is valid,
subsisting and in good standing and Norbakco is not in default or breach in any
material respect of any Environmental Permit and no proceeding is pending, or
threatened, to revoke or limit any Environmental Permit;
(c) Norbakco has not used or permitted to be used, except in compliance
with all Environmental Laws, the Norbakco Leased Property or facilities or any
property or
facility that it previously owned or leased, to generate, manufacture, process,
distribute, use, treat, store, dispose of, transport or handle any Hazardous
Substance;
(d) Norbakco has never received any notice of, nor been prosecuted for an
offence alleging, non-compliance with any Environmental Laws, and neither the
Vendors nor Norbakco has settled any allegation of non-compliance short of
prosecution. There are no orders or directions relating to environmental matters
requiring any work, repairs, construction or capital expenditures with respect
to the Norbakco Business or any property of Norbakco, nor has Norbakco received
notice of any of the same;
(e) To the best of the Vendors' knowledge, there are no pending or proposed
changes to Environmental Laws that would render illegal or restrict the
manufacture or sale any product manufactured or sold or service provided by
Norbakco;
(f) Norbakco has not caused or permitted, nor does it have any knowledge
of, the release, in any manner whatsoever, of any Hazardous Substance on or from
any of its properties (including the Norbakco Leased Property) or assets or any
property or facility that it previously owned or leased, or any such release on
or from a facility owned or operated by third parties but with respect to which
Norbakco is or may reasonably be alleged to have liability. All Hazardous
Substances and all other wastes and other materials and substances used in whole
or in part by Norbakco or resulting from the Norbakco Business have been
disposed of, treated and stored in compliance with all Environmental Laws;
(g) Norbakco has not received any notice that it is potentially responsible
for a federal, provincial, municipal or local clean-up site or corrective action
under any Environmental Laws. Norbakco has not received any request for
information in connection with any federal, provincial, municipal or local
inquiries as to disposal sites.
2.32 Employee Plans
Norbakco does not have any retirement, pension, stock purchase, profit
sharing, stock option or deferred compensation plans. Schedule B2.32 identifies
each insurance, medical, hospital, dental, vision care, drug, sick leave,
disability, salary continuation, legal benefits, unemployment benefits,
vacation, incentive or other compensation plan or arrangement or other employee
benefit that is maintained or otherwise contributed to, or required to be
contributed to, by Norbakco for the benefit of employees or former employees of
Norbakco (the "Norbakco Employee Plans") and a true and complete copy of each
Norbakco Employee Plan has been furnished to the Purchaser. Each Norbakco
Employee Plan has been maintained in all material respects in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulation that are applicable to such Norbakco Employee Plan.
(a) all contributions to, and payments from, each Norbakco Employee Plan
that may have been required to be made in accordance with the terms of any such
Norbakco Employee
Plan, or with the recommendation of the actuary for such Norbakco Employee Plan,
and, where applicable, the laws of the jurisdictions that govern such Norbakco
Employee Plan, have been made in a timely manner;
(b) all material reports, returns and similar documents (including
applications for approval of contributions) with respect to any Norbakco
Employee Plan required to be filed with any governmental agency or distributed
to any Norbakco Employee Plan participant have been duly filed on a timely basis
or distributed;
(c) to the knowledge of the Vendors, there are no pending investigations by
any governmental or regulatory agency or authority involving or relating to a
Norbakco Employee Plan, no threatened or pending claims (except for claims for
benefits payable in the normal operation or the Employee Plans), suits or
proceedings against any Employee Plan or asserting any rights or claims to
benefits under the Norbakco Employee Plan that could give rise to a liability
nor, to the knowledge of the Vendor and Norbakco, are there any facts that could
give rise to any liability in the event of such investigation, claim, suit or
proceeding; and
(d) no notice has been received by Norbakco of any complaints or other
proceedings of any kind involving Norbakco or, to the Vendor's or the knowledge,
any of the employees of Norbakco before any pension board or committee relating
to any Norbakco Employee Plan or to Norbakco.
2.33 Collective Agreements
Except as described in Schedule B2.32, Norbakco has not made any Contracts
with any labour union or employee association nor made commitments to or
conducted negotiations with any labour union or employee association with
respect to any future agreements and, except as set out in Schedule B2.32,
neither the Vendor nor Norbakco is aware of any current attempts to organize or
establish any labour union or employee association with respect to any employees
of Norbakco, nor is there any certification of any such union with regard to a
bargaining unit.
2.34 Employees
Schedule B2.32 contains a complete and accurate list of the names of all
individuals who are employees or sales or other agents or representatives of
Norbakco specifying:
(a) with respect to the unionized employees, the rate of hourly pay,
whether or not such employee is absent for any reason such as lay off, leave of
absence or worker's compensation; and
(b) with respect to salaried employees and sales or other agents or
representatives, the length of service, age, title, rate of salary and
commission structure for each such employee, agent or representative.
(being acknowledged that those employees listed under the heading VLRL
Management Ltd. are being employed by VLRL Management Ltd. and are providing
services to both TGF and Norbakco and that such arrangement with VLRL Management
Ltd. is to be terminated on closing and such personnel to be fixed by TGF and
Norbakco).
No notice has been received by Norbakco of any complaint filed by any of
the employees against Norbakco claiming that Norbakco has violated the
Employment Standards Act (Ontario) or the Human Rights Code (Ontario) (or any
applicable employee or human rights or similar legislation in the other
jurisdictions in which the Norbakco Business is conducted or Norbakco operates)
or of any complaints or proceedings of any kind involving Norbakco or, to the
Vendor's and Norbakco's knowledge, after due inquiry, any of the employees of
Norbakco before any labour relations board, except as disclosed in Schedule 17.
There are no outstanding orders or charges against Norbakco under the
Occupational Health and Safety Act (Ontario). All levies, assessments and
penalties made against Norbakco pursuant to the Worker's Compensation Act
(Ontario) have been paid by Norbakco and Norbakco has not been reassessed under
any such legislation during the past two (2) years.
2.35 Employee Accruals
All accruals for unpaid vacation pay, premiums for unemployment insurance,
health premiums, Canada Pension Plan premiums, accrued wages, salaries and
commissions and employee benefit play payments have been reflected in the books
and records of Norbakco.
2.36 Customers and Suppliers
Schedule B2.36 sets out the major customers of Norbakco (being those
customers of Norbakco accounting for more than 75% of sales for the twelve (12)
month period ending August 31, 1998 and there has been no termination or
cancellation of, and no modification or change in, Norbakco's business
relationship with any major customer or group of major customers. Norbakco has
no reason to believe that the benefits of any relationship with any of the major
customers or suppliers of Norbakco will not continue after the Closing Date in
substantially the same manner as prior to the date of the Agreement.
2.37 Full Disclosure
The Vendors have disclosed to the Purchaser all facts known to them
relating to the Norbakco Business and Norbakco and its assets and operations
which could reasonably be expected to be material to an intending purchaser of
the Purchased Shares.
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
WITH RESPECT TO VLRL
The Vendors severally represent and warrant to the Purchaser as follows and
acknowledge that the Purchaser is relying on such representations and warranties
in connection with its purchase of the Purchased Shares:
3.01 Organization
VLRL is a corporation duly incorporated and organized and validly
subsisting under the laws of Ontario and has the corporate power to own or lease
its property, to own the Norbakco Shares, to enter into this Agreement and to
perform its obligations hereunder. VLRL is duly qualified as a corporation to do
business in each jurisdiction in which the nature of the Business or the
property and assets owned or leased by it makes such qualification necessary.
3.02 Intentionally Deleted
3.03 No Other Agreements to Purchase
No person has any written or oral agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement or option for the purchase or acquisition from VLRL of any of the
Norbakco Shares.
3.04 Authorized and Issued Capital
The authorized capital of VLRL consists of an unlimited number of common
shares, of which 200 common shares of VLRL (and no more) have been duly issued
and are outstanding as fully paid non-assessable.
3.05 Options
Other than as contained in the Norbakco Shareholders' Agreement, no person,
firm or corporation has any agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an agreement,
including convertible securities, warrants or convertible obligations of any
nature, for the purchase, subscription, allotment or issuance of any unissued
shares or other securities of VLRL.
3.06 Ownership of Norbakco Shares
Other than the Xxxxx Norbacko Shares in respect of which VLRL is not the
beneficial owner, VLRL is the beneficial owner of record of the Norbakco Shares,
with good and marketable title thereto, free and clear of all Encumbrances and,
without limiting the generality of the foregoing, none of the Norbakco Shares
are subject to any voting trust, shareholder agreement or voting agreement other
than the Norbakco Shareholders' Agreement and other than the Xxxxx Norbakco
Shares which shares are
being held in trust by VLRL for Xxxxx. Upon completion of the transaction
contemplated by this Agreement, all of the Norbakco Shares will be owned by VLRL
as the beneficial owner of record, with a good and marketable title thereto
other than the Xxxxx Norbakco Shares, the beneficial ownership of which will be
held by the Purchaser.
3.07 No Subsidiaries
VLRL does not own and does not have any agreement of any nature to acquire,
directly or indirectly, any shares in the capital of or other equity or
proprietary interests in any person, firm or corporation other than Norbakco,
and VLRL does not have any agreements to acquire or lease any other business
operations.
3.08 No Violation
The execution and delivery of this Agreement by the Vendors and the
consummation of the transactions herein provided for will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any
obligation of VLRL under:
(i) any provision of the constating documents, by-laws or resolutions
of the board of directors (or any committee thereof) or
shareholders of VLRL;
(ii) any judgement, decree, order or award of any court, governmental
body or arbitrator having jurisdiction over VLRL;
(iii) any license, permit, approval, consent or authorization held by
VLRL or necessary to the ownership of the Norbakco Shares; or
(iv) any applicable law, statute, ordinance, regulation or rule; or
(b) the creation or imposition of any Encumbrance on any of the Norbakco
Shares or any of the property or assets of VLRL.
3.09 Business of VLRL
VLRL does not carry on or conduct any business operations and is strictly a
holding company to hold the Norbakco Shares, and the only property and assets
owned by Norbakco are the Norbakco Shares. Other than the Norbakco Shareholders'
Agreement, VLRL is not a party to any contract or agreement of any kind, no
consents are required in connection with the sale of the shares in the capital
of VLRL other than the sale by Xxxxx of his beneficial interest in the Xxxxx
Norbakco Shares and does not have any employees.
3.10 Taxes
(a) Other than in respect of those periods pre-dating VLRL commencing
carrying on business, has filed on a timely basis all tax returns required to be
filed by it in all applicable jurisdictions and has paid all taxes that are due
and payable, and all assessments, governmental charges, penalties, interest and
fines due and payable by it. Adequate provision has been made in the Interim
VLRL Financial Statements for all taxes, governmental charges and assessments,
whether relating to income, sales, real or personal property, or other types of
taxes, governmental charges or assessments, including interest and penalties
thereon, payable in respect of the business or assets of VLRL or otherwise for
all periods up to the date of the balance sheet comprising part of the unaudited
financial statements and whether or not assessed.
(b) No Canadian federal and provincial income tax assessments have been
issued to VLRL.
(c) There are no actions, suits, proceedings, investigations or claims
pending or, to the knowledge of the Vendors, threatened against, VLRL in respect
of taxes, governmental charges or assessments, nor are any material matters
under discussion with any governmental authority relating to taxes, governmental
charges, assessments or reassessments asserted by any such authority.
(d) VLRL has withheld from each amount paid or credited to any person the
amount of all taxes, governmental charges, assessments or other deductions
required to be withheld therefrom and has remitted the amounts withheld
therefrom and has remitted the amounts withheld to the proper tax or other
receiving authorities within the time required under applicable legislation.
VLRL has collected and remitted to the appropriate tax authority when required
by law to do so all amounts to be collected by them on account of the goods and
services tax or other taxes or governmental charges.
(e) There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or payment of
any tax, governmental charges or deficiency against, or the period for any
assessment or reassessment of any government charges or deficiency of, VLRL with
respect to any other matters.
(f) No tax returns or federal goods and services tax returns have been
filed by VLRL.
(g) VLRL is and has always been a Canadian-controlled private corporation,
as defined in the Income Tax Act (Canada), and has been since its incorporation.
3.11 Financial Statements
No financial statements have been prepared for VLRL. VLRL's sole assets
consist of the VLRL Norbakco Shares carried at a value of One Hundred Dollars
($100.00) and shareholder advances carried at a value of One Hundred and Forty
Thousand Dollars ($140,000.00) and VLRL's sole liability consists of Shareholder
Loans owing to Victorco and Rhysco aggregating One Hundred and Forty Thousand
Dollars ($140,000.00).
3.12 Books and Records
The books and records of VLRL set out and disclose in all material respects
in accordance with generally accepted accounting principles the financial
position of VLRL as at the date hereof and all financial transactions of VLRL
have been accurately recorded in such books and records.
3.13 Directors and Officers
Schedule B3.13 sets forth the names and titles of all the officers and
directors of VLRL.
3.14 Full Disclosure
The Vendors have disclosed to the Purchasers all facts known to them
relating to VLRL and its assets and operations which could reasonably be
expected to be material to an intending purchaser of the Purchased Shares.
THIS IS SCHEDULE C TO THE SHARE PURCHASE AGREEMENT
--------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx represents and warrants to the Purchaser as follows and acknowledges
that the Purchaser is relying on such representations and warranties in
connection with its purchase of the Victorco Shares:
1.01 Organization
Victorco is duly incorporated and organized and validly subsisting under
the laws of Ontario and has the corporate power to own or lease its property, to
carry on the Business as now being conducted by it, to enter into this Agreement
and perform its obligations hereunder. Victorco is duly qualified as a
corporation to do business in each jurisdiction in which the nature of the
business or the property and assets owned or leased by it makes such
qualification necessary.
1.02 Authorization
This Agreement has been duly executed and delivered by Xxxxxx and is a
legal, valid and binding obligation of Xxxxxx enforceable against Xxxxxx by the
Purchaser in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other laws affecting the rights of creditors
generally and except that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction.
1.03 No Other Agreements to Purchase
No person other than the Purchaser has any written or oral agreement or
option or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or acquisition from
Xxxxxx of any of the Victorco Shares.
1.04 Authorized and Issued Capital
The authorized capital of Victorco consists of an unlimited number of
common shares, of which thirty (30) common shares of Victorco (and no more) have
been duly issued and are outstanding as fully paid non-assessable.
1.05 Options
No person, firm or corporation has any agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, including convertible securities, warrants or convertible obligations
of any nature, for the purchase, subscription, allotment or issuance of any
unissued shares or other securities of Victorco.
1.06 Ownership of Victorco Shares
Xxxxxx is the beneficial owner of record of the Victorco Shares, with good
and marketable title thereto, free and clear of all Encumbrances other than
restrictions contained and, without limiting the generality of the foregoing,
none of the Victorco Shares are subject to any voting trust, shareholder
agreement of voting agreement other than restrictions contained in the TGF
Shareholders' Agreement. At the time of completion of the transaction
contemplated by this Agreement, all of the Victorco Shares will be transferred
to the Purchaser or such other person as the Purchaser may direct as the
beneficial owner of record, with a good and marketable title thereto.
1.07 No Subsidiaries
Victorco does not own and does not have any agreement of any nature to
acquire, directly or indirectly, any shares in the capital of or other equity or
proprietary interests in any person, firm or corporation other than the
Corporation and VLRL other than shares of VLRL Management Ltd. which shall be
disposed of prior to closing, and Victorco does not have any agreements to
acquire or lease any other business operations.
1.08 No Violation
The execution and delivery of this Agreement by Xxxxxx and the consummation
of the transactions herein provided for will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any
obligation of Xxxxxx or Victorco under:
(i) any provision of the constating documents, by-laws or resolutions
of the board of directors (or any committee thereof) or
shareholders of Victorco;
(ii) any judgement, decree, order or award of any court, governmental
body or arbitrator having jurisdiction over Xxxxxx or Victorco;
(iii) any contract to which Victorco or Xxxxxx is a party or by which
either of their properties are bound or any license, permit,
approval, consent or authorization held by Xxxxxx or Victorco or
necessary to the ownership of the Victorco Shares other than the
banking arrangements of TGF and Norbakco with Bank of Nova Scotia
and Business Development Bank of Canada and other than the TGF
Shareholders' Agreement; or
(iv) any applicable law, statute, ordinance, regulation or rule; or
(b) the creation or imposition of any Encumbrance on any of the Victorco
Shares or any of the property or assets of Victorco.
1.09 Business of Victorco
Victorco does not carry on or conduct any business operations and is
strictly a holding company to hold the Victorco Corp Shares and the Victorco
VLRL Shares, and the only property and assets owned by Victorco are the Victorco
Shares. Victorco is not a party to any contract or agreement of any kind, no
consents are required in connection with the sale of the shares in the capital
of Victorco and does not have any employees.
1.10 Taxes
(a) Other than tax returns for the fiscal years subsequent to March 31,
1994 which have now been only filed, Victorco has filed on a timely basis all
tax returns required to be filed by them in all applicable jurisdictions and has
paid all taxes that are due and payable, and all assessments, governmental
charges, penalties, interest and fines due and payable by them. Adequate
provision has been made in the Victorco Financial Statements for all taxes,
governmental charges and assessments, whether relating to income, sales, real or
personal property, or other types of taxes, governmental charges or assessments,
including interest and penalties thereon, payable in respect of the business or
assets of Victorco or otherwise for all periods up to the date of the balance
sheet comprising part of the unaudited financial statements and whether or not
assessed.
(b) Canadian federal and provincial income tax assessments have been issued
to Victorco covering all past periods up to and including the fiscal year ended
March 31, 1994 and these assessment, if any amounts were owing in respect
thereof, have been paid. Assessments for all other applicable federal and
provincial taxes and levies have been issued and any amounts owing thereunder
have been paid.
(c) There are no actions, suits, proceedings, investigations or claims
pending or, to the knowledge of the Vendors, threatened against, Victorco in
respect of taxes, governmental charges or assessments, nor are any material
matters under discussion with any governmental authority relating to taxes,
governmental charges, assessments or reassessments asserted by any such
authority.
(d) Victorco has withheld from each amount paid or credited to any person
the amount of all taxes, governmental charges, assessments or other deductions
required to be withheld therefrom and has remitted the amounts withheld
therefrom and has remitted the amounts withheld to the proper tax or other
receiving authorities within the time required under applicable legislation.
Victorco has collected and remitted to the appropriate tax authority when
required by law to do so all amounts to be collected by them on account of the
goods and services tax or other taxes or governmental charges.
(e) There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or payment of
any tax,
governmental charges or deficiency against, or the period for any assessment or
reassessment of any government charges or deficiency of, Victorco with respect
to any other matters.
(f) The Vendors have provided to the Purchaser a true copy of all tax
returns and all federal goods and services tax returns filed by Victorco, and
all written communications relating thereto, in respect of the five last
completed fiscal years of Victorco.
(g) Victorco is and has always been a Canadian-controlled private
corporation, as defined in the Income Tax Act (Canada), and has been since its
incorporation.
1.11 Financial Statements
The Victorco Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods, and present fairly the assets, liabilities (whether accrued,
absolute, contingent or otherwise) and financial condition of Victorco as at the
respective dates of Victorco for the respective periods covered by such
financial statements. The financial position and condition of Victorco is now at
least as good as that shown on or reflected in the Interim Victorco Financial
Statements.
1.12 Books and Records
The books and records of Victorco fairly and correctly set out and disclose
in accordance with generally accepted accounting principles the financial
position of Victorco as at the date hereof and all financial transactions of
Victorco have been accurately recorded in such books and records.
1.13 Directors and Officers
Schedule C1.13 sets forth the names and titles of all the officers and
directors of Victorco.
1.14 Full Disclosure
Xxxxxx has disclosed to the Purchaser all facts known to him relating to
Victorco and its assets and operations which could reasonably be expected to be
material to an intending purchaser of the Purchased Shares.
1.15 Purchased Loans and Shareholder Loans
Other than as disclosed in Schedule A1.02, there are no Purchased Loans or
Shareholder Loans to Xxxxxx.
