SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 10th day of May, 1999,
BETWEEN:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
of the Township of Center Wellington, in the County of Wellington
(hereinafter called "▇▇▇▇▇▇"),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
of the Township of Center Wellington, in the County of Wellington
(hereinafter called "▇▇▇▇▇▇▇")
▇▇▇▇▇▇ ▇▇▇▇▇,
of the City of Waterloo, in the Municipality of Waterloo
(hereinafter called "▇▇▇▇▇▇")
▇▇▇▇▇▇ ▇▇▇▇▇,
of the City of Waterloo, in the Municipality of Waterloo
(hereinafter called "Anjela)
(Donald, Deborah, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ being hereinafter,
individually called a "Vendor" and 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" and "IMSI")
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.
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WHEREAS the Purchaser wishes to acquire all of the issued and outstanding
shares of 1005549 Ontario Limited (herein called "Holdco");
AND WHEREAS Holdco owns all of the issued and outstanding Class A Common
Shares of D.C. Food Processing Inc. (herein called the "Corporation");
AND WHEREAS ▇▇▇▇▇▇ is the owner of (a) 50 Class B Convertible Common Shares
in the capital stock of Holdco (herein called the "▇▇▇▇▇▇ B Shares"), (b) 405
Class D Special Shares in the capital stock of Holdco (herein called the "▇▇▇▇▇▇
D Shares"), and (c) 1,000 Class E Special Shares in the capital stock of Holdco
(herein called the "▇▇▇▇▇▇ E Shares"; the ▇▇▇▇▇▇ B Shares, the ▇▇▇▇▇▇ D Shares
and the ▇▇▇▇▇▇ E Shares are herein collectively called the "▇▇▇▇▇▇ Shares");
AND WHEREAS ▇▇▇▇▇▇▇ is the owner of 50 Class B Convertible Common Shares in
the capital stock of Holdco (herein called the "▇▇▇▇▇▇▇ Shares");
AND WHEREAS ▇▇▇▇▇▇ is the owner of (a) 50 Class B Convertible Common Shares
in the capital stock of Holdco (herein called the "▇▇▇▇▇▇ B Shares"), (b) 405
Class D Special Shares in the capital stock of Holdco (herein called the "▇▇▇▇▇▇
D Shares"), and (c) 1,000 Class E Special Shares in the capital stock of Holdco
(herein called the "▇▇▇▇▇▇ E Shares"; the ▇▇▇▇▇▇ B Shares, the ▇▇▇▇▇▇ D Shares
and the ▇▇▇▇▇▇ E Shares herein collectively called the "▇▇▇▇▇▇ Shares");
AND WHEREAS Anjela is the owner of 50 Class B Convertible Common Shares in
the capital stock of Holdco (herein called the "Anjela Shares"); and
AND WHEREAS the Purchaser wishes to purchase the ▇▇▇▇▇▇ Shares, the ▇▇▇▇▇▇▇
Shares, the ▇▇▇▇▇▇ Shares and the Anjela Shares (herein collectively called the
"Purchased Shares") from Donald, Deborah, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ respectively, and
each Vendor wishes to sell his or her Purchased Shares to the Purchaser on the
terms and conditions herein set forth;
THIS AGREEMENT WITNESS THAT in consideration of the mutual covenants,
agreements, representations, warranties and indemnities herein contained and for
other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged by each party,) the parties hereto hereby covenant and agree
as follows:
ARTICLE I
INTERPRETATION
1.01 Defined Terms
All capitalized terms used in this Agreement and not defined in the recitals to
this Agreement shall
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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.
1.04 Number, Gender and Persons
In this Agreement, 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 Agreement shall be construed, interpreted and enforced in accordance
with, and the
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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 is hereby
declared to be separate, severable and distinct.
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. No party may assign any of its rights or
obligations hereunder without the prior written consent of the other parties.
1.11 Amendments 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 attached to this Agreement are incorporated into
this Agreement by reference and are deemed to be part hereof:
Schedule A - Defined Terms
Schedule B - Representations and Warranties of the Vendors with respect
to Holdco
Schedule C - Representations and Warranties of the Vendors with respect
to the Corporation
Schedule D - Representations and Warranties of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
Schedule E - Representations and Warranties of ▇▇▇▇▇▇ and Anjela
Schedule F - Representations and Warranties of the Purchaser
Schedule G - Representations and Warranties of IMSC and the Purchaser
Schedule 2.03 - Allocation of Purchase Price
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Schedule 4.01(i) - Non-Competition and Non-Solicitation Agreement for
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
Schedule 4.01(j) - Form of Opinion of ▇▇▇▇▇▇, Hanbidge & ▇▇▇▇▇▇
Schedule 4.01(l) - Form of Release
Schedule 4.02(s) - Registration Rights Agreement
Schedule 4.02(i) - Form of Opinion of Purchaser's Counsel and U.S. Counsel
to the Purchaser
Schedule A1.01(e) - Audited Financial Statements
Schedule A1.01(jj) - Interim Financial Statements
Schedule A1.01(oo) - Permitted Encumbrances
Holdco
Schedule B1.10 - Location of Real Property
Schedule B1.10 - Real Property Leases
Schedule B1.13 - Insurance Policies
Schedule B1.15 - Contracts
Schedule B1.16 - Licenses and Permits
Schedule B1.17 - Consents and Approvals
Schedule B1.20 - Absence of Changes
Schedule B1.25 - Accounts and Attorneys
Schedule B1.26 - Directors and Officers
Corporation
Schedule C1.13 - Intellectual Property
Schedule C1.16 - Contracts
Schedule C1.17 - Licences
Schedule C1.18 - Consents and Approvals
Schedule C1.21 - Absence of Changes
Schedule C1.25 - Accounts and Attorneys
Schedule C1.26 - Directors and Officers
Schedule C1.30 - Employee Plans and Employee Matters
Schedule C1.34 - Major Customers
Purchaser
Schedule F1.09 - Litigation
IMSC and Purchaser
Schedule G1.01 - Organization
Schedule G1.05 - Reserved Common Shares
Schedule G1.08 - Litigation
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Schedule G1.09 - No Subsidiaries
Schedule G1.11 - Encumbrances of IMSC and Purchaser
Schedule G1.14 - Consolidated Financial Statement of IMSC
Schedule G.1.15 - Absence of Changes
Schedule G1.16 - Taxes
Schedule G1.17 - Non-Arm's Length Transactions
Schedule G1.19 - Issuance of Shares
1.13 Best of Knowledge
Any reference in this Agreement to "the best of the knowledge" of a party
or parties or to "the best of the knowledge and belief" of a party or parties,
will be deemed to mean the actual knowledge of the party or parties and the
knowledge which they would have had if they had conducted a reasonably prudent
inquiry into the subject matter.
1.14 Materiality
In this Agreement, "material" when used to describe a contract, lease or
other agreement, means:
(a) in the case of Holdco, 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 $10,000.00 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, at the Closing Time, each of
the Vendors shall sell, assign and transfer to the Purchaser and the Purchaser
shall purchase the Purchased Shares owned by the Vendor.
2.02 Purchase Price
The aggregate purchase price payable by the Purchaser to the Vendors for
the Purchased Shares (the "Purchase Price") shall be an amount equal to the sum
of:
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(a) $6,345,000.00 and
(b) an amount equal to the greater of (i) the Adjusted EBITDA of the
Corporate Entities for the period from and including December 7, 1998
to and including December 31, 1999 (the "1999 Period"), and (ii) zero;
and
(c) an amount equal to the greater of:
(1) four times the Adjusted EBITDA of the Corporate Entities for the
one year period ending March 31, 2002 or December 31, 2002 (such
period to be selected by the Vendors as hereinafter provided in
this Section 2.02), minus (A) $6,000,000.00, and (B) an amount
equal to the greater of (i) the Adjusted EBITDA of the Corporate
Entities for the 1999 Period, and (ii) zero, and
(2) zero.
With respect to Section 2.02(c)(1), the Vendors shall have the right during the
fifteen (15) day period following delivery to the Vendors of the financial
statements for the period ending March 31, 2002 to elect to have the Purchase
Price determined based upon the Adjusted EBITDA of the Corporate Entities for
the one year period ending March 31, 2002, by delivery of a notice in writing to
the Purchaser to such effect failing which the Vendors shall be deemed to have
the Purchase Price determined based upon the Adjusted EBITDA for the Corporate
Entities for the one year period ending December 31, 2002.
If the Adjusted EBITDA of the Corporate Entities is determined on a period
ending on December 31st, the determination shall be based upon the audited
consolidated financial statements of the Corporate Entities. If the Adjusted
EBITDA of the Corporate Entities is determined on a period ending on other than
December 31st, then the Purchaser shall determine in its absolute discretion
whether such financial statements are audited statements or review statements.
For the purposes of this Agreement "Adjusted EBITDA of the Corporate Entities"
shall mean the consolidated earnings before interest, income taxes, depreciation
and amortization, as calculated in accordance with Canadian generally accepted
accounting principles and past practice, including actual management salaries
and bonuses paid (but notwithstanding the foregoing, only 50 percent of the
salary and bonuses paid during the relevant period to ▇▇▇▇▇▇ and ▇▇▇▇▇▇),
adjusted by adding back any inter-company management fees or allocations of
overhead expenses that are expensed subsequent to the Closing Date for the
relevant period, the intent of the parties being that the Purchase Price should
be based on a "normalized" EBITDA of the business carried on by the Corporate
Entities. For the purpose of the Adjusted EBITDA calculations, if any expenses
are charged to the Corporate Entities by an Affiliate of either of the Corporate
Entities, for services not reasonably required in the normal course of the
Corporate Entities business and past practice, such expenses shall not be
included in the Adjusted EBITDA calculations.
Page 8
The Vendors will have the right to have KPMG review and comment on the Adjusted
EBITDA calculations to be made to determine the Purchase Price. The costs for
the KPMG review and comment for the 1999 Period and the one year period ending
March 31, 2002 or December 31, 2002, as the case may be, will be considered
non-recurring expenses for the purpose of calculating the Adjusted EBITDA. Such
costs shall be paid by the Corporation provided that such costs shall not exceed
the aggregate amount of $7,500.00 for all such reviews and comments. Such costs
in the excess of the aggregate amount of $7,500.00 for KPMG services rendered in
connection with the aforesaid reviews and comment shall be for the account of
the Vendors.
2.03 Payment of Purchase Price
The Purchaser shall satisfy the Purchase Price as follows:
(a) The Cash Amount. $4,000,000.00 by delivery at the Closing Time of certified
cheques in immediately available funds to or to the order of the Vendors
according to the entitlements of the Vendors set out in Schedule 2.03;
(b) Non-Escrowed Class X Shares. $500,000.00 by the delivery at the Closing Time
of 190,476 Class X Shares registered according to the entitlements of the
Vendors set out in Schedule 2.03;
(c) Escrowed Class X Shares. $1,845,000.00 by the delivery at the Closing Time
of 702,857 Class X Shares registered according to the entitlements of the
Vendors set out in Schedule 2.03;
(d) 1999 Period Amount. By the delivery at the Closing Time of 250,000 Class E
Series 1 Shares registered according to the entitlements of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
set out in Schedule 2.03, and 250,000 Class E Series 2 Shares registered
according to the entitlements of ▇▇▇▇▇▇ and Anjela set out in Schedule 2.03.
(e) The March 31, 2002 or December 31, 2002 EBITDA Amount. By the delivery at
the Closing Time of 250,000 Class E Series 3 Shares registered according to the
entitlements of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ set out in Schedule 2.03, and 250,000 Class E
Series 4 Shares registered according to the entitlements of ▇▇▇▇▇▇ and Anjela
set out in Schedule 2.03.
(f) Advance of Purchase Price Calculation. Subject to the provisions of this
section, the Vendors shall have the right to have determined the Adjusted EBITDA
of the Corporate Entities, as at a period ending prior to the end of the 1999
Period and March 31, 2002 (or December 31, 2002) and, accordingly the portion of
the Purchase Price calculated pursuant to Section 2.02(b) (if then not
determined), and Section 2.02(c) (if then not determined):
(a) in the event of the death, permanent disability or termination of
employment, without
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cause, of either of ▇▇▇▇▇▇ or ▇▇▇▇▇▇;
(b) in the event ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is not the Chief Executive Officer of
IMSC; or
(c) in the event that a take-over bid for IMSC, results in a single
shareholder acquiring more than fifty percent of the issued and
outstanding voting shares of IMSC (not including the Common Shares or
the Class N Shares that would be acquired by the Vendors upon the
exchange of their Class X Shares and Class E Shares).
Upon the occurrence of any of the events specified above and subject to the next
following paragraph, the Vendors shall have the right to elect to determine the
Adjusted EBITDA of the Corporate Entities as at a period ending prior to the end
of the 1999 Period and March 31, 2002 (or December 31, 2002), as the case may
be, and such right shall continue for a sixty (60) day period following the date
of such event, after which if such election is not exercised, such right shall
be at an end with respect to such event.
In the event of the death, permanent disability or termination of employment
without cause, of either of ▇▇▇▇▇▇ or ▇▇▇▇▇▇, the right to elect set forth above
shall only apply with respect to the Class E Shares held by the Vendor and such
Vendor's spouse that has suffered the death, permanent disability or termination
of employment without cause.
If one or more of the Vendors elect to determine the Adjusted EBITDA of the
Corporate Entities as at a period ending prior to the end of the 1999 Period or
March 31, 2002 (or December 31, 2002) upon the occurrence of the event described
in subparagraph (a) above, the escrow periods in Section 2.05 with respect to
the Class X Shares and Class E Shares held by such Vendors shall be shall not
apply with respect to the Class X Shares and Class E Shares held by such Vendors
that make such election and such shares shall be immediately released from
escrow.
If one or more of the Vendors elect to determine the Adjusted EBITDA of the
Corporate Entities as at a period ending prior to the end of the 1999 Period or
March 31, 2002 (or December 31, 2002) upon the occurrence of the event described
in paragraphs (b) above, the escrow periods in Section 2.05 with respect to the
Class X Shares and Class E Shares held by such Vendors shall not apply with
respect to the Class X Shares and Class E Shares held by such Vendors that make
such election and such shares shall be immediately released from escrow.
If one or more of the Vendors elect to determine the Adjusted EBITDA of the
Corporate Entities as at a period ending prior to the end of the 1999 Period or
March 31, 2002 (or December 31, 2002) upon the occurrence of the event described
in paragraph (c) above, the escrow periods in Section 2.05 with respect to the
Class X Shares and Class E Shares held by such Vendors shall not apply with
respect to the Class X Shares and Class E Shares held by such Vendors that make
such election and such shares shall be immediately released from escrow.
For greater certainty, in the event that such fifty percent is achieved, the
Vendors shall have the right
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to sell the Class X Shares, the Class E Shares or the Common Shares acquired
upon an exchange of Class X Shares or Class E Shares.
Upon the occurrence of an event described in subparagraph (a), (b) or (c) above
and one or more of the Vendors (herein called the "Electing Vendors") elect to
determine the Adjusted EBITDA of the Corporate Entities as at a period ending
prior to the end of the 1999 Period or March 31, 2002 (or December 31, 2002) the
portion of the Purchase Price referred to in Section 2.02 (b) (if at the time of
the event then not determined), and Section 2.02(c) (if at the time of the event
then not determined) shall be determined as follows:
(1) during the ninety (90) day period following the date of the occurrence
of the triggering event, the Purchaser and the Electing Vendors shall
have good faith discussions to seek to negotiate the amount that the
Purchaser and the Electing Vendors are prepared to accept as the
Adjusted EBITDA for the Corporate Entities for the relevant period;
and
(2) failing a negotiated agreement pursuant to the preceding paragraph (1)
during such ninety (90) day period, then the matter shall be
determined by arbitration in accordance with the provisions of Section
2.07 on the basis that the arbitrator shall determine the portion of
the Purchase Price referred to in Section 2.02(b) and Section 2.02(c),
as required, based upon the reasonably expected results and Adjusted
EBITDA for the relevant period that the Corporate Entities would have
achieved had the triggering event not occurred.
(g) Class N Shares. On the Closing Date the Vendors shall be issued for a
nominal subscription price, that number of Class N Shares equal to the number of
Class X Shares issued to the Vendors pursuant to Sections 2.03(b) and (c). The
Vendors agree that at the time of the conversion of the Class X Shares into
Common Shares, an equivalent number of Class N Shares shall be surrendered by
the relevant Vendor or Vendors to IMSC for cancellation.
Upon determination of the number of Common Shares into which the Vendors are
entitled to exchange their Class E Shares, IMSC shall issue to the Vendors an
equivalent number of Class N Shares for a nominal subscription price. Each of
the Vendors agree that at the time of conversion of Class E Shares into Common
Shares, an equivalent number of Class N Shares will be surrendered by the Vendor
to IMSC for cancellation.
2.04 Subsection 85(1) Election Under the Tax Act
In connection with the sale and transfer of the Purchased Shares, the
Vendors and the Purchaser shall do, sign, execute and file at the time
prescribed all things, forms and documents necessary or desirable in order to
make joint statutory elections pursuant to the provisions of Subsection 85(1) of
the Tax Act. The Vendors and the Purchaser agree that the elected amount
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for the Purchased Shares to be used in the joint statutory elections shall be
such amount as the Vendors advise, provided that if so requested by any of the
Vendors, the Purchaser will execute and file amended elections to amend any
elected amount. The costs of any such amended election shall be borne by the
Vendor or Vendors, as the case may be, which costs shall include reasonable
professional fees incurred by the Purchaser.
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2.05 Escrow of Class X Shares and Class E Shares
On the Closing Date, the Vendors shall enter into an escrow agreement with
the Purchaser and IMSC, in form and substance satisfactory to the Vendors and
the Purchaser, which will provide that the Class X Shares received by the
Vendors pursuant to section 2.03(c) and the Class E Shares received pursuant to
sections 2.03(d) and 2.03(e), including any Common Shares received by the
Vendors in accordance with the rights, privileges, restrictions and conditions
attached to such Class X Shares and Class E Shares, shall be held in escrow and
released as follows:
(a) with respect to the Class X Shares received pursuant to Section
2.03(c) as follows:
1/3 released April 1, 2000
1/3 released April 1, 2001 and
1/3 released April 1, 2002
(b) with respect to the Class E Shares received pursuant to Section
2.03(d) as follows:
1/3 released December 31, 2000
1/3 released December 31, 2001 and
1/3 released December 31, 2002
(c) with respect to the Class E Shares received pursuant to Section
2.03(e) as follows:
(i) if the Adjusted EBITDA used for the calculation of the
Purchase Price in Section 2.02(c)(1) for the one year period is
elected by the Vendors to be March 31, 2002 then as follows:
1/3 released April 1, 2003
1/3 released April 1, 2004
1/3 released April 1, 2005
(ii) if the Adjusted EBITDA used for the calculation of the
Purchase Price in Section 2.02(c)(1) for the one year period is
elected by the Vendors to be December 31, 2002 then as follows:
1/3 released January 1, 2004
1/3 released January 1, 2005
1/3 released January 1, 2006
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In the event that securities regulators have additional escrow requirements
relating to the Class X Shares and Class E Shares specified in paragraphs (a),
(b) and (c) above, the Vendor's agree to comply with such requirements.
The Class X Shares, the Class E Series 1 Shares and the Class E Series 3 Shares
(including any Common Shares received upon an exchange of Class X Shares, Class
E Series 1 Shares and Class E Series 3 Shares) of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, shall be
immediately released from escrow in the event of the death, permanent disability
or termination of the employment of ▇▇▇▇▇▇ by the Corporation without cause. The
first right of first refusal provided for in section 2.06 shall continue to
apply to such shares. The Class X Shares, the Class E Series 2 Shares and the
Class E Series 4 Shares (including any Common Shares received upon an exchange
of Class X Shares and Class E Series 2 Shares and the Class E Series 4 Shares)
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall be immediately released from escrow in the event of
the death, permanent disability or termination of the employment of ▇▇▇▇▇▇ by
the Corporation without cause. The right of first refusal provided in section
2.06 shall continue to apply to such shares.
The share held in escrow shall be immediately released from escrow in the event
that:
(a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is not the President and Chief Executive Officer of
the Purchaser; or
(b) a take over bid results in a single shareholder acquiring more than
fifty percent of the issued and outstanding voting shares of IMSC
(determined on a basis including the voting shares in IMSC held by the
Vendors at the time).
2.06 Right of First Refusal
The Vendors further agree that the Class X Shares and Class E Shares issued
to the Vendors pursuant to sections 2.03(b), 2.03(c), 2.03(d) and 2.03(e)
(including any Common Shares received upon an exchange of the Class X Shares and
the Class E Shares) shall be subject to a right of first refusal in favour of
the Purchaser and IMSC in the event that any Vendor wishes to sell any of such
shares other than for estate and/or tax planning purposes.
2.07 Arbitration
Any dispute between the parties with respect to the determination of
Adjusted EBITDA of the Corporate Entities shall be submitted to arbitration in
accordance with the following provisions:
(a) such arbitration shall be conducted by a single arbitrator who shall
be a professional accountant who is a partner with Ernst & Young or
its successor who shall be appointed by mutual agreement of the
parties, or in the event the parties are unable to agree upon an
arbitrator within ten (10) days, such arbitrator shall be appointed by
Page 14
a Judge of the Ontario Court (General Division) upon the application
of any of the parties. In either case, 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 all reasonable
efforts shall be made to ensure that the arbitration award is rendered
within thirty (30) days of the submission of such dispute to
arbitration;
(c) the arbitration shall take place in Toronto, Ontario;
(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 the 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 arbitration shall proceed in accordance with the provisions of the
Arbitrations Act (Ontario).
2.08 Covenants and Restrictions
During the period commencing the Closing Date and ending on the date
selected by the Vendors pursuant to Section 2.02(c) being either March 31, 2002
or December 31, 2002 (the "Period") the Purchaser shall provide the Corporate
Entities with additional capital and if necessary, replacement bank financing
for the reasonable expansion of the Waterloo, Ontario plant and facilities and
for marketing the products of the Corporate Entities in the United States and
Canada during the Period. The Purchaser acknowledges that the Corporate Entities
have forecasted capital expenditures for the twelve month period ending December
31, 1999 which aggregate approximately $2 million and that such capital
expenditures are in support of a forecast of increased business and a properly
formulated operating budget.
During the Period, the Purchaser shall refer to the Corporate Entities, all
business acquired by the Purchaser and its Affiliates, during the Period for
individual quick frozen and batter breaded products and all bundled meals for
which the Corporate Entities are producing the major protein component to the
extent of the Corporate Entities plant capacities. In the event that the
Corporate Entities decline to accept any business referred to the Corporate
Entities by the Purchaser, the Corporate Entities shall advise the Purchaser by
notice in writing within three (3) Business Days of the date of referral of the
business to the Corporate Entities. Subject to adverse economic conditions and
adjustments agreed to by ▇▇▇▇▇▇ and ▇▇▇▇▇▇, the Purchaser will preserve in all
material respects the ability of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ to operate the Corporate
Entities during the Period to maximize
Page 15
the Adjusted EBITDA of the Corporate Entities. During the Period, IMSC covenants
and agrees, save for the amalgamation of Holdco and the Corporation which the
Purchaser shall have the right to do, to preserve Holdco and the Corporation as
separate entities and shall not knowingly permit Holdco or the Corporation to
enter into a transaction that would knowingly adversely effect Adjusted EBITDA
of the Corporate Entities.
During the Period, IMSC shall not issue or otherwise become bound to issue
Common Shares or any securities that are convertible into or exchangeable for
Common Shares, at a price below net book value per Common Share without the
prior written approval of the Vendors.
2.09 Vendors' Nominee for Director.
Provided that the Vendors give to the President of IMSC during the thirty
day period following the date of this Agreement, notice in writing of the name
of the Vendor's nominee for director of IMSC, IMSC shall during the Period,
include as a nominee by management for the board of directors of IMSC in respect
of each shareholders' meeting at which directors are to be elected, a nominee of
the Vendors for election to the board of directors of IMSC. Prior to his
election to the board, the Vendor's nominee shall be entitled to attend and
shall receive notice of all meetings of the board and will be provided the same
information as provided to the directors in respect of any such meeting.
Provided that the Vendors give notice of their nominee for director as set
forth above, IMSC shall elect to the board of directors of the Purchaser during
the Period, the nominee of the Vendors' which it is required to include as a
nominee for the board of directors of IMSC.
The Vendors' shall be responsible for and ensure that it's nominee from
time to time is qualified to hold office as a director of IMSC and the Purchaser
as required by all applicable laws, regulations and administrative authorities
save with respect to the matter of residence.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall be entitled to participate as members of the
Purchaser's Advisory Board during the Period.
ARTICLE III
COVENANTS
3.01 Access to Holdco and the Corporation
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
Page 16
and all other material documents, information or data relating to Holdco, the
Corporation and the Business. The Vendors shall afford the Purchaser and its
authorized representatives every reasonable opportunity to have reasonable
access to the Business and the property, assets, undertaking, records and
documents of Holdco and the Corporation. At the request of the Purchaser, the
Vendors shall execute or cause to be executed such consents, authorizations and
directions as may be necessary to permit any inspection of the Business, and any
property of Holdco and the Corporation 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 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
(b) auditors, solicitors or any other persons engaged or previously
engaged to provide services to the Corporation who have knowledge of
matters relating to the Corporation and the Business.
In particular, without limitation, the Vendors shall permit the Purchaser's
representatives or consultants, at the Purchaser's cost, to conduct such testing
and inspection in respect of environmental matters at the location of the
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 to conduct, and the Corporation shall conduct, in
co-operation with the representatives or consultants of the Purchaser, such
physical review of the equipment of the Business as is necessary so as to enable
the confirmation of the values carried on the respective balance sheets of the
Corporation 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 Vendors and the Corporation hereunder,
which shall continue in full force and effect as provided herein.
3.02 Access to Purchaser and IMSC
The Purchaser and IMSC shall forthwith make available to the Vendors and
their authorized representatives and, if requested by the Vendors, provide a
copy to the Vendors of all title documents, contracts, financial statements,
minute books, share certificate books, share registers, plans, reports,
licences, orders, permits, books of account, accounting records, constating
documents and all other material documents, information or data relating to the
Purchaser and IMSC and the business currently and heretofore carried on by IMSC,
the Purchaser and their Affiliates (hereinafter in this Section the "Business").
The Purchaser and IMSC shall afford the Vendors and their authorized
representatives every reasonable opportunity to have reasonable access to the
Business and the property, assets, undertaking, records and documents of the
Purchaser and IMSC. At the reasonable request of the Vendors, the Purchaser and
IMSC shall execute or cause to be executed such consents, authorizations and
directions as may be necessary to permit any inspection of the
Page 17
business and any property of the Purchaser and IMSC or to enable the Vendors or
their authorized representatives to obtain full access to all material files and
records relating to the Purchaser and IMSC and any of the assets of the
Purchaser and IMSC maintained by governmental and other public authorities. At
the Vendors' request, the Purchaser and IMSC shall co-operate with the Vendors
in arranging any such meetings as the Vendors should reasonably request with:
(a) employees of the Purchaser, IMSC and their Affiliates; and
(b) auditors, solicitors or any other persons engaged or previously
engaged to provide services to the Purchaser and IMSC who have
knowledge of matters relating to the Purchaser or IMSC and the
business.
The exercise of any rights of inspection by or on behalf of the Vendors under
this section 3.02 shall not mitigate or otherwise affect the representations and
warranties of the Purchaser or IMSC hereunder, which shall continue in full
force and effect.
3.03 Delivery of Books and Records
At the Closing Time there shall be delivered to the Purchaser, by the
Vendors all of the books and records of and relating to Holdco, the Corporation
and the Business. The Purchaser agrees that it will preserve the books and
records so delivered to it for a period of six (6) 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.
3.04 Delivery of Documents
The Vendors shall deliver to the Purchaser at the Closing Time all
necessary transfers, 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.
3.05 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.
3.06 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.
Page 18
3.07 Conduct After Closing
The Purchaser acknowledges that the Purchase Price will be significantly
affected by the performance of the Corporate Entities after the Closing. During
the Period, the Purchaser and IMSC shall not inhibit ▇▇▇▇▇▇ and ▇▇▇▇▇▇ from
conducting the Business after Closing in accordance with prudent business
practice and in a manner so as to permit the Adjusted EBITDA to be earned for
the relevant period on the basis of the normal course of business of the
Business, consistent with past practices.
The Purchaser and the Vendors also acknowledge that in addition to the
Audited Financial Statements, the Purchaser will require audited consolidated
financial statements for the periods ending December 6, 1996 and December 7,
1997. The cost of the preparation of the financial statements for the periods
ending December 6, 1996 and December 7, 1997, shall be for the account of the
Purchaser.
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 Tax Act.
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 Closing Time:
(a) Representations and Warranties. The representations and warranties of
the Vendors contained in this Agreement shall be true and correct in all
material respects at the Closing Time, 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
Page 19
complied with or performed by the Vendors at or before the Closing Time shall
have been complied with or performed, in all material respects, 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;
Page 20
(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 B1.17 hereto;
(d) Contractual Consents. The Vendors shall have been given or obtained the
notices, consents and approvals described in the Schedule B1.17 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 Interim Financial Statements.
(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;
(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 Holdco and the
Corporation shall have occurred from the date hereof to the Closing Time;
(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 ▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel for the Purchaser, acting
reasonably;
(i) Non-Competition Agreement. Each of ▇▇▇▇▇▇▇ and Anjela shall have
executed and delivered to the Purchaser a non-competition and non-solicitation
agreement substantially 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
favourable opinions of ▇▇▇▇▇▇, Hanbidge & ▇▇▇▇▇▇ and ▇▇▇▇▇▇ & ▇▇▇▇▇▇, in the
form substantially annexed hereto as Schedule 4.01(j);
(k) Resignation of Directors and Officers. Such directors and officers of
Holdco and the Corporation as the Purchaser may specify shall have resigned in
favour of nominees of the Purchaser effective as of the Closing Time;
(l) Release by Vendors, Directors and Officers. The Vendors and such
directors and
Page 21
officers of Holdco and the Corporation as the Purchaser may specify shall have
executed and delivered, at the Closing Time, releases in favour of Holdco, the
Corporation and the Purchaser substantially in the form annexed hereto as
Schedule 4.01(l);
(m) Employment Agreement. The Corporation shall have entered into an
employment agreement with each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, in form and substance
satisfactory to the Purchaser;
(n) Share Escrow Agreement. The Vendors shall have entered into the escrow
agreement as contemplated by Section 2.05, in form and substance satisfactory to
the Purchaser;
(o) Right of First Refusal Agreement. The Vendors shall have entered into
an agreement granting a right of first refusal as contemplated by Section 2.06,
in form and substance satisfactory to the Purchaser; and
(p) Put Agreement. The Vendors and the Purchaser shall have entered into a
put agreement with respect to the shares of the Purchaser acquired by the
Vendors pursuant to Section 2.03(d), in form and substance satisfactory to the
Purchaser.
If any of the conditions contained in this section 4.01 shall not be
performed or fulfilled at or prior to the Closing Time 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 Closing Time:
(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 Closing Time, 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
Closing Time 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,
Page 22
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, in each
case in form and substance satisfactory to the Vendors, acting reasonably;
(d) Contractual Consents. The Vendors shall have been given or obtained the
notices, consents and approvals described in Schedule B1.17 hereto, in each case
in form and substance satisfactory to the Vendors.
(e) Material Adverse Changes. There shall have been no material adverse
changes in the condition (financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of any of IMSC or any of the IMSC
Subsidiaries, since December 31, 1998.
(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;
(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 IMSC or any of the IMSC
Subsidiaries shall have occurred from the date hereof to the Closing Time;
(h) 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 ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Vendors,
acting reasonably;
(i) Legal Opinion. The Purchaser shall have delivered to the Vendors a
favourable opinion of ▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇, Canadian counsel to the
Purchaser, and U.S. Counsel to the Purchaser, substantially in the forms annexed
hereto as Schedule 4.02(i); and
(j) Guarantee. The Vendors shall have been released unconditionally from
all guarantees with respect to the indebtedness of Holdco and the Corporation;
(k) Support Agreement. The Purchaser, IMSC and the Vendors shall have
entered into and delivered a support agreement which shall provide for, among
other things, the exchange of Class X Shares and Class E Shares for Common
Shares, in form and substance satisfactory to the Vendors;
(l) Employment Agreement. The Corporation shall have entered into
employment
Page 23
agreements with each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, in form and substance satisfactory to
▇▇▇▇▇▇ and ▇▇▇▇▇▇, as the case may be;
Page 24
(m) Undertaking of ▇▇▇▇▇▇. The undertaking of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in favour
of the Vendors, with respect to the sale of IMSC and IMSI shares controlled,
directly or indirectly by him, in form and substance satisfactory to the
Vendors;
(n) IMSI Shares. The rights, privileges, restrictions and conditions
attaching to the share capital of IMSI, including the Class X Shares and the
Class E Shares shall be in form and substance satisfactory to the Vendors;
(o) Repayment of Vendor's Advances. On or before the Closing Date, Holdco
shall have repaid any outstanding advances made by each of the Vendors to
Holdco, in an aggregate principal amount of approximately $130,000;
(p) Share Escrow Agreement. The Vendors and the Purchaser shall have
entered into the escrow agreement contemplated by Section 2.05 of this Agreement
in form and substance satisfactory to the Vendors;
(q) Right of First Refusal Agreement. The Purchaser shall have entered into
an agreement granting the Purchaser a right of first refusal as contemplated by
Section 2.06, in form and substance satisfactory to the Vendors;
(r) Put Agreement. The Vendors and the Purchaser shall have entered into a
put agreement with respect to the shares of the Purchaser acquired by the
Vendors pursuant to Section 2.03(d), in form and substance satisfactory to the
Vendors;
(s) Registration Rights Agreement. The Vendors, the Purchaser and IMSC
shall have entered into a registration rights agreement in substantially the
form attached to this Agreement as Schedule 4.02(s); and
(u) Financing Agreements. The Purchaser or IMSC shall have secured a
financing commitment with a Canadian chartered bank which provides a working
capital facility for IMSC and the Subsidiaries.
If any of the conditions contained in this section 4.02 shall not be
performed or fulfilled at or prior to the Closing Time 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.
Page 25
ARTICLE V
CLOSING ARRANGEMENTS
5.01 Place of Closing
The closing shall take place at the Closing Time at the offices of ▇▇▇▇▇▇▇▇
Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel for the Purchaser, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or such other place in Kitchener, Ontario as the Purchaser
may designate.
5.02 Closing
At the Closing Time, 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 and will cause transfers
of such shares to be duly and regularly recorded in the name of the Purchaser.
Subject to all other terms and conditions hereof being complied with, payment of
the Purchase Price 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-time 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.
5.04 Professional Costs
Each of the parties agree that they shall be responsible for their
respective legal and other professional costs incurred in connection with
negotiating and completing the transactions provided for herein. For greater
certainty the Vendors shall pay for all professional fees incurred with respect
to any reorganization of the Corporate Entities completed by the Vendors prior
to the Closing Date and advice and professional services relating thereto
provided to the Vendors.
If financial statements relating to the Corporate Entities are included in
any prospectus, registration statement or other offering document, the costs
associated with making any changes to such financial statements as may be
required by any securities regulatory authority shall be for the account of the
Purchaser. In addition, the fees and expenses of KPMG relating to any such
prospectus, registration statement or other offering document shall also be for
the account of the Purchaser.
Page 26
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.01 Survival of Representations and Warranties of the Vendors
To the extent that they have not been fully performed at or prior to the
Closing Time, 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 and shall continue in full force and effect for the
benefit of the Purchaser for the applicable time limitation period,
notwithstanding such closing, nor any investigation made by or on behalf of the
Purchaser, except that:
(a) the representations and warranties set out in sections 1.01, 1.02, 1.03
and 1.04 of Schedule B, sections 1.01, 1.02, 1.03 and 1.04 of Schedule C,
sections 1.01, 1.02, 1.03 and 1.04 of Schedule D and section 1.01, 1.02, 1.03
and 1.04 of Schedule E (and the corresponding representations and warranties set
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 of the Vendors contained in section
1.21 of Schedule B and section 1.22 of Schedule C (and the corresponding
representations and warranties set out in the Closing Certificates) shall
survive the closing of the transactions contemplated hereby and continue in full
force and effect until, but not beyond, the expiration of the period, if any,
during which an assessment, reassessment or other form of recognized document
assessing liability for tax, interest or penalties under applicable tax
legislation in respect of any taxation year to which such representations and
warranties extend could be issued under such tax legislation to Holdco or the
Corporation, provided Holdco or the Corporation did not file any waiver or other
document extending such period;
(c) the representations and warranties set out in sections 1.05 to 1.20 and
1.22 to 1.29 of Schedule B, sections 1.05 to 1.21 and 1.23 to 1.34 of Schedule
C, sections 1.05 and 1.06 of Schedule D and sections 1.05 and 1.06 of Schedule E
(and the corresponding representations and warranties set out in the Closing
Certificates) shall survive closing and continue in full force and effect until
the third anniversary of the Closing Date; and
(d) 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 Survival of Representations and Warranties of the Purchaser and IMSC
Page 27
To the extent that they have not been fully performed at or prior to the
Closing Time, the covenants, representations and warranties of the Purchaser and
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 and shall continue in full force and effect for
the benefit of the Vendors for the applicable time limitation period,
notwithstanding such closing, nor any investigation made by or on behalf of the
Vendors, except that:
(a) the representations and warranties set out in section 1.01 of Schedule
F and section 1.01 of Schedule G (and the corresponding representations and
warranties set out in the certificates to be delivered pursuant to subsection
4.02(a) (the "Closing Certificates")) shall survive and continue in full force
and effect without limitation of time;
(b) the representations and warranties of IMSC and the Purchaser contained
in section 1.16 of Schedule G (and the corresponding representations and
warranties set out in the Closing Certificates) shall survive the closing of the
transactions contemplated hereby and continue in full force and effect until,
but not beyond, the expiration of the period, if any, during which an
assessment, reassessment or other form of recognized document assessing
liability for tax, interest or penalties under applicable tax legislation in
respect of any taxation year to which such representations and warranties extend
could be issued under such tax legislation to IMSC or any of the IMSC
Subsidiaries, provided IMSC or any of the IMSC Subsidiaries did not file any
waiver or other document extending such period;
(c) all other representations and warranties of the Purchaser and IMSC in
Schedule F and Schedule G (and the corresponding representations and warranties
set out in the Closing Certificates) shall survive closing and continue in full
force and effect until the third anniversary of the Closing Date; and
(d) 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.
ARTICLE VII
INDEMNIFICATION
7.01 Indemnification by the Vendors
Subject to Section 7.02, 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:
Page 28
(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 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 the Corporation existing at the Closing
Time, including any liabilities for federal, provincial, sales excise, income,
corporate or any other taxes of the Corporation for any period up to and
including the Closing Time, and not disclosed on, provided for or included in
the balance sheets forming part of the Audited Financial Statements, except
those liabilities disclosed in this Agreement or any Schedule hereto or accruing
or incurred subsequent to the balance sheet date of such Audited Financial
Statements in the ordinary course of the Business; and
(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 the Corporation in respect of pollution, contamination
or other environmental matters, caused or arising or otherwise existing at or
prior to the Closing Time, 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 Maximum Liability of the Vendors
The Vendors will not have any liability with respect to matters described
in Section 7.01 until the total of all Losses with respect to such matters
exceeds $25,000.00, whereupon the Vendors will be liable on a dollar for dollars
basis for the total amount of all Losses. The maximum aggregate liability of the
Vendors, collectively, under this Agreement shall not exceed $4,000,000.00.
7.03 Indemnification by the Purchaser and IMSC
(a) The Purchaser and IMSC jointly and severally agree 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 or IMSC of or any inaccuracy of any
representation or
Page 29
warranty contained in this Agreement or in any agreement, certificate or other
document delivered pursuant hereto (provided that the Purchaser and IMSC shall
not be required to indemnify or save harmless the Vendors in respect of any
breach or inaccuracy of any representation or warranty unless the Vendors shall
have provided notice to the Purchaser or IMSC in accordance with section 7.03 on
or prior to the expiration of the applicable time period related to such
representation and warranty set out in section 6.02);
(ii) any breach or non-performance by the Purchaser or 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 hereto.
(iii) all debts, liabilities or contracts whatsoever (whether accrued,
absolute contingent or otherwise) of IMSC or any of the IMSC Subsidiaries,
existing at the Closing Time, including any liabilities for federal, state,
provincial, sales excise, income, corporate or any other taxes of IMSC or any of
the IMSC Subsidiaries for any period up to and including the Closing Time, and
not disclosed on, provided for or included in the balance sheets forming part of
the Audited Consolidated Financial Statements of IMSC for the period ending
December 31, 1998 attached hereto as Schedule G1.14, except those liabilities
disclosed in this Agreement or any Schedule hereto or accruing or incurred
subsequent to the balance sheet date of such Audited Consolidated Financial
Statements in the ordinary course of business; and
(iv) any claims, demands, judgments, orders, duties imposed by law or by
administration action or other obligations or liabilities of any kind whatsoever
suffered or incurred by IMSC or any of the IMSC Subsidiaries in respect of
pollution, contamination or other environmental matters, caused or arising or
otherwise existing at or prior to the Closing Time , whether or not disclosed in
this Agreement or any Schedule hereto or otherwise known to the Vendors or to
their representatives or within the power of the Vendors or their
representatives to discover.
7.04 Maximum Liability of the Purchaser and IMSC
The Purchaser and IMSC will not have liability with respect to matters
described in Section 7.03 until the total of all Losses with respect to such
matters exceed $25,000.00, whereupon the Purchaser and IMSC will be liable on a
dollar for dollar basis for the total amount of all Losses. The maximum
aggregate liability of the Purchaser and IMSC under this Agreement shall not
exceed $4,000,000.00.
7.05 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 or parties (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
Page 30
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.
7.06 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.
7.07 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 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
Page 31
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.
7.08 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.
7.09 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).
7.10 Set-Off
Neither the Purchaser nor IMSC shall have the right to satisfy any amount
from time to time owing by it to any of the Vendors by way of set-off against
any amount from time to time owing by any of the Vendors to the Purchaser or
IMSC pursuant to this Agreement or any agreement, certificate or other document
delivered pursuant hereto. Notwithstanding anything to the contrary contained in
this Agreement, the sole recourse of the Purchaser and IMSC for amounts from
time to time owing by any of the Vendors to the Purchaser or IMSC pursuant to
this Agreement or any agreement, certificate or other document delivered
pursuant hereto, shall be limited to the Class X Shares, Class E Shares and
Common Shares of the Vendors that have not been released from escrow pursuant to
the terms of the escrow agreement contemplated by Section 2.05 hereof. For
greater certainty, recourse may not be had by the Purchaser or IMSC against any
other property, assets or rights of the Vendors.
Any amounts owing by any of the Vendors to the Purchaser pursuant to this
Agreement or any agreement, certificate or other documents delivered pursuant
hereto, shall be set-off against the Common Shares, Class X Shares and Class E
Shares of the Vendors (the "Vendors' Shares") that have not been released from
escrow pursuant to the escrow agreement entered into pursuant to Section 2.05.
The Purchaser shall have the right to demand by notice in writing to the
Vendors that:
(a) the Vendors sell a number of the Vendors' Shares as may be required to
satisfy the
Page 32
payment of the amount owing to the Purchaser, or
(b) the Vendors surrender to the Purchaser such number of the Vendors'
Shares as may be required to satisfy the payment of the amount owing
to the Purchaser based on the Current Market Price (as defined in the
articles of amendment of the Purchaser) of the Common Shares.
To satisfy the payment of amounts owing by any of the Vendors to the
Purchaser, with respect to the Vendors' Shares,
(i) the Common Shares shall first be used to satisfy such amounts, and if
there are no Common Shares or insufficient Common Shares in escrow to
satisfy any such amounts, then Class X Shares shall be used to satisfy
such amounts or part thereof; and
(ii) if there are any such amounts owing and there are no Common Shares or
Class X Shares in escrow available to satisfy such amounts then, upon
the Common Share exchange multiple having been determined for one or
more of the series of the Class E Shares, then such Series of Class E
Shares shall be used to satisfy such amounts owing.
IMSC and the Purchaser shall authorize and approve the release from escrow
of the necessary number of Vendors' Shares (herein called the "Released Shares")
required to be released from escrow to satisfy amounts owing by any of the
Vendors to the Purchaser and IMSC pursuant to this Agreement or any agreement,
certificate or other document delivered pursuant hereto.
The Released Shares shall then be dealt with as follows:
(1) in the event that the Purchaser has elected to have the Released
Shares surrendered, then the Vendors shall surrender the Released
Shares to the Purchaser, or
(2) if the Purchaser has elected to receive cash in satisfaction of
amounts owing to it hereunder, the Released Shares shall, if not
Common Shares, be exchanged for Common Shares and the Vendors shall
sell the Released Shares into the market and the proceeds shall be
used to satisfy amounts owing to the Purchaser. If the net proceeds
from the Released Shares are not sufficient to pay to the Purchaser
the amount owing, then additional Vendors Shares shall be released as
required to satisfy the amount due to the Purchaser.
If the Class E Shares are required to satisfy amounts that are owing to the
Purchaser and the number of Common Shares for which the Class E Shares may be
exchanged has not yet been
Page 33
determined, the amounts owing to the Purchaser shall accrue interest until such
time as the exchange multiple is determined at which time the liquidation of the
Vendors' Shares shall occur to the extent required to pay the amount due to the
Purchaser plus interest calculated quarterly, not in advance, at the prime rate
of interest of the Purchaser's banker.
The Vendors shall deliver to the Purchaser that number of Class N Shares
equal to the aggregate number of Common Shares represented by the Released
Shares.
7.11 Exclusivity
The provisions 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
If the transactions contemplated herein are not consummated, the Purchaser
and IMSC shall return to the Vendors any confidential schedules, documents or
other written information obtained from the Vendors, Holdco or the Corporation,
whether received before or after the date of this Agreement. 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 connection with the transactions contemplated herein.
If the transactions contemplated herein are not consummated, the Vendors
shall return to the Purchaser any confidential schedules, documents or other
written information obtained from the Purchaser, whether received before or
after the date of this Agreement. In the event that the transactions
contemplated herein are not consummated for any reason, the Vendors covenant and
agree that, except as otherwise authorized by the Purchaser, neither the Vendors
nor their representatives, agents or employees will disclose to third parties,
directly or indirectly, any confidential information or confidential data
relating to the Purchaser and IMSC discovered by the Vendor or its
representatives as a result of the Purchaser and IMSC making available to the
Vendor and their representatives the information requested by them in connection
with the transactions contemplated herein.
Page 34
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:
Page 35
(i) if to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇:
R.R. #1
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
with a copy to :
▇▇▇▇▇▇ & Elliot
Scotia Plaza, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to ▇▇▇▇▇▇ and Anjela:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
with a copy to :
▇▇▇▇▇▇ & Elliot
Scotia Plaza, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) if to the Purchaser:
International Menu Solutions Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Q.C.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iv) if to IMSC:
International Menu Solutions Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Page 36
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Q.C.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Any such notice or other communication shall be deemed to have been
given and 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.
Except as otherwise expressly provided for herein, 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 parties hereto shall issue any such press
release or make any such public announcement without the prior consent of the
other parties, 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
Page 37
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 or sale of the Purchased
Shares shall be made by any party hereto without the prior consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
8.07 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.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------------
Witness ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------------
Witness ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------- ----------------------------------------
Witness ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------- ----------------------------------------
Witness ▇▇▇▇▇▇ ▇▇▇▇▇
INTERNATIONAL MENU
SOLUTIONS INC.
Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: President
-------------------------------
INTERNATIONAL MENU SOLUTIONS
CORPORATION
Per: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: President
-------------------------------