EXHIBIT 16.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 31st day of March, 2004.
BETWEEN:
BIO-ONE CORPORATION
(the "PURCHASER")
THE FIRST PARTY
AND:
INTERACTIVE NUTRITION INC.
(the "VENDOR")
THE SECOND PARTY
AND:
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(the "PRINCIPALS")
THE THIRD PARTY
WHEREAS:
(1) The Vendor beneficially owns and controls all the issued and
outstanding shares of Interactive Nutrition International
Inc., a corporation governed by the laws of Canada (the
"Company").
(2) The Vendor desires to sell, and the Purchaser desires to
purchase, all of the issued and outstanding shares of the
Company in accordance with the terms set forth in this
Agreement.
(3) The Principals own all the issued and outstanding shares of
the Vendor.
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND CURRENCY
1.01 DEFINITIONS
In this Agreement:
"ACCOUNTING FIRM" means ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP;
"AFFILIATE" has the meaning given in the Business Corporations
Act;
"BALANCE SHEET" means the balance sheet of the Company as at
December 31, 2003 forming part of the Financial Statements;
"BUSINESS CORPORATIONS ACT" means the Canada Business
Corporations Act;
"BUSINESS DAY" means a day, other than a Saturday or Sunday,
on which the principal commercial banks located at Ottawa,
Ontario are open for business during normal banking hours;
"CLAIMS" means any claim, demand, action, cause of action,
damage, loss, cost, liability or expense, including, without
limitation, reasonable legal fees and all costs incurred in
investigating or pursuing any of the foregoing or any
proceeding relating to of any of the foregoing;
"CLOSING" means the completion of the sale to and purchase by
the Purchaser of the Purchased Shares under this Agreement by
the transfer and delivery of documents of title to the
Purchased Shares as contemplated in this Agreement;
"CLOSING DATE" means the date hereof;
"CLOSING TIME" means 11 o'clock a.m. Ottawa, Ontario time, on
the Closing Date or such other time on such date as the
parties may agree as being the time of Closing;
"CONTROL" has the meaning given in the Business Corporations
Act;
"CONVERTIBLE PROMISSORY NOTE" has the meaning provided in
SECTION 2.01(3);
"ENCUMBRANCES" means any pledge, lien, restriction, charge,
security agreement, lease, title retention agreement,
mortgage, encumbrance, option or adverse claim, of any kind or
character whatsoever;
"ENVIRONMENT" means the environment or natural environment as
defined in any Environmental Law and includes, without
limitation, air, surface, water, ground water, land surface,
soil, subsurface strata, a sewer system and the environment in
the workplace;
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"ENVIRONMENTAL APPROVALS" means all permits, certificates,
licences, authorizations, consents, instructions,
registrations, directions or approvals issued or required by
Governmental Authorities pursuant to Environmental Laws with
respect to the business, assets or operation of the Company;
"ENVIRONMENTAL LAWS" means all applicable federal, provincial
and local laws, by-laws, rules, regulations, orders and
judgments as well as any protocols, codes, guidelines and
policies established and used by Governmental Authorities for
the purpose of interpreting or applying any of the foregoing,
relating in full or in part to the protection of the
Environment, product liability, and employee and public health
and safety, and includes, without limitation, those
Environmental Laws relating to the storage, generation, use,
handling, manufacture, processing, labeling, advertising,
sale, display, transportation, treatment, Release and disposal
of Hazardous Substances;
"FINANCIAL STATEMENTS" means the unaudited financial
statements of the Company for the fiscal year ended December
31, 2003, consisting of the Balance Sheet and the statements
of income, retained earnings and cash flows and all notes
thereto as reported upon by the Accounting Firm, a copy of
which is attached as SCHEDULE 3.09;
"GOVERNMENTAL AUTHORITIES" means all applicable Canadian or
foreign federal, provincial, state and municipal agencies,
ministries, or departments;
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste,
liquid waste, industrial waste, hazardous waste, hazardous
substance, hazardous material, toxic substance, dangerous
substance or dangerous good as defined, judicially interpreted
or identified in any Environmental Law;
"INTELLECTUAL PROPERTY" means all patents, copyrights,
trade-marks, trade-names, industrial designs (including
applications for all of the foregoing and renewals, divisions,
extensions and reissues, where applicable, relating thereto),
inventions, licences, trade secrets, patterns, drawings,
software, technical information, research data, concepts,
methods, procedures, designs, knowhow, and all other
intellectual property owned by or licenced to the Company;
"LEASED PREMISES" means the leased premises which are the
subject of the Premises Lease;
"MATERIAL CONTRACT" means any contract or commitment, whether
oral or written, involving an aggregate payment to or by the
Company in excess of $10,000 or any commitment to or by the
Company that may reasonably extend beyond one (1) year;
"NOTE SECURITY" has the meaning provided in SECTION 2.01(3);
"OPERATION AGREEMENT" has the meaning provided in SECTION
7.01;
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"PERMITTED ENCUMBRANCES" means (a) any Encumbrances or other
minor imperfections of title which are not in the aggregate
material in respect of the Company and which do not materially
impair the use of the property or assets subject thereto, and
(b) the Encumbrances listed as Permitted Encumbrances on
SCHEDULE 3.25;
"PERSON" means any individual, sole proprietorship,
partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate,
and a natural person in his capacity as trustee, executive,
administrator, or other legal representative;
"PREDECESSOR" includes, for any corporation: (a) any body
corporate or other entity that has been merged into, or
combined with the corporation or any other body corporate or
other entity, to form the corporation (or a predecessor
thereof) in any manner whatsoever including by way of
amalgamation, arrangement or continuance; and (b) any
subsidiaries of the corporation (including a predecessor
within the meaning of subsection (a) above) which has been
wound up or dissolved;
"PREMISES LEASE" means the premises leases and sub-lease
referred to in SCHEDULE 3.32;
"PURCHASE PRICE" means the amount to be paid for the Purchased
Shares as set forth in SECTION 2.01 (1);
"PURCHASED SHARES" means 101 Class A Common Shares of the
Company representing all of its issued and outstanding shares;
"RELATED ENTITY" means any partnership, co-tenancy, joint
venture, trust or other entity in which the Company is a
member, partner, beneficiary, trustee or other participant;
"RELEASE" has the meaning prescribed in any Environmental Law
and includes, without limitation, releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, dumping, depositing,
spraying, burying, abandoning, incinerating, seeping, or
placing;
"REMEDIAL ORDER" means any administrative complaint,
direction, order or sanction issued, filed or imposed by
Governmental Authorities pursuant to any Environmental Laws
and includes, without limitation, any order requiring any
remediation or clean-up of any Hazardous Substance, or
requiring that any Release or any other activity be reduced,
modified or eliminated;
"TAX RETURNS" includes, without limitation, all returns,
reports, declarations, elections, filings, information returns
and statements filed in respect of Taxes; and
"TAXES" includes, without limitation, all taxes, duties, fees,
premiums, assessments, imposts, levies and other charges of
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any kind whatsoever imposed by any taxing or other
governmental authority or agency within or outside of Canada,
together with all interest, penalties, fines, additions to tax
or other additional amounts imposed in respect thereof,
including, without limitation, those levied on, or measured by
or referred to as income, gross receipts, profits, capital,
transfer, sales, goods and services, use, value-added, excise,
stamp, withholding, business, franchising, property, payroll,
employment, health, social services, education and social
security taxes, all surtaxes, all customs duties and import
and export taxes, all license, franchise and registration fees
and all unemployment insurance, health insurance and Canada,
Quebec and other government pension plan premiums.
1.02 CURRENCY
All references to dollar amounts in this Agreement or any schedule
hereto shall mean the lawful currency of Canada.
1.03 BEST OF KNOWLEDGE
The phrase "to the best of the Company's knowledge" and similar
expressions shall mean and be interpreted with respect to the Vendor
as being limited to the knowledge, information and belief of the
Vendor's officers or the knowledge, information and belief such
Vendor's officers would have had after reasonable inquiry.
ARTICLE 2
PURCHASE AND SALE
2.01 ACTION BY VENDOR AND PURCHASER
At the Closing Time:
(1) The Vendor shall sell and the Purchaser shall purchase the
Purchased Shares for an aggregate purchase price of Fifteen
Million Dollars ($15,000,000) as adjusted pursuant to
SECTION 2.02 (the "Purchase Price").
(2) The Vendor shall transfer and deliver to the Purchaser at
the Closing share certificates representing the Purchased
Shares duly endorsed in blank for transfer, or accompanied
by irrevocable security transfer powers of attorney duly
executed in blank, in either case by the holders of record
thereof, and shall take such steps as shall be necessary to
cause the Company to enter the Purchaser or its nominee(s)
upon the books of the Company as the holder of the Purchased
Shares and to issue one or more share certificates to the
Purchaser or its nominee(s) representing the Purchased
Shares.
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(3) The Purchaser shall pay the Purchase Price at the Closing by
the issuance of a convertible promissory note in the form
attached hereto as SCHEDULE 2.01(3)(A) (the "Convertible
Promissory Note") for which the Company shall be jointly and
severally liable and which shall be secured by: (a) a Share
Pledge Agreement against 20% of the Purchased Shares (the
"Share Pledge Agreement"); and (b) a first-ranking (provided
the Vendor discharges the existing bank security at the
Closing Time) General Security Agreement (the "General
Security Agreement") against all the assets of the Company,
in the forms attached as SCHEDULES 2.01(3)(B) AND
2.01(3)(C), respectively.
2.02 PURCHASE PRICE ADJUSTMENT
As part of the Purchase Price, the Vendor shall be entitled to
receive and the Purchaser covenants that it will pay an amount of
$3,500,000 provided that the net sales of the Company as reported on
by its independent accountants exceed $40,000,000 in any one of the
four (4) years following the Closing Date. The obligations of the
Purchaser pursuant to this SECTION 2.02 which are in recognition of a
corresponding increase to the underlying goodwill of the Company are
contained in SCHEDULE 2.02 which is incorporated herein by reference.
ARTICLE 3
VENDOR'S AND PRINCIPALS' REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as hereafter provided in
this Article 3, and the Principals jointly and severally with the Vendor
represent and warrant to the Purchaser as hereafter provided in SECTIONS 3.03,
3.09, and 3.29 only:
3.01 INCORPORATION AND REGISTRATION
The Company is a corporation duly incorporated and validly existing
under the laws of Canada and has all necessary corporate power,
authority and capacity to own its property and assets (including,
without limitation, the property and assets shown in the Balance
Sheet) and to carry on its business as presently conducted. Neither
the nature of its business nor the location or character of the
property owned or leased by the Company requires the Company to be
registered, licensed or otherwise qualified as an extra-provincial or
foreign corporation or to be in good standing in any jurisdiction
other than in the Province of Ontario where it is duly registered,
licensed or otherwise qualified and in good standing for such
purpose.
3.02 SUBSIDIARIES
The Company has no subsidiaries within the meaning of the Business
Corporations Act.
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3.03 RIGHT TO SELL
The Vendor is a corporation duly incorporated and validly existing
under the laws of Ontario. The Vendor is the sole beneficial owner of
the Purchased Shares and has the exclusive right to dispose of the
Purchased Shares as provided in this Agreement and such disposition
will not violate, contravene, breach or offend against or result in
any default under any indenture, mortgage, lease, agreement,
obligation, instrument, charter or by-law provision, statute,
regulation, order, judgment, decree, licence, permit or law to which
the Vendor is a party or subject or by which the Vendor is bound or
affected. The Vendor is the holder of record of all the Purchased
Shares free and clear of all Encumbrances (other than the rights of
the Purchaser under this Agreement and those Encumbrances listed in
SCHEDULE 3.25 which will be discharged within seven Business Days
after Closing) and will deliver to the Purchaser on Closing good and
valid title to all of the Purchased Shares free and clear of all
Encumbrances. The Purchased Shares are not subject to the terms of
any shareholders agreement.
3.04 CAPITALIZATION
The Company is authorized to issue an unlimited number of Class A
Common, Class B Common, Class C Preferred and Class D Preferred
Shares, of which 101 Class A Common Shares have been issued to the
Vendor and are outstanding as fully paid and non-assessable shares of
the Company. No options, warrants or other rights to purchase shares
or other securities of the Company and no securities or obligations
convertible into or exchangeable for shares or other securities of
the Company have been authorized or agreed to be issued or are
outstanding.
3.05 DUE AUTHORIZATION
The Vendor has all necessary corporate power, authority and capacity
to enter into this Agreement and to carry out its obligations under
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have
been duly authorized by all necessary corporate action on the part of
the Vendor.
3.06 ENFORCEABILITY OF OBLIGATIONS
This Agreement constitutes a valid and binding obligation of the
Vendor enforceable against it in accordance with the terms hereof,
subject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy or similar proceedings and to
the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are
sought.
3.07 ABSENCE OF CONFLICTING AGREEMENTS
The Company is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, obligation, instrument,
charter or by-law provision, statute, regulation, judgment, decree,
licence, permit or law which would be violated, contravened, breached
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by or under which default would occur or under which any payment or
repayment would be accelerated as a result of the execution and
delivery of this Agreement or the consummation of any of the
transactions provided for in this Agreement.
3.08 REGULATORY APPROVALS
No governmental or regulatory authorization, approval, order, consent
or filing is required other than a notification requirement under the
Investment Canada Act on the part of the Vendor or the Company in
connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered under
the terms of this Agreement or the performance of the Vendor's or the
Company's obligations under this Agreement or any other documents and
agreements to be delivered under the terms of this Agreement.
3.09 FINANCIAL STATEMENTS
The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with that of the preceding period and present fairly:
(1) all of the assets, liabilities and financial position of the
Company as at December 31, 2003; and
(2) the sales, net income, retained earnings and cash flows for
the 12-month period ended December 31, 2003.
3.10 NET WORTH
At December 31, 2003, the book value of the assets of the Company,
the total liabilities of the Company and the net book equity of the
Company were as set forth in the Financial Statements.
3.11 ABSENCE OF UNDISCLOSED LIABILITIES
Since the date of the Balance Sheet, the Company has not incurred any
liabilities or obligations (whether accrued, absolute, contingent or
otherwise), except as incurred in the ordinary course of business.
3.12 ABSENCE OF CHANGES
Since the date of the Balance Sheet there has not been:
(1) any material change in the condition or operations of the
business, assets or financial condition of the Company other
than changes in the ordinary and usual course of business,
none of which has been, or in the aggregate would be,
materially adverse; or
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(2) any damage, destruction, loss, labour trouble or other
event, development or condition of any character (whether or
not covered by insurance) materially and adversely affecting
the business, assets, properties or future prospects of the
Company.
3.13 ABSENCE OF UNUSUAL TRANSACTIONS
Since the date of the Balance Sheet the Company has not:
(1) transferred, assigned, sold or otherwise disposed of any of
the assets shown in the Balance Sheet or cancelled any debts
or claims except, in each case, in the ordinary and usual
course of business;
(2) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and
liabilities incurred in the ordinary and usual course of
business;
(3) issued or sold any shares in its capital or any warrants,
bonds, debentures or other corporate securities of the
Company or issued, granted or delivered any right, option or
other commitment for the issuance of any such securities;
(4) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than
liabilities included in the Balance Sheet and liabilities
incurred since the date of the Balance Sheet in the ordinary
and usual course of business;
(5) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital or
purchased or redeemed any such shares thereof or effected
any subdivision, consolidation or reclassification of any
such shares;
(6) suffered an operating loss or any extraordinary loss, waived
or omitted to take any action in respect of any rights of
substantial value, or entered into any commitment or
transaction not in the ordinary and usual course of business
where such loss, rights, commitment or transaction is or
would be material in relation to the Company;
(7) amended or changed or taken any action to amend or change
its articles or by-laws;
(8) except as described in SCHEDULE 3.13(8), granted any
bonuses, whether monetary or otherwise, or made any general
wage or salary increases in respect of personnel which it
employs;
(9) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or
property, whether tangible or intangible; or
(10) authorized, agreed or otherwise become committed to do any
of the foregoing.
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3.14 RESERVES AND ACCRUALS
Where reserves and accrued liabilities have been disclosed on or
reflected in the Financial Statements, such reserves and accruals are
sufficient in all respects to provide for the liabilities in respect
of which they have been established.
3.15 NON-ARM'S LENGTH INDEBTEDNESS
No director or officer, former director or officer, shareholder or
employee of the Company or any other Person not dealing at arm's
length with the Company or the Vendor will at the Time of Closing
have any outstanding indebtedness to or from the Company.
3.16 NO JOINT VENTURE INTERESTS, ETC.
The Company is not a partner, co-tenant, joint venturer or otherwise
a participant in any partnership, joint venture, co-tenancy or other
similar jointly owned business undertaking and the Company has no
other significant investment interests in any business owned or
controlled by any third party.
3.17 ABSENCE OF GUARANTEES
The Company has not given or agreed to give, nor is it a party or
bound by, any guarantee or indemnity in respect of indebtedness, or
other obligations, of any Person, or any other commitment by which
the Company is, or is contingently, responsible for such indebtedness
or other obligations.
3.18 GOVERNMENT GRANTS
The Company is not the recipient from any Governmental Authorities of
any grants or other forms of assistance.
3.19 BUSINESS IN COMPLIANCE WITH LAW
The operations of the Company are being and have been conducted in
compliance with all applicable laws, rules, regulations, judgments,
government authorizations and orders and decrees of each jurisdiction
in which they operate or have operated. Except as described in
SCHEDULE 3.19, there are no governmental authorizations, orders,
permits, licences or approvals required by law to enable the Company
to carry on its business operations. To the best of the Company's
knowledge, there is no pending or proposed law, rule, regulation,
judgment, government authorization, order or decree which would
require the Company to obtain a governmental authorization, order,
permit, license or approval to enable it to carry on its operations
as currently conducted.
3.20 RESTRICTIVE COVENANTS
Except as disclosed in SCHEDULE 3.20, the Company is not a party to
or bound or affected by any commitment, agreement or document
containing any covenant which expressly limits the freedom of the
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Company to compete in any line of business, transfer or move any of
its assets or operations or which materially or adversely affects the
business practices, operations or conditions of the Company or the
continued operation of its business after the Closing.
3.21 SUPPLIERS AND CUSTOMERS
No contract or agreement with any supplier or customer of the Company
will terminate or be terminable by the supplier or customer, as a
result of the transfer of the Purchased Shares as contemplated in
this Agreement and no supplier or customer intends, to the best of
the Company's knowledge, to terminate or seek a renegotiation of its
relationship with the Company as a result of the transfer of the
Purchased Shares as contemplated in this Agreement.
3.22 TAX MATTERS
(1) In this Section, a reference to the Company shall include a
reference to every Predecessor in respect of the Company.
(2) Each of the Company and any Related Entity has duly and
timely filed its Tax Returns with the appropriate taxing or
other governmental authority or agency and has duly,
completely and correctly reported all income and all other
amounts and information required to be reported thereon.
(3) Each of the Company and any Related Entity has duly and
timely paid all Taxes, including all installments on account
of Taxes for the current year, that are due and payable by
it and the Company has established reserves that are
reflected on the Balance Sheet that are adequate for the
payment by the Company of all Taxes that are not yet due and
payable (and that will not be due and payable by the Closing
Date) and that relate to periods ending on or prior to the
Closing Date.
(4) Each of the Company and any Related Entity has not
requested, or entered into any agreement or other
arrangement or executed any waiver providing for, any
extension of time within which (a) to file any Tax Return
covering any Taxes for which the Company or a Related Entity
is or may be liable; (b) to file any elections, designations
or similar things relating to Taxes for which the Company or
a Related Entity is or may be liable; (c) the Company or a
Related Entity is required to pay or remit any Taxes or
amounts on account of Taxes; or (d) any taxing or other
governmental authority or agency may assess or collect Taxes
for which the Company or a Related Entity is or may be
liable.
(5) The Canadian federal and provincial income and capital tax
liabilities of each of the Company and any Related Entity
has been assessed by the relevant taxing authorities and
notices of assessment have been issued to each such entity
by the relevant taxing authorities for all taxation years
prior to and including the taxation year ended December 31,
2002.
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(6) There are no actions, suits, proceedings, investigations,
audits or claims now pending or, to the best of the
Company's knowledge, threatened against the Company or any
Related Entity in respect of any Taxes and there are no
matters under discussion, audit or appeal with any taxing or
other governmental authority or agency relating to Taxes.
(7) Each of the Company and any Related Entity has duly and
timely withheld from any amount paid or credited by it to or
for the account or benefit of any Person, including, without
limitation, any of its employees, officers and directors and
any non-resident Person, the amount of all Taxes and other
deductions required by any applicable law, rule or
regulation to be withheld from any such amount and has duly
and timely remitted the same to the appropriate taxing or
other governmental authority or agency.
(8) Except as specifically disclosed in writing to the
Purchaser, for purposes of the Income Tax Act (Canada) or
any applicable provincial or municipal taxing statute, no
Person or group of Persons has ever acquired or had the
right to acquire control of the Company or any Predecessor
thereof.
3.23 TAX DATA
Complete and accurate information relating to income tax matters
affecting the Company have been made available to the Purchaser and
its representatives.
3.24 RESIDENCE OF THE VENDOR
The Vendor is not a non-resident of Canada for purposes of the Income
Tax Act (Canada).
3.25 TITLE TO ASSETS
The Company is the absolute beneficial owner of, and has good and
valid title to, all its properties, interests in properties and
assets, real and personal, including without limitation those
reflected in the Balance Sheet or acquired since the date of the
Balance Sheet (except as since transferred, sold or otherwise
disposed of in the ordinary and usual course of business), free and
clear of all Encumbrances, other than those listed on SCHEDULE 3.25.
3.26 CONDITION OF ASSETS
All material tangible assets of the Company are in good condition,
repair and (where applicable) proper working order, having regard to
the use and age of such assets.
3.27 INVENTORIES
All inventories of raw materials, work-in progress, finished goods,
operating supplies and packaging materials of the Company are valued
at the lower of cost, using the first in, first out method, or net
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realizable value and such inventories are, merchantable, usable and
saleable and in quantities usable and saleable in the ordinary course
of business.
3.28 COLLECTABILITY OF ACCOUNTS RECEIVABLE
The accounts receivable recorded on the Balance Sheet or acquired
subsequent to the date thereof by the Company either have been
collected or are good and collectible at the aggregate recorded
amounts (subject to no defence, counterclaim or set off), except to
the extent of any reserves provided for such accounts in the Balance
Sheet, or in the case of any accounts receivable acquired subsequent
to the date of the Balance Sheet, except as provided for in the books
and records of the Company, in each case as adjusted in the ordinary
and usual course of business.
3.29 INTELLECTUAL PROPERTY
(1) SCHEDULE 3.29 sets forth a complete and correct list and
brief description of all patents, trade-marks, copyright,
industrial designs and other Intellectual Property that is
material to the Company. The compact disk delivered by the
Vendor to the Purchaser at the Closing Time contains a true,
complete and accurate description of all the recipes used by
the Company.
(2) Except as disclosed in SCHEDULE 3.29, the Company has the
sole and exclusive right to use and is the sole and
exclusive registered owner of all right, title and interest
in and to the Intellectual Property (with no breaks in the
chain of title thereof). The Company has all right, title
and interest in and to the Intellectual Property. The
Intellectual Property that is not owned by the Company is
being used by the Company only with the consent of or
license from the rightful owner thereof and all such
licenses are in full force and effect.
(3) The Intellectual Property is in full force and effect and
has not been used or enforced or failed to be used or
enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Intellectual
Property.
(4) Except as set forth in SCHEDULE 3.29, to the best of the
Company's knowledge there exists no claim of adverse
ownership, invalidity or other opposition to or conflict
with any Intellectual Property nor of any pending or
threatened suit, proceeding, claim, demand, action or
investigation of any nature or kind against the Company
relating to the Intellectual Property which, if determined
adversely to the Company, might materially and adversely
affect the properties, business, future prospects or
financial condition of the Company.
(5) Except as set forth in SCHEDULE 3.29, to the best of the
Company's knowledge: (a) no activity in which the Company is
engaged; (b) no product which the Company manufactures, uses
or sells; (c) no process, method, packaging, advertising, or
material that the Company employs in the manufacture,
marketing or sale of any such product; and (d) no use of any
of the Intellectual Property breaches, violates, infringes
or interferes with any rights of any third party or requires
payment for the use of any patent, trade-name, trade secret,
trade-▇▇▇▇, copyright or other intellectual property right
or technology of another.
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3.30 EQUIPMENT CONTRACTS
The Company is not a party to any motor vehicle lease, equipment
lease, conditional sales contract, title retention agreement or any
other similar type of agreement.
3.31 REAL PROPERTY
The Company does not own or have any interest in any real property
except for its interest as lessee of the Leased Premises as described
in the Premises Lease.
3.32 PREMISES LEASE
The Company is not a party to any lease of real property except for
the premises leases and sublease described in SCHEDULE 3.32
(collectively referred to as the "Premises Lease"). Except as
disclosed in SCHEDULE 3.32:
(1) The interest held by the Company as tenant or subtenant
under the Premises Lease is free and clear of all liens,
charges and Encumbrances.
(2) All payments required to be paid by the Company pursuant to
the Premises Lease have been duly paid and the Company is
not otherwise in default in meeting their respective
obligations under the Premises Lease.
(3) The head landlord under the Premises Lease is not in default
in meeting any of its obligations under the Premises Lease
or either of them, and there is no default by the Vendor or
the Company under the Premises Lease.
(4) No event exists which, but for the passing of time or the
giving of notice, or both, would constitute a default by
either party to the Premises Lease, and no party to a
Premises Lease is claiming any such default or taking any
action purportedly based upon any such default.
(5) The Company has not waived, or omitted to take any action in
respect of any substantial rights under the Premises Lease
or either of them.
(6) The sublease of the Leased Premises on Kaladar Avenue dated
January 2, 2002 was fully and properly entered into with the
head landlord's consent and otherwise in accordance with the
head lease.
3.33 ENVIRONMENTAL MATTERS
(1) To the best of the Company's knowledge, all operations of
the Company conducted on the Leased Premises have been and
are in compliance with all Environmental Laws. Any Release
14
by the Company of any Hazardous Substance into the
Environment complied and complies with all Environmental
Laws.
(2) All Environmental Approvals required to be held by the
Company have been obtained, are valid and in full force and
effect, have been and are being complied with, and there
have been and are no proceedings commenced or threatened to
revoke or amend any Environmental Approvals.
(3) The Company has not been nor is it the subject of any
Remedial Order, nor to the best of the Company's knowledge,
has: (a) any investigation or evaluation been commenced as
to whether any such Remedial Order is necessary; (b) there
been any threat of any such Remedial Order; or (c) there
been any circumstance which could result in the issuance of
any such Remedial Order.
(4) The Company has not been prosecuted for or convicted of any
offence under Environmental Laws. The Company has not been
found liable in any proceeding to pay any fine or judgment
to any person (including, without limitation, any Person or
Governmental Authorities), as a result of any Release or
threatened Release of any Hazardous Substance into the
Environment or the breach of any Environmental Law. To the
best of the Company's knowledge, there is no basis for any
such civil or criminal proceeding to be commenced against
the Company.
(5) The Company has not used any part of the Leased Premises as
a landfill or for the disposal of waste.
(6) The Company does not use or store in or on the Leased
Premises any equipment, waste or other material containing
polychlorinated biphenyls (PCBs).
(7) All material environmental data and studies (including,
without limitation, the results of any environmental audit)
relating to the Company or any of its operations or assets
have been delivered or made available to the Purchaser.
(8) To the best of the Company's knowledge, there has been no
Release by the Company of any Hazardous Substance which is
now present in, on or under the Leased Premises (including
underlying soils and substrata, surface water and
groundwater) at levels which exceed decommissioning or
remediation standards under any Environmental Laws or
standards published or administered by those Governmental
Authorities responsible for establishing or applying such
standards.
(9) To the best of the Company's knowledge, there is no urea
formaldehyde foam insulation, friable asbestos or
radioactive substances in, on or under the Leased Premises
or any other assets of the Company.
(10) To the best of the Company's knowledge, there is no
Hazardous Substance originating from any neighbouring or
15
adjoining properties which has migrated onto, or is
migrating towards the Leased Premises or any other assets of
the Company.
3.34 EMPLOYMENT MATTERS
(1) There are no written contracts of employment entered into
with any employees or independent contractors of the
Company, or any oral contracts of employment which are not
terminable on the giving of reasonable notice in accordance
with applicable law.
(2) There are no employment policies including policies
regarding incentive compensation, stock options, severance
pay or other terms or conditions of employment or terms or
conditions upon which employees may be terminated which are
binding upon the Company.
(3) The Company is in full compliance with all pay equity and
employment equity legislation and have complied therewith.
There have been no complaints against the Company under such
legislation.
(4) There are no complaints against the Company before any
employment standards branch or tribunal or human rights
tribunal, nor are there any threatened complaints. To the
best of the Company's knowledge, there has been no
occurrence which might lead to a complaint under any human
rights legislation or employment standards legislation. To
the best of the Company's knowledge, there are no
outstanding decisions or settlements or pending settlements
under the employment standards legislation which place any
obligation upon the Company to do or refrain from doing any
act.
3.35 COLLECTIVE AGREEMENTS
(1) There are no outstanding labor tribunal proceedings of any
kind, including any proceedings which could result in
certification of a trade union as bargaining agent for
employees or independent contractors of the Company, and
there have not been any such proceedings relating to the
Company.
(2) There are no threatened or apparent union organizing
activities involving employees or independent contractors of
the Company.
(3) There is no strike or lock out occurring or threatened
affecting the Company.
(4) The Company is not a party, either directly or by operation
of law, to any collective agreement, letters of
understanding, letters of intent or other written
communication with any trade union or association which may
qualify as a trade union.
(5) The Company does not have any labor problems that might
affect the value of the Company or lead to an interruption
of its operations.
16
3.36 PENSION AND BENEFIT PLANS
Except as disclosed in SCHEDULE 3.36, the Company does not have any
nor has it agreed to have any pension plans or other group or
individual employment benefit plans.
3.37 DIRECTORS AND OFFICERS
The directors and officers of the Company are as follows:
▇▇▇ ▇▇▇▇▇▇▇▇▇ - Director and President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Director and Treasurer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Director and Secretary
3.38 INSURANCE
The Company maintains such policies of insurance, issued by
responsible insurers, as are appropriate to its operations, property
and assets, in such amounts and against such risks as are customarily
carried and insured against by owners of comparable operations,
properties and assets as described in SCHEDULE 3.38. All such
policies of insurance are in full force and effect and the Company is
not in default, as to the payment of premium or otherwise, under the
terms of any such policy.
3.39 MATERIAL CONTRACTS
Except for the:
- Encumbrances listed in SCHEDULE 3.25,
- Premises Lease listed in SCHEDULE 3.32, and
- Those contracts described in SCHEDULE 3.39;
the Company is not a party to or bound by any Material Contract.
3.40 COPIES OF AGREEMENTS. ETC.
Current and complete copies of the:
- Encumbrances listed in SCHEDULE 3.25,
- Premises Lease,
- policies of insurance referred to in SECTION 3.38;
and
- those contracts described in SCHEDULE 3.39;
have been delivered to the Purchaser and there are no ongoing
negotiations with respect to the renewal, repudiation or amendment of
any such agreement, plan or policy.
3.41 LITIGATION
There is no suit, action, litigation, investigation, claim,
complaint, grievance or proceeding, including appeals and
17
applications for review, in progress, pending or threatened against
or relating to the Company or affecting its properties or business
before any court, governmental department, commission, board, bureau,
agency or arbitration panel, which, if determined adversely to the
Company might materially and adversely affect the properties,
business, future prospects or financial condition of the Company.
There is not presently outstanding against the Company any judgment,
decree, injunction, rule or order of any court, governmental
department, commission, board, bureau, agency or arbitrator.
3.42 BANK ACCOUNTS, ETC.
SCHEDULE 3.42 sets forth the name of every financial institution in
which the Company maintains any depository account, trust account or
safety deposit box and the names of all persons authorized to draw
thereon or who have access thereto.
3.43 ARTICLES AND BY-LAWS
The Vendor has made available to the Purchaser, the Articles and
by-laws of the Company, including any and all amendments thereto and
such Articles and By-laws as so amended are in full force and effect
and no amendments are being made to the same.
3.44 CORPORATE RECORDS AND MINUTE BOOKS
The Vendor has made available to the Purchaser, the corporate records
and minute books of the Company. The minute books include complete
and accurate minutes of all meetings of the directors or shareholders
of the Company held to date or resolutions passed by the directors or
shareholders on consent, since the date of its incorporation. The
share certificate book, register of shareholders, register of
transfers and register of directors of the Company are complete and
accurate.
3.45 BOOKS AND RECORDS
Except for information relating to the Company's suppliers and
customers, the Vendor has made available to the Purchaser, all books
and records of the Company. Such books and records fairly and
correctly set out and disclose in all material respects the financial
position of the Company and all material financial transactions
relating to the Company have been accurately recorded in such books
and records.
3.46 NO BROKER
The Vendor has carried on all negotiations relating to this Agreement
and the transactions contemplated in this Agreement directly and
without intervention on its behalf of any other party in such manner
as to give rise to any valid claim for a brokerage commission,
finder's fee or other like payment, except for Capital Alliance
Corporation whose fee will be paid by the Vendor.
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3.47 FULL DISCLOSURE
None of the foregoing representations and statements of fact contains
any untrue statement of material fact or omits to state any material
fact necessary to make any such statement or representation not
misleading to a prospective purchaser of the Purchased Shares seeking
full information as to the Company and its properties, businesses and
affairs.
ARTICLE 4
PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants as follows to the Vendor that:
4.01 INCORPORATION
The Purchaser is a corporation duly incorporated and validly existing
under the laws of the State of Nevada.
4.02 DUE AUTHORIZATION
The Purchaser has all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out its
obligations under this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated in
this Agreement have been duly authorized by all necessary corporate
action on the part of the Purchaser.
4.03 ENFORCEABILITY OF OBLIGATIONS
This Agreement constitutes a valid and binding obligation of the
Purchaser enforceable against it in accordance with the terms hereof,
subject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy or similar proceedings and to
the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are
sought.
4.04 ABSENCE OF CONFLICTING AGREEMENTS
The Purchaser is not a party to, bound or affected by nor subject to
any indenture, mortgage, lease, agreement, obligation, instrument,
charter or by-law provision, statute, regulation, order, judgment,
decree, license, permit or law which would be violated, contravened
or breached by, or under which any default would occur or a lien,
claim, restriction or encumbrance would be created as a result of the
execution and delivery by it of this Agreement or the performance by
it of any of the terms of this Agreement.
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4.05 RESIDENCE OF THE PURCHASER
The Purchaser is a non-Canadian for purposes of the Investment Canada
Act.
4.06 NO BROKER
The Purchaser has carried on all negotiations relating to this
Agreement and the transactions contemplated in this Agreement
directly and without the intervention on its behalf of any other
party in such manner as to give rise to any valid claim for a
brokerage commission, finder's fee or other like payment, except for
Health Business Partners whose fee will be paid by the Purchaser.
ARTICLE 5
NON-WAIVER AND SURVIVAL
5.01 NON-WAIVER
No investigations made by or on behalf of the Purchaser at any time
shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made by the Vendor
in or pursuant to this Agreement. No waiver of any condition or other
provision, in whole or in part, shall constitute a waiver of any
other condition or provision (whether or not similar) nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
5.02 SURVIVAL
(1) All statements contained in any certificate or other
instrument delivered by or on behalf of a Party pursuant to
or in connection with the transactions contemplated in this
Agreement shall be deemed to be made by such Party under
this Agreement.
(2) Subject to the limitations set out in SECTION 5.02(3), all
representations, warranties and covenants contained in this
Agreement on the part of each of the Parties shall survive
the Closing, the execution and delivery under this Agreement
of any share or security transfer instruments or other
documents of title to the Purchased Shares and the payment
of the consideration for the Purchased Shares.
(3) Representations and warranties, concerning environmental
matters set out in SECTION 3.33 and all covenants made
pursuant to this Agreement shall survive indefinitely.
Representations and warranties, concerning tax matters set
out in SECTION 3.22 shall survive for a period of ninety
days after the relevant authorities shall no longer be
entitled to assess liability for tax against the Company for
any particular fiscal year ended on or prior to the Closing
Date. All other representations and warranties shall only
survive for a period of three (3) years from the Closing
Date. If no claim shall have been made under this Agreement,
prior to the expiry of the survival periods provided for,
20
against a Party for any incorrectness in or breach of any
representation or warranty made in this Agreement by such
Party, such Party shall have no further liability under this
Agreement with respect to such representation or warranty.
(4) Notwithstanding the limitations set out in SECTION 5.02(3)
any claim which is based on title to the Purchased Shares or
fraud may be brought at any time.
ARTICLE 6
PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to complete the purchase of the Purchased Shares
under this Agreement shall be subject to the satisfaction of, or compliance
with, at or before the Closing Time, each of the following conditions precedent
(each of which is acknowledged to be inserted for the exclusive benefit of the
Purchaser):
6.01 CHANGE OF NAME
The Vendor shall have changed its name to one which does not include
the words "interactive" or "nutrition".
6.02 PERFORMANCE OF OBLIGATION
The Vendor shall have performed or complied with, in all respects,
all its obligations, covenants and agreements under this Agreement.
6.03 DOCUMENTATION
All documentation relating to the due authorization and completion of
the sale and purchase of the Purchased Shares under this Agreement
and all actions and proceedings taken on or prior to the Closing in
connection with the performance by the Vendor of its obligations
under this Agreement shall be satisfactory to the Purchaser and the
Purchaser shall have received copies of all such documentation or
other evidence as it may reasonably request in order to establish the
consummation of the transactions contemplated hereby and the taking
of all corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and otherwise)
and substance satisfactory to the Purchaser.
6.04 OPINION OF COUNSEL FOR THE VENDOR AND THE COMPANY
The Purchaser shall have received an opinion dated the Closing Date
from counsel for the Vendor and the Company substantially in the form
of SCHEDULE 6.04.
21
6.05 CONSENTS, AUTHORIZATIONS AND REGISTRATIONS
All consents, approvals, orders and authorizations of any Person or
Governmental Authority (or registrations, declarations, filings or
recordings with any such authorities) required in connection with the
completion of any of the transactions contemplated by this Agreement,
the execution of this Agreement, the Closing or the performance of
any of the terms and conditions of this Agreement shall have been
obtained on or before the Closing Time. There shall be no injunction
or restraining order issued preventing, and no pending or threatened
claim, action, litigation or proceeding, judicial or administrative
or investigation against any party to this Agreement by any
governmental agency, in Canada or elsewhere, for the purpose of
enjoining or preventing the consummation of the transactions
contemplated in this Agreement or otherwise claiming that this
Agreement or the consummation of the transactions contemplated in
this Agreement is improper or would give rise to proceedings under
any statute or rule of law.
6.06 ENCUMBRANCES
The Purchaser shall have received evidence satisfactory to it that
all Encumbrances other than Permitted Encumbrances have been
discharged and that all of the assets owned by the Company are free
and clear of all Encumbrances other than Permitted Encumbrances.
6.07 RESIGNATION
The Principals shall have submitted their resignations as members of
the board of directors of the Company.
6.08 TRANSFER OF INTELLECTUAL PROPERTY FROM VENDOR TO COMPANY
The License Agreement between the Vendor, as licensor, and the
Company, as licensee, dated January 2, 2002 shall have been
terminated and all of the IP Rights as referred to in that agreement
and any other Intellectual Property held by the Vendor shall have
been fully, properly and unconditionally transferred to the Company
free and clear of all Encumbrances.
6.09 TRANSFER OF EQUIPMENT FROM VENDOR TO COMPANY
The Equipment Lease between the Vendor, as lessor, and the Company,
as lessee, dated January 2, 2002 shall have been terminated and all
of the equipment as referred to in that agreement and any other
equipment held by the Vendor shall have been fully, properly and
unconditionally transferred to the Company free and clear of all
Encumbrances.
6.10 RELEASE OF INTEREST IN SHARES
The Royal Bank of Canada and any other creditor with a secured
interest in the Purchased Shares shall have provided a full and final
22
release of its security interest in the Purchased Shares so that the
Purchased Shares may be transferred to the Purchaser free and clear
of Encumbrances.
6.11 SUBSTANTIAL DAMAGE
No substantial damage by fire or other hazard to the assets of the
Company shall have occurred prior to the Closing Time.
6.12 EXECUTIVE MANAGEMENT AGREEMENTS
The Principals shall have entered into Executive Management
Agreements with the Company in the form of SCHEDULES 6.12 (A), (B)
AND (C) to this Agreement.
6.13 AMENDMENT OF PREMISES LEASE
The Premises Lease shall have been amended so that the term of the
Premises Lease expires at the same time as the expiry of the
corresponding head lease from the head landlord, and in such other
respects as required by the Purchaser following its review of the
Premises Lease.
If any of the foregoing conditions in this Article has not been fulfilled by
Closing, the Purchaser may terminate this Agreement by notice in writing to the
Vendor, in which event the Purchaser is released from all its obligations under
this Agreement. However, the Purchaser may waive compliance with any condition,
in whole or in part, if it sees fit to do so, without prejudice to its rights of
termination in the event of non-fulfillment of any other condition, in whole or
in part, or to its rights to recover damages for the breach of any
representation, warranty, covenant or condition contained in this Agreement.
ARTICLE 7
VENDOR'S CONDITIONS PRECEDENT
The obligations of the Vendor to complete the sale of the Purchased Shares under
this Agreement shall be subject to the satisfaction of or compliance with, at or
before the Closing Time, each of the following conditions precedent (each of
which is acknowledged to be inserted for the exclusive benefit of the Vendor):
7.01 OPERATION AGREEMENT
The Company and the Vendor shall have entered into an operation
agreement in form and content satisfactory to the Vendor (the
"Operation Agreement").
7.02 PERFORMANCE OF OBLIGATIONS
The Purchaser shall have performed or complied with, in all respects,
all its obligations, covenants and agreements under this Agreement.
23
7.03 OPINION OF COUNSEL FOR PURCHASER
The Vendor shall have received an opinion dated the Closing Date from
counsel for the Purchaser substantially in the form of SCHEDULE 7.03
to this Agreement.
7.04 EXECUTIVE MANAGEMENT AGREEMENTS
The Company shall have entered into Executive Management Agreements
with the Principals in the form of SCHEDULES 6.12 (A), (B) AND (C) to
this Agreement.
7.05 PAYMENT OF $15,000,000 PROMISSORY NOTE
The Purchaser shall have advanced the sum of $15,000,000 to the
Company, and the Company shall have paid the sum of $15,000,000 to
the Vendor in full satisfaction of a promissory note in the same
amount given by the Company to the Vendor in consideration of the
transfer of intellectual property as contemplated by SECTION 6.08.
7.06 ASSIGNMENT OF ACCOUNTS RECEIVABLE
The Company shall have assigned to the Vendor accounts receivable
outstanding at the Closing Time for less than sixty (60) days in the
amount of $1,200,000 in consideration of the transfer of the
equipment as contemplated by SECTION 6.09.
7.07 CONVERTIBLE PROMISSORY NOTE, SHARE PLEDGE AGREEMENT, GENERAL
SECURITY AGREEMENT
The Purchaser and the Company shall have delivered to the Vendor the
Convertible Promissory Note, Share Pledge Agreement and General
Security Agreement contemplated by SECTIONS 2.01 and 2.02.
If any of the foregoing conditions in this Article has not been fulfilled by
Closing, the Vendor may terminate this Agreement by notice in writing to the
Purchaser, in which event the Vendor is released from all its obligations under
this Agreement, and unless the Vendor can show that the condition relied upon
could reasonably have been performed by the Purchaser, the Purchaser is also
released from all its obligations under this Agreement. However, the Vendor may
waive compliance with any condition, in whole or in part, if it sees fit to do
so, without prejudice to its rights of termination in the event of
non-fulfillment of any other condition in whole or in part or to its rights to
recover damages for the breach of any representation, warranty, covenant or
condition contained in this Agreement.
24
ARTICLE 8
OTHER COVENANTS
8.01 STUB PERIOD RETURNS
The Purchaser shall cause to be prepared and filed on a timely basis,
all Tax Returns for each of the Company and any Related Entity for
any period which ends on or before the Closing Date and for which Tax
Returns have not been filed as of such date. The Purchaser shall also
cause to be prepared and filed on a timely basis, all Tax Returns for
each of the Company and any Related Entity for periods beginning
before and ending after the Closing Date. The Vendor and the
Purchaser shall cooperate fully with each other and make available to
each other in a timely fashion such data and other information as may
reasonably be required for the preparation of any Tax Return of the
Company and any Related Entity for a period ending on, prior to or
including the Closing Date and shall preserve such date and other
information until the expiration of any applicable limitation period
under any applicable law with respect to Taxes.
8.02 COOPERATION
The Vendor covenants and agrees with the Purchaser and the Company to
provide all assistance reasonably required by either of them
following the Closing to prepare and file in a timely manner with the
Securities and Exchange Commission ("SEC"), audited financial
statements for the business of the Company in accordance with
applicable requirements of Regulation S-X or any other applicable
regulation promulgated by the SEC.
8.03 SUPPLIERS AND CUSTOMERS
The Vendor and the Principals agree to provide to the Purchaser as
and when requested by the Purchaser a comprehensive listing of each
supplier of goods and services to, and each customer of, the Company
together with, in each case, the amount so billed or paid.
8.04 COVENANT OF PURCHASER
The Purchaser covenants and agrees on its own behalf and on behalf of
the Company that it shall cause the business of the Company, after
Closing, to be operated by the Principals (or such of them whose
employment has not been terminated for cause) until such time as the
Convertible Promissory Note shall be repaid in full and that it shall
not take or omit to take any action which shall negatively affect or
reduce the rights of the Vendor as established in the Convertible
Promissory Note, the Note Security and the Operation Agreement.
25
ARTICLE 9
INDEMNIFICATION
9.01 MUTUAL INDEMNIFICATIONS FOR BREACHES OF WARRANTY, ETC.
The Vendor and the Principals jointly and severally covenant and
agree with the Purchaser (and in the case of the Principals, limited
only to Claims arising from a breach of SECTIONS 3.03, 3.09 or 3.29
or fraud by the Vendor), and the Purchaser covenants and agrees with
the Vendor (the Party or Parties so covenanting and agreeing to
indemnify another Party being referred to in this Section as the
"Indemnifying Party" and the Party so to be indemnified being
referred to as the "Indemnified Party") to indemnify and save
harmless the Indemnified Party, effective as and from the Closing
Time, from and against all Claims which may be made or brought
against the Indemnified Party or which it may suffer or incur,
directly or indirectly as a result of or in connection with any
non-fulfillment of any covenant or agreement on the part of the
Indemnifying Party under this Agreement or any incorrectness in or
breach of any representation or warranty of the Indemnifying Party
contained in this Agreement or in any certificate or other document
furnished by the Indemnifying Party pursuant to this Agreement. The
foregoing obligation of indemnification in respect of such Claims
shall be subject to:
(1) the limitation referred to in SECTION 5.02 respecting the
survival of the representations and warranties of the
parties; and
(2) the requirement that the Indemnifying Party shall, in
respect of any Claim made by any third person, be afforded
an opportunity at its sole expense to resist, defend and
compromise such Claim.
9.02 CLAIMS AGAINST THE VENDOR AND THE PRINCIPALS
The Purchaser covenants and agrees that it shall, in the event it has
any Claims arising pursuant hereto, first apply the amount of its
Claim by way of set-off against any amounts owing to the Vendor
pursuant to the Convertible Promissory Note. If the amount of the
Claim is in excess of the amount remaining to be paid under the
Convertible Promissory Note, the Purchaser shall be entitled to make
the excess Claim against the Vendor and, where applicable. the
Principals.
ARTICLE 10
CLOSING
10.01 PLACE
The Closing shall take place at the Time of Closing at the offices of
BrazeauSeller LLP, ▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇.
26
10.02 DOCUMENTS
At or before the Time of Closing and upon fulfillment of all of the
conditions in this Agreement which have not been waived as provided
in this Agreement, the Vendor shall deliver or cause to be delivered
to the Purchaser against payment of the Purchase Price as provided
for in this Agreement:
(1) certificates representing the Purchased Shares duly endorsed
in blank for transfer or accompanied by a stock transfer
power, with signatures guaranteed by a Canadian chartered
bank or trust company (and with all security, transfer and
other taxes, if any, paid);
(2) evidence satisfactory to the Purchaser of all consents
required in order to complete this Agreement, including
without limitation certified copies of all necessary
directors' or shareholders' resolutions;
(3) a current certificate of compliance for the Company; and
(4) such further and other documents as counsel for the
Purchaser may consider reasonably necessary or advisable to
implement the transactions contemplated by this Agreement.
10.03 BOOKS AND RECORDS
All books, records and documents in the possession of the Vendor
relating to the Company and the Business shall be delivered to the
Purchaser on Closing except to the extent required by law to be
retained by the Vendor in which case they shall be made available by
the Vendor to the Purchaser and its authorized representatives for
inspection and copying during the period of seven years following the
Closing Date.
ARTICLE 11
GENERAL CONTRACT PROVISIONS
11.01 INTERPRETATION
(1) All references in this Agreement to sections are references
to sections of this Agreement unless otherwise provided.
(2) Unless the context requires otherwise, words importing the
singular number shall include the plural and vice versa,
words importing the masculine gender shall include the
feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships,
associations, trusts, unincorporated organizations and
corporations and vice versa.
(3) Whenever a provision of this Agreement or a Schedule
requires an approval or consent by a party and notification
27
of such approval or consent is not delivered within the
applicable time limit, then, unless otherwise specified, the
party whose consent or approval is required shall be
conclusively deemed to have withheld its consent or
approval.
(4) Unless otherwise specified, time periods within or following
which any payment is to be made or act is to be done shall
be calculated by excluding the day on which the period
commences and including the day on which the period ends and
by extending the period to the next Business Day following
if the last day of the period is not a Business Day.
(5) The parties acknowledge and agree that this Agreement has
been freely negotiated between them and that the contra
preferentum rule will not apply in the interpretation of
this Agreement.
11.02 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns
of the parties.
11.03 ENTIRE AGREEMENT
The parties expressly agree that in all respects pertaining to this
Agreement and its subject matter their rights, obligations and
remedies shall be governed exclusively by the terms of this Agreement
and that this Agreement supersedes any prior understandings and
agreements between them with respect to its subject matter. There are
no representations, warranties, terms, conditions, undertakings or
collateral agreements, express, implied or statutory, between the
parties other than as expressly made in this Agreement.
11.04 AMENDMENTS AND WAIVERS
No provision in this Agreement may be amended or waived except in
writing.
11.05 FURTHER ASSURANCES
Each party shall with reasonable diligence sign such other documents
and do and perform such other acts as may, in the reasonable opinion
of counsel for the other party, be necessary or desirable in order to
give full effect to this Agreement.
11.06 NOTICES
Any demand, notice, request or other communication to be given in
connection with this Agreement shall be given in writing and by
delivery addressed to the recipient as follows:
if to the Purchaser, at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America 32708; Fax: (407)
977-1186, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ &
28
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇; Fax: (▇▇▇)▇▇▇-▇▇▇▇ and BrazeauSeller LLP,
▇▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇; Fax: (613)
237-4001, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; if to the Vendor and the
Principals, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to
▇▇▇▇▇▇ ▇▇▇▇▇▇ Gervais LLP, ▇▇▇▇-▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇; Fax: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇;
or such other address as may be designated by written notice by any
party to the others, and shall be conclusively deemed to have been
given and received when so delivered, provided that delivery actually
made on a day after normal business hours shall be deemed to have
been made at the commencement of the next Business Day.
11.07 REFERENCES
Any references in this Agreement to any law, by-law, rule,
regulation, order or act of any government, governmental body or
other regulatory body, in whatever form, shall be construed as a
reference to it as amended or re-enacted from time to time or as a
reference to any successor to it.
11.08 ACCOUNTING PRINCIPLES
Except as may be otherwise specifically provided to the contrary, any
reference in this Agreement to generally accepted accounting
principles shall be deemed to be a reference to generally accepted
accounting principles from time to time in effect and approved by the
Canadian Institute of Chartered Accountants, or any successor
institute.
11.09 BROKERS
Except for the Purchaser's hiring of Health Business Partners whose
fee shall be paid by the Purchaser and the Vendor's hiring of Capital
Alliance Corporation whose fee shall be paid by the Vendor, each
party represents that it has not employed any agent, broker, finder,
investment banker or other intermediary in connection with the
transaction contemplated by this Agreement who might be entitled to a
fee from the other party or to a commission upon consummation of the
transaction.
11.10 TENDER
Any tender of documents or money pursuant to this Agreement may be
made upon the solicitor acting for the party on whom tender is
required and such tender shall be deemed to have occurred if such
solicitor does not permit the tender to occur at the time and place
designated in accordance with this Agreement for closing.
11.11 TIME OF THE ESSENCE
Time shall be of the essence in respect of every part of this
Agreement.
29
11.12 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable
therein.
11.13 TIMING OF PAYMENTS
Whenever any payment is to be made or action to be taken under this
Agreement is required to be made or taken on a day other than a
Business Day, such payment shall be made or action taken on the next
Business Day following.
11.14 ARBITRATION
Any disagreement relating to this Agreement may be referred by a
party to arbitration. The arbitration shall be conducted by a single
arbitrator if the parties can agree upon one, failing which, an
arbitrator shall be appointed in accordance with the Arbitration Act,
1991 or any statutory modification or reenactment thereof and the
arbitration shall be subject to such Act. The decision arrived at by
the arbitrator shall be final and binding upon the parties and may be
appealed only in accordance with such Act. The provisions of this
Section shall be deemed to be a submission to arbitration within the
provisions of such Act. The compensation and expenses of the
arbitrator shall be paid equally by the parties to the arbitration.
The arbitration hearing shall be held in Ottawa, Ontario.
11.15 COUNTERPARTS
This Agreement may be executed by the parties in separate
counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and
the same instrument.
11.16 INDEPENDENT LEGAL ADVICE
Each of the parties acknowledges that such party has been urged to
obtain independent legal advice prior to signing this Agreement and
that such party has either obtained such advice or has been given
adequate opportunity to obtain such advice prior to the signing of
this Agreement.
11.17 DISCLOSURE
No disclosure with respect to the transaction contemplated by this
Agreement shall be made to any person without the mutual agreement of
the parties, except as required by law or to the extent that it is
reasonably necessary for a party to make such disclosure for the
purpose of performing the provisions of this Agreement.
30
11.18 OBLIGATIONS OF VENDOR AND PRINCIPALS
The liabilities of the Vendor and the Principals to the Purchaser
under this Agreement shall in all respects and in all matters be
joint and several.
11.19 SCHEDULES
The following are the schedules to this Agreement:
Schedule 2.01(3)(a) Convertible Promissory Note
Schedule 2.01(3)(b) Share Pledge Agreement
Schedule 2.01(3)(c) General Security Agreement
Schedule 2.02 Purchase Price Adjustment
Schedule 3.09 Financial Statements
Schedule 3.13(8) Salary Increases Since January 1, 2004
Schedule 3.19 Business in Compliance with Law
Schedule 3.20 Restrictive Covenants
Schedule 3.25 Security
Schedule 3.29 Intellectual Property
Schedule 3.32 Premises Lease
Schedule 3.36 Pension and Benefit Plans
Schedule 3.38 Insurance
Schedule 3.39 Material Contracts
Schedule 3.42 Bank Accounts
Schedule 6.05 Opinion of Vendor's Counsel
Schedule 6.09 Equipment Transferred from Vendor to Company
Schedule 6.12 Executive Management Agreements
Schedule 7.03 Opinion of Purchaser's Counsel
IN WITNESS OF WHICH the parties have executed this Share Purchase Agreement.
) BIO-ONE CORPORATION
)
) -------------------
) BY ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
) ITS PRESIDENT & CEO
)
31
)
) INTERACTIVE NUTRITION INC.
)
) -------------------------
) BY ▇▇▇ ▇▇▇▇▇▇▇▇▇
) ITS PRESIDENT & CEO
)
)
)
) -------------------------
) ▇▇▇ ▇▇▇▇▇▇▇▇▇
) -------------------------
)
)
)
) -------------------------
) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
)
)
)
) -------------------------
) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
32
SCHEDULE 2.01(3)(A)
CONVERTIBLE PROMISSORY NOTE
Issued to: Interactive Nutrition Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Issuers: Bio-One Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
And
Interactive Nutrition International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Principal: $15,000,000 Issue Date: March 31, 2004
1. Defined Terms. Defined terms are set out in Schedule "A".
2. Principal.
(i) Bio-One Corporation and Interactive Nutrition International
Inc. (together, the "Debtors") for value received hereby
jointly and severally promise to pay to Interactive Nutrition
Inc. (the "Noteholder"), at its address specified above the
sum of $15,000,000 to be paid in 57 consecutive monthly
payments of $263,158 on the first (1st) day of each calendar
month with the first payment falling due on the 1st day of
July, 2004.
(ii) Accelerated Payments. If, in any Year (as defined in this
Note), 7% of the Net Sales (as defined in this Note) of
Interactive Nutrition International Inc. ("INII") shall be
greater than $3,157,896 then 50% of such excess shall be paid
to the Noteholder, in equal monthly amounts in addition to the
payments otherwise payable in the Year next following the year
in which such excess occurred. Accelerated payments shall be
deducted from the amount otherwise owing under this Note in
inverse payment order, i.e. accelerated payments shall be
deducted first from the 57th installment, then the 56th and so
on.
3. Interest. There shall be no interest payable on this Note until
default after which event interest shall accrue on the amounts
owing at the Prime Rate charged by the Royal Bank of Canada to its
commercial customers in Ottawa plus 2% per annum.
4. Conversion to Shares of the Corporation. The Noteholder may, on
giving written notice not less than 10 Business Days prior to the
due date of any installment payable under this Note, notify the
Debtors that it wishes to receive all but not less than all of such
installment in the common shares of stock of Bio-One. The price of
the common shares shall be determined as the average trading price
of the common shares in the five days immediately preceding the
receipt of such notice by Bio-One. Such shares shall be issued to
the Noteholder in complete satisfaction of the installment. Such
Shares shall bear the following legend: "THE SHARES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE."
5. Payments and Notice. Any payments received by the Noteholder after
2:00 p.m. on a Business Day shall be deemed to have been received
on the next Business Day. Any notice required or desired to be
given hereunder or under any instrument supplemental hereto shall
be in writing and may be given by personal delivery, by facsimile
or other means of electronic communication or by sending the same
by registered mail, postage prepaid, to the Noteholder or to the
Debtors at their respective addresses set out above and, in the
case of electronic communication, to the facsimile numbers set out
above. Any notice so delivered shall be conclusively deemed given
when personally delivered and any notice sent by facsimile or other
means of electronic transmission shall be deemed to have been
delivered on the Business Day following the sending of the notice,
and any notice so mailed shall be conclusively deemed given on the
third Business Day following the day of mailing, provided that in
the event of a known disruption of postal service, notice shall not
be given by mail. Any address for notice or payments herein
referred to may be changed by notice in writing given pursuant
hereto.
6. Covenants. This Note is issued subject to and with the benefit of
all the covenants, terms and conditions in Schedule "B".
7. Default and Enforcement. The terms and conditions upon which the
security constituted by this Note shall become enforceable are
provided for in Schedule "B".
8. Security. As continuing security for the due and timely payment by
the Corporation of its obligations hereunder, Bio-One shall enter
into a Share Pledge Agreement securing 20% of the shares of INII,
and INII shall enter into a General Security Agreement securing all
of the assets of INII in the form delivered herewith.
9. Receipt. The Debtors hereby acknowledges receipt of a true copy of
this Note.
10. Waiver of Notice. The extension of time for making any payment
which is due and payable hereunder at any time or the failure,
delay or omission on the part of the Noteholder to exercise or
enforce any rights or remedies of the Noteholder hereunder or under
the Security shall not constitute a waiver of the rights of the
Noteholder to enforce such rights and remedies thereafter.
-2-
11. Binding Effect, Governing Law and Headings. These presents are binding
upon the parties hereto and their respective successors and assigns.
This Note shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable
therein. The division of this Note into sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Note.
12. Invalidity, etc. Each of the provisions contained in this Note is
distinct and severable and a declaration of invalidity, illegality or
unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability
of any other provision of this Note.
13. Schedules. Each of the following schedules is incorporated by reference
into, and constitutes a part of, this Note: Schedule "A" - Definitions
Schedule "B" - Covenants, Events of Default and Enforcement
14. Amendment. This Note may only be amended with the written agreement of
the Debtors and the Noteholder.
15. Currency. All payments contemplated herein shall be paid in Canadian
funds, in cash or by certified cheque. Whenever any payment is to be
made or action to be taken under this Note is required to be made or
taken on a day other than a Business Day, such payment shall be made or
action taken on the next Business Day following.
16. Set-Off. Except for claims by the Debtors for breaches of
representations or warranties under the Share Purchase Agreement, the
Debtors shall have no right to set off amounts payable to the
Noteholder pursuant to this Note against any obligations of the
Noteholder to the Debtors.
IN WITNESS WHEREOF the Debtors have executed this Note.
BIO-ONE CORPORATION
Per:______________________________c/s
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
I have authority to bind the Corporation.
INTERACTIVE NUTRITION
INTERNATIONAL INC.
Per:______________________________c/s
Name:
Title:
I have authority to bind the Corporation.
-3-
SCHEDULE "A"
DEFINITIONS
1. Interpretation. As used in this Note and all schedules incorporated therewith
the following expressions shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday or a statutory holiday in
the Province of Ontario.
"COLLATERAL" means the collateral described in the Share Pledge Agreement and
General Security Agreement securing the obligations hereunder in the forms
delivered herewith.
"CORPORATION" means Bio-One Corporation, a corporation organized under the laws
of the State of Nevada.
"COSTS" means any and all costs and expenses incurred from time to time by the
Noteholder or any Receiver in the perfection or preservation of the security
constituted hereby, in enforcing payment or performance of the Obligations or
any part thereof or in locating, taking possession of, transporting, holding,
repairing, processing, preparing for and arranging for the disposition of and/or
disposing of the Collateral and any and all other expenses incurred by the
Noteholder or any Receiver as a result of the Noteholder or such Receiver
exercising any of its rights or remedies hereunder or at law, including, without
in any way limiting the generality of the foregoing, any and all legal expenses
including those incurred in any legal action or proceeding or appeal therefrom
commenced or taken in good faith by the Noteholder and any and all fees and
disbursements of any counsel, accountant or valuator or any similar person
employed by the Noteholder in connection with any of the foregoing and the costs
of insurance and payment of taxes (other than taxes relating to the income of
the Noteholder) and other charges incurred in retaking, holding, repairing,
processing and preparing for disposition and disposing of the Collateral.
"DEBTORS" means the Corporation and INII.
"EVENT OF DEFAULT" has the meaning ascribed thereto in Section 3 of Schedule
"B".
"EBITDA" shall mean Earnings Before Interest Tax Depreciation and Amortization
as determined by the auditors of the Corporation in accordance with United
States generally accepted accounting principles ("GAAP") and whose determination
therefor shall be final and binding upon the parties.
"INII" means Interactive Nutrition International Inc.
"ISSUE DATE" means the 31st day of March, 2004.
"NET SALES" shall mean all right, title and interest in goods sold by INII in
the ordinary course of business at prices and upon terms usually charged for
such goods to arms-length third parties or to subsidiaries or affiliates of the
Corporation less any returns, allowances, destroyed goods or other adjustments.
Net Sales shall not include any freight or carriage charges or any taxes,
levies, duties or other governmental or quasi-governmental charges incurred or
paid with respect to such goods.
"NOTE" means this Convertible Promissory Note.
"NOTEHOLDER" means Interactive Nutrition Inc.
"OBLIGATIONS" means all indebtedness, liabilities and obligations (whether
direct, indirect, absolute, contingent or otherwise) of the Debtors from time to
time, under or in respect of this Note.
"PERSON" means a natural person, a firm, a corporation or other body corporate,
a syndicate, a partnership, an association, a trust, a government or agency
thereof or any other legal or business entity whatsoever.
"PRINCIPAL" means $15,000,000 in lawful money of Canada.
"PROCEEDS" of any Collateral, means property in any form derived, directly or
indirectly, from any dealing with such Collateral or the proceeds therefrom and
includes any payment representing indemnity or compensation for loss or damage
to such Collateral or proceeds therefrom, including, without limitation,
insurance proceeds.
"RECEIVER" means a receiver, a receiver and manager or any similar person
appointed in accordance with the Security.
"SHARE PURCHASE AGREEMENT" means the share purchase agreement entered into as of
he date hereof between the Noteholder and Bio-One Corporation and in connection
with which this Note is being given.
"THE SECURITY" means the Share Pledge Agreement and the General Security
Agreement delivered herewith.
"YEAR" shall mean each full 12-month fiscal year immediately following the
closing of the transaction in respect of which this Note is issued.
-2-
SCHEDULE "B"
COVENANTS, EVENTS OF DEFAULT AND ENFORCEMENT
AND REPRESENTATIONS AND WARRANTIES
1. Covenants. The Debtors shall perform and observe each of the following
covenants for so long as any amounts are outstanding under the Note:
2. (a) Payment of Principal. The Debtors shall duly and
punctually pay or cause to be paid to the Noteholder hereof
the Principal and any other amounts owing as and when due at
the places and in the manner specified herein. The Debtors may
pre-pay the Note, in whole or in part at any time or times,
without notice, bonus or penalty.
(b) Corporate Existence. Except as permitted hereby, the
Corporation shall preserve and maintain its corporate
existence.
(c) Taxes, Claims for Labor and Materials. The Debtors will
promptly pay and discharge, (i) all lawful taxes, assessments
and governmental charges or levies imposed upon INII or upon
or in respect of all or any part of the property or business
of INII; (ii) all trade accounts of INII payable in accordance
with its usual and customary business practices, except those
trade accounts that are in dispute; and (iii) all claims for
work, labor or materials, that if unpaid might become a lien
upon any property of INII; provided the Debtors will not be
required to pay any such tax, assessment, charge, levy,
account payable or claim if (A) the validity, applicability or
amount thereof is being contested in good faith by appropriate
actions or proceedings that will prevent the forfeiture or
sale of any property of INII or any interference with the use
thereof by INII, except that whenever foreclosure on any lien
that attaches (or security therefor) appears imminent, the
Debtors shall pay or cause to be paid all such taxes,
assessments, charges, levies, accounts payable or claims and
(B) the Debtors will, to the extent required, in accordance
with generally accepted accounting principles, set aside on
the books of INII reserves deemed by them to be adequate with
respect thereto.
(d) Compliance with Laws. INII shall comply and the Corporation
will cause INII to comply in all material respects with the
requirements of all applicable laws, rules and regulations and
orders of any governmental authority including, without
limitation, all laws, rules and regulations.
(e) Regulatory Approvals. INII shall maintain and keep in good
standing and the Corporation shall cause INII to maintain and
keep in good standing all permits, licenses, memberships and
other regulatory approvals necessary or desirable to carry on
its business and do all things necessary to prevent the
cancellation or suspension thereof to the extent the failure
to maintain any such permit, license, membership or other
regulatory approval would have a material adverse effect on
the business.
-3-
(f) Further Assurances. The Debtors shall, upon request by the
Noteholder, execute and deliver all such further documents and
do all such further acts and things as may be reasonably
necessary or desirable at any time or times to give effect to
the terms and conditions of this Note.
(g) Certificate of Officer. The Debtors shall deliver to the
Noteholder at any time and from time to time, promptly
following a request by the Noteholder a certificate of a
senior officer of the Debtors (which shall be given on their
behalf and without personal liability) to the effect that to
the best knowledge of that officer, there exists no condition,
event or act which constitutes an Event of Default or a
default or breach of any provision of this Agreement which,
with notice or lapse of time, or both, would constitute an
Event of Default or, if any such condition, event or act
exists, specifying the nature thereof, the period of existence
thereof and the action that the Debtors propose to take with
respect thereto.
3. Events of Default; Acceleration of Payment. The whole of the principal
balance remaining unpaid together with interest and other moneys owing
hereunder shall become immediately due and payable and the Collateral
shall become enforceable in each of the following events:
(a) If any installment shall remain unpaid for a period of fifteen
(15) days following the receipt by the Debtors of written
notice to that effect; or
(b) if an event of default as defined in the Security Agreement
should occur,
(hereinafter, an "Event of Default")
The Debtors shall promptly notify the Noteholder of any facts that may
give rise to an Event of Default or any facts that may give rise to any
event, which, with notice or lapse of time or both, would constitute an
Event of Default under this Note.
4. Costs of Noteholder. The Debtors shall pay the reasonable costs
incurred by the Noteholder in connection with the enforcement of this
Note or related security.
-4-
SCHEDULE 2.01(3)(B)
SHARE PLEDGE AGREEMENT
THIS AGREEMENT made as of the 31st day of March, 2004.
BETWEEN:
BIO-ONE CORPORATION
("BIO-ONE")
THE FIRST PARTY
AND:
INTERACTIVE NUTRITION INC.
("INI")
THE SECOND PARTY
AND:
INTERACTIVE NUTRITION INTERNATIONAL INC.
("INII")
THE THIRD PARTY
WHEREAS:
(1) Bio-One and INII are indebted to INI pursuant to a Convertible
Promissory Note dated the date hereof (the "Promissory Note");
(2) Bio-One has agreed with INI to pledge to INI the securities
described below as continuing collateral security for the
payment and performance of Bio-One's payment obligations under
the Promissory Note (the "Obligations").
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. TERMINOLOGY
All terms not otherwise defined in this Agreement shall have the
respective meanings attributed thereto in the Promissory Note.
2. PLEDGE
BIO-ONE hereby mortgages, charges, hypothecates, pledges, grants a
security interest in and delivers to the solicitors for INI (the
"Escrow Agent") the securities listed below, and any substitutions
therefor, additions thereto and proceeds thereof, and all rights and
claims of BIO-ONE in respect of the same or evidenced thereby
(collectively, subject to SECTION 9, the "Securities"):
SECURITY AND ISSUER NUMBER
------------------- ------
Class A Common Shares of INII 20
to be held by the Escrow Agent as continuing collateral security for
the due and punctual payment of the Obligations.
3. COVENANTS OF INII
INII hereby covenants and represents that the Securities are free and
clear of any encumbrances or liens and that all necessary approvals
have been obtained for the grant of security interest contemplated
herein. INII further covenants that it shall do all acts necessary to
fulfill the intention of this Agreement including, without limiting
the generality of the foregoing, delivering upon the Escrow Agent's
written confirmation of an Event of Default a share certificate
registered in the name of INI.
4. ENFORCEMENT
In the event of: (a) a default in payment of any of the Obligations
and a continued default for at least fifteen (15) days following
receipt by Bio-One of a demand for payment by INI (an "Event of
Default"); and (b) a determination by INI to enforce its rights under
this Agreement, the Escrow Agent may, without notice to BIO-ONE or
advertisement, cause all or any of the Securities to be realized,
collected, sold, transferred and delivered by INI in such manner as
may seem to be advisable to it, or may exercise and enforce all
rights of a holder of the Securities. For the purposes of the
foregoing rights and remedies all requirements relating thereto and
prescribed by law or otherwise are hereby waived; however, INI shall
not be bound to exercise any such rights and remedies and shall not
be liable for any loss which may be occasioned by any failure so to
do. The proceeds of disposition of any of the Securities, after
deduction of all expenses, shall be applied to the Obligations and
the balance, if any, shall be paid to BIO-ONE or as a court of
competent jurisdiction may otherwise direct.
5. EXPENSES OF ENFORCEMENT
INI may charge on its own behalf and also pay to others sums for
expenses incurred and for services rendered (expressly including fees
and out-of-pocket expenses for legal services) in connection with
realizing, collecting, selling, transferring or obtaining payment of
the Securities or any part thereof and may deduct the amount of such
sums from the proceeds thereof. The balance of such proceeds shall be
applied on account of such parts of the Obligations as to INI seems
2
best, without prejudice to INI's claims, if any, against BIO-ONE for
any deficiency.
6. ENFORCEABILITY
This Agreement shall continue and remain in full force and effect
until satisfaction in full of the Obligations. This Agreement shall
be unconditional, irrespective of the validity, regularity or
enforceability of the Promissory Note and any documents delivered in
connection with the Agreement (or any of them) and shall not be
affected by any action taken or any remedy conferred thereunder or
under this Agreement, or by law, equity or otherwise.
7. OTHER SECURITY
This Agreement shall be in addition to and shall not in any way
prejudice or affect any collateral or other securities now or
hereafter held by INI for all or any part of the Obligations.
8. DUTY OF CARE IN KEEPING SECURITIES
The Escrow Agent shall be bound to exercise in the keeping of the
Securities only the same degree of care as it would exercise with
respect to its own securities kept at the same place.
9. ALTERATION IN FORM OF THE SECURITIES
In the event of any consolidation, subdivision, reclassification,
stock dividend or similar increase, decrease or alteration of the
capital of any issuer of one or more of Securities, the term
"Securities" shall be deemed to refer to the securities described in
SECTION 2, as increased, decreased, amended or supplemented and to
moneys delivered to the Escrow Agent pursuant to SECTION 9. BIO-ONE
will, forthwith upon receipt, deliver to the Escrow Agent any share
certificates issued in replacement for or in addition to the share
certificates delivered under this Agreement.
10. DEALING WITH SECURITIES
Until the occurrence of an Event of Default and a determination by
INI to enforce the rights granted to it under this Agreement, BIO-ONE
shall be entitled to vote the Securities and to receive all cash
dividends with respect thereto. Any other moneys which may be
received by BIO-ONE for or in respect of the Securities shall be
received as trustee for INI and shall forthwith be paid over to the
Escrow Agent and be held by the Escrow Agent pursuant to the
mortgage, charge, hypothecation, pledge and grant of security
interest herein. INI agrees that it will not require the Securities
to be registered in its name or in the name of a nominee unless and
until the occurrence of an Event of Default and the determination by
INI to enforce the rights granted to it under this Agreement.
3
11. BENEFICIAL OWNERSHIP OF SECURITIES
Without in any way derogating from the validity and enforceability of
the mortgage charge, hypothecation, pledge and grant of security
interest described in this Agreement, and the rights and remedies of
INI with respect thereto, until the occurrence of an Event of Default
and the determination of INI to enforce its rights under this
Agreement, BIO-ONE shall be the beneficial owner of the Securities.
12. GENERAL CONTRACT PROVISIONS
(1) Unless the context requires otherwise, words importing the
singular number shall include the plural and vice versa,
words importing the masculine gender shall include the
feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships,
associations, trusts, unincorporated organizations and
corporations and vice versa.
(2) Each party shall sign such other documents and do and
perform such other acts as may, in the reasonable opinion of
counsel for the other party, be necessary or desirable in
order to give full effect to this Agreement.
(3) This Agreement shall enure to the benefit of and be binding
upon the respective heirs, executors, administrators,
successors and assigns of the parties, provided that BIO-ONE
shall not assign its rights or obligations under this
Agreement without the prior written consent of INI.
(4) The parties expressly agree that in all respects pertaining
to this Agreement and its subject matter their rights,
obligations and remedies shall be governed exclusively by
the terms of this Agreement and that this Agreement
supersedes any prior understandings and agreements between
them with respect to its subject matter. There are no
representations, warranties, terms, conditions, undertakings
or collateral agreements, express, implied or statutory,
between the parties other than as expressly made in this
Agreement.
(5) Any finding that a provision of this Agreement is invalid or
unenforceable shall apply only to such provision.
(6) Any demand, notice, request or other communication to be
given in connection with this Agreement shall be given in
writing and by delivery addressed to the recipient as
provided in the Share Purchase Agreement dated the date
hereof between the parties and shall be conclusively deemed
to have been given and received when so delivered, provided
that delivery actually made on a day after normal business
hours shall be deemed to have been made at the commencement
of the next business day.
(7) This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein.
(8) Any references in this Agreement to any law, by-law, rule,
regulation, order or act of any government, governmental
4
body or other regulatory body, in whatever form, shall be
construed as a reference to it as amended or re-enacted from
time to time or as a reference to any successor to it.
(9) All references in this Agreement to sections are references
to sections of this Agreement unless otherwise provided.
(10) BIO-ONE acknowledges that it has been urged to obtain
independent legal advice prior to signing this Agreement and
that it has either obtained such advice or has been given
adequate opportunity to obtain such advice prior to the
signing of this Agreement.
IN WITNESS OF WHICH the parties have executed this Agreement.
)
)
) BIO-ONE CORPORATION
)
) Per:
) __________________________
) Authorized Signing Officer
)
)
)
) INTERACTIVE NUTRITION
) INTERNATIONAL INC.
)
)
) Per:
) __________________________
) Authorized Signing Officer
5
SCHEDULE 2.01(3)(C)
GENERAL SECURITY AGREEMENT
1. Interactive Nutrition International Inc.
----------------------------------------------------
(NAME OF DEBTOR)
of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
-------------------------------------------------------------
(ADDRESS OF DEBTOR)
(the "Debtor") for valuable consideration grants, assigns, transfers, sets
over, mortgages and charges to
Interactive Nutrition Inc.
------------------------------------------------
(the "Secured Party") as and by way of a fixed and specific mortgage and charge,
and grants to the Secured Party, a security interest in the present and after
acquired undertaking and property (other than consumer goods) of the Debtor
including all the right, title, interest and benefit which the Debtor now has or
may hereafter have in all property of the kinds hereinafter described (the
"Collateral"):
(a) all goods comprising the inventory of the Debtor including but not limited
to goods held for sale or lease or that have been leased or consigned to or
by the Debtor or furnished or to be furnished under a contract of service
or that are raw materials, work in process or materials used or consumed in
a business or profession or finished goods and timber cut or to be cut,
oil, gas, hydrocarbons, and minerals extracted or to be extracted, all
livestock and the young and unborn young thereof and all crops;
(b) all goods which are not inventory or consumer goods, including but not
limited to furniture, fixtures, equipment, machinery, plant, tools,
vehicles and other tangible personal property, whether described in
Schedule "A" hereto or not;
(c) all accounts, including deposit accounts in banks, credit unions, trust
companies and similar institutions, debts, demands and choses in action
which are now due, owing or accruing due or which may hereafter become due,
owing or accruing due to the Debtor, and all claims of any kind which the
Debtor now has or may hereafter have including but not limited to claims
against the Crown and claims under insurance policies;
(d) all chattel paper;
(e) all warehouse receipts, bills of lading and other documents of title,
whether negotiable or not; (f) all instruments, shares, stock, warrants,
bonds, debentures, debenture stock or other securities, money, letters
of credit, advices of credit and cheques;
(g) all intangibles including but not limited to contracts, agreements,
options, permits, licences, consents, approvals, authorizations, orders,
judgments, certificates, rulings, insurance policies, agricultural and
other quotas, subsidies, franchises, immunities, privileges, and benefits
and all goodwill, patents, trade marks, trade names, trade secrets,
inventions, processes, copyrights and other industrial or intellectual
property;
(h) with respect to the personal property described in subparagraphs (a) to (g)
inclusive, all books, accounts, invoices, letters, papers, documents,
disks, and other records in any form, electronic or otherwise, evidencing
or relating thereto; and all contracts, securities, instruments and other
rights and benefits in respect thereof;
(i) with respect to the personal property described in subparagraphs (a) to (h)
inclusive, all parts, components, renewals, substitutions and replacements
thereof and all attachments, accessories and increases, additions and
accessions thereto; and
(j) with respect to the personal property described in subparagraphs (a) to (i)
inclusive, all proceeds therefrom (other than consumer goods), including
personal property in any form or fixtures derived directly or indirectly
from any dealing with such property or proceeds therefrom, and any
insurance or other payment as indemnity or compensation for loss of or
damage to such property or any right to such payment, and any payment made
in total or partial discharge or redemption of an intangible, chattel
paper, instrument or security; and
In this Agreement, the words "goods", "consumer goods", "account", "account
debtor", "inventory", "crops", "equipment", "fixtures", "chattel paper",
"document of title", "instrument", "money", "security", or "securities",
"intangible", "receiver", "proceeds" and "accessions" shall have the same
meanings as their defined meanings where such words are defined in the Personal
Property Security Act of the province or territory in which the Branch of the
Secured Party mentioned in paragraph 1 is located, such Act, including any
amendments thereto, being referred to in this Agreement as "the PPSA". In this
Agreement, "Collateral" shall refer to "Collateral or any item thereof ".
2. The fixed and specific mortgages and charges and the security interest
granted under this Agreement secure payment and performance of all
obligations of the Debtor to the Secured Party pursuant to a convertible
promissory note of even date and pursuant to Sections 2.02 and 8.04 of a
share purchase agreement of even date (the "Obligations").
3. The Debtor hereby represents and warrants to the Secured Party that:
(a) all of the Collateral is, or when the Debtor acquires any right, title or
interest therein, will be then sole property of the Debtor free and clear
of all security interests, mortgages, charges, hypothecs, liens or other
encumbrances except for the security interest of the Royal Bank of Canada
and as disclosed by the Debtor to the Secured Party in writing;
(b) the Collateral insofar as it consists of goods (other than inventory
enroute from suppliers or enroute to Debtors or on lease or consignment)
will be kept at the locations specified in Schedule "B" hereto or at such
other locations as the Debtor shall specify in writing to the Secured Party
and subject to the provisions of paragraph 4 (j) none of the Collateral
shall be moved therefrom without the written consent of the Secured Party;
(c) the Debtor's chief executive address is located at the address specified in
paragraph 1; (d) none of the Collateral consists of consumer goods; and (e)
this Agreement has been properly authorized and constitutes a legally valid
and binding obligation of the Debtor
in accordance with its terms.
4. The Debtor hereby agrees that:
(a) the Debtor shall diligently maintain, use and operate the Collateral and
shall carry on and conduct its business in a proper and efficient manner so
as to preserve and protect the Collateral and the earnings, incomes, rents,
issues and profits thereof;
(b) the Debtor shall cause the Collateral to be insured and kept insured to the
full insurable value thereof with reputable insurers against loss or damage
by fire and such other risks as the Secured Party may reasonably require
and shall maintain such insurance with loss if any payable to the Secured
Party and shall lodge such policies with the Secured Party;
(c) the Debtor shall pay all rents, taxes, levies, assessments and government
fees or dues lawfully levied, assessed or imposed in respect of the
Collateral or any part thereof as and when the same shall become due and
payable, and shall exhibit to the Secured Party, when required, the
receipts and vouchers establishing such payment;
2
(d) the Debtor shall duly observe and conform to all valid requirements of any
governmental authority relative to any of the Collateral and all covenants,
terms and conditions upon or under which the Collateral is held;
(e) the Debtor shall keep proper books of account in accordance with sound
accounting practice, shall furnish to the Secured Party such financial
information and statements and such information and statements relating to
the Collateral as the Secured Party may from time to time require, and the
Debtor shall permit the Secured Party or its authorized agents at any time
to examine all books of account and other financial records and reports
relating to the Collateral and to make copies thereof and take extracts
therefrom;
(f) the Debtor shall furnish to the Secured Party such information with respect
to the Collateral and the insurance thereon as the Secured Party may from
time to time require and shall give written notice to the Secured Party of
all litigation before any court, administrative board or other tribunal
affecting the Debtor or the Collateral;
(g) the Debtor shall defend the title to the Collateral against all persons;
(h) the Debtor shall, upon request by the Secured Party, execute and deliver
all such financing statements, certificates, further assignments and
documents and do all such further acts and things as may be considered by
the Secured Party to be necessary or desirable to give effect to the intent
of this Agreement;
(i) the Debtor shall promptly notify the Secured Party in writing of any event
which occurs that would have a material adverse effect upon the Collateral
or upon the financial condition of the Debtor and immediately upon the
Debtor's acquisition of rights in any vehicle, mobile home, trailer, boat,
aircraft or aircraft engine, shall promptly provide the Secured Party with
full particulars of such collateral; and
(j) the Debtor will not change its name or the location of its chief executive
office or place of business or sell, exchange, transfer, assign or lease or
otherwise dispose of or change the use of the Collateral or any interest
therein or modify, amend or terminate any chattel paper, document of title,
instrument, security or intangible, without the prior written consent of
the Secured Party, except that the Debtor may, until an event of default
set out in paragraph 9 occurs, sell or lease inventory in the ordinary
course of the Debtor's business; and
5. Until an event of default occurs, the Debtor may use the Collateral in any
lawful manner not inconsistent with this Agreement, but the Secured Party
shall have the right at any time and from time to time to verify the
existence and state of the Collateral in any manner the Secured Party may
consider appropriate and the Debtor agrees to furnish all assistance and
information and to perform all such acts as the Secured Party may
reasonably request in connection therewith, and for such purpose shall
permit the Secured Party or its agents access to all places where
Collateral may be located and to all premises occupied by the Debtor to
examine and inspect the Collateral and related records and documents.
6. After an event of default occurs, the Secured Party may give notice to any
or all account debtors of the Debtor and to any or all persons liable to
the Debtor under an instrument to make all further payments to the Secured
Party and any payments or other proceeds of Collateral received by the
Debtor from account debtors or from any persons liable to the Debtor under
an instrument, whether before or after such notice is given by the Secured
Party, shall be held by the Debtor in trust for the Secured Party and paid
over to the Secured Party upon request. The Secured Party may take control
of all proceeds of Collateral and may apply any money taken as Collateral
to the satisfaction of the Obligations secured hereby. The Secured Party
may hold as additional security any increase or profits, except money,
received from any Collateral in the Secured Party's possession, and may
apply any money received from such Collateral to reduce the Obligations
secured hereby and may hold any balance as additional security for such
part of the Obligations as may not yet be due, whether absolute or
contingent. The Secured Party will not be obligated to keep any Collateral
separate or identifiable. In the case of any instrument, security or
chattel paper comprising part of the Collateral, the Secured Party will not
be obligated to take any necessary or other steps to preserve rights
against other persons.
3
7. The Secured Party may have any Collateral comprising instruments, shares,
stock, warrants, bonds, debentures, debenture stock or other securities,
registered in its name or in the name of its nominee and shall be entitled
but not bound or required to vote in respect of such Collateral at any
meeting at which the holder thereof is entitled to vote and, generally, to
exercise any of the rights which the holder of such Collateral may at any
time have; but the Secured Party shall not be responsible for any loss
occasioned by the exercise of any of such rights or by failure to exercise
the same within the time limited for the exercise thereof.
8. Upon the Debtor's failure to perform any of its duties hereunder, the
Secured Party may, but shall not be obliged to, upon reasonable notice to
the Debtor perform any or all of such duties, without waiving any rights to
enforce this Agreement, and the Debtor shall pay to the Secured Party,
forthwith upon written demand therefor, an amount equal to the reasonable
costs, fees and expenses incurred by the Secured Party in so doing plus
interest thereon from the date such costs, fees and expenses are incurred
until paid at the rate of 3% per annum over the Prime Lending Rate of the
Secured Party in effect from time to time. The "Prime Lending Rate of the
Secured Party" means the variable per annum, reference rate of interest as
announced and adjusted by the Secured Party from time to time for loans
made by the Secured Party in Canada in Canadian dollars.
9. The happening of any one or more of the following events shall constitute
an event of default under this Agreement:
(a) if the Debtor does not pay when due any of the Obligations within fifteen
(15) days following written demand therefor;
(b) if the Debtor does not perform any provisions of this Agreement or of any
other agreement to which the Debtor and the Secured Party are parties
within fifteen (15) days following written demand therefor or such greater
period of time as may be required with the exercise of reasonable diligence
by the Debtor;
(c) if the Debtor ceases or threatens to cease to carry on its business,
commits an act of bankruptcy, becomes insolvent, makes an assignment or
proposal under the Bankruptcy Act, takes advantage of provisions for relief
under the Companies Creditors Arrangement Act or any other legislation for
the benefit of insolvent debtors, transfers all or substantially all of its
assets, or proposes a compromise or arrangement to its creditors;
(d) if any proceeding is taken with respect to a compromise or arrangement, or
to have the Debtor declared bankrupt or wound up, or if any proceeding is
taken, whether in court or under the terms of any agreement or appointment
in writing, to have a receiver appointed of any Collateral or if any
encumbrance becomes enforceable against any Collateral;
(e) if any execution, sequestration or extent or any other process of any court
becomes enforceable against the Debtor or if any distress or analogous
process is levied upon any Collateral;
(f) if the Debtor should do, or agree to do, any of the following without the
prior written consent of the Secured Party:
(i) make any amendment to the articles of incorporation of the
Debtor;
(ii) authorize the issuance of any shares or securities convertible
into shares;
(iii) complete a sale of all or substantially all of the assets of
the Debtor or a transaction or series of related transactions
involving the amalgamation, business combination or merger of
the Debtor with another corporation or entity, or an
arrangement or other transaction, pursuant to which the
holders of voting securities of the Debtor immediately prior
to the transaction or series of related transactions hold,
immediately after such transaction or series of related
transactions, directly or indirectly, 50% or less of the votes
that would be entitled to be cast at a general meeting of
shareholders of the Debtor.
4
(iv) move or substantially carry on the business of the Debtor
outside of the City of Ottawa or move any of the Collateral
outside the City of Ottawa;
(v) terminate the employment of any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇▇▇▇ except for just cause;
(vi) sell, convey or otherwise dispose of all of the Debtor's
right, title or interest in any material intellectual property
owned by the Debtor or all or substantially all of its assets;
(vii) take any action that will lead to or result in a material
change in the nature of the business of the Debtor or the
engagement directly or indirectly in any other business
actively unrelated to the business of the Debtor as presently
conducted;
(viii) make any loan or grant any other financial assistance to any
shareholder of the Debtor;
(ix) grant any security interest against the Collateral which shall
have priority over the security created hereby;
(x) declare or pay a dividend during the occurrence of an event of
default under this Agreement;
10. If an event of default occurs, the Secured Party may declare that the
Obligations shall immediately become due and payable in full, and the
Secured Party may proceed to enforce payment of the Obligations and the
Debtor and the Secured Party shall have, in addition to any other rights
and remedies provided by law, the rights and remedies of a debtor and a
secured party respectively under the PPSA and other applicable legislation
and those provided by this Agreement. The Secured Party may take possession
of the Collateral, enter upon any premises of the Debtor, otherwise enforce
this Agreement and enforce any rights of the Debtor in respect of the
Collateral by any manner permitted by law and may use the Collateral in the
manner and to the extent that the Secured Party may consider appropriate
and may hold, insure, repair, process, maintain, protect, preserve, prepare
for disposition and dispose of the same and may require the Debtor to
assemble the Collateral and deliver or make the Collateral available to the
Secured Party at a reasonably convenient place designated by the Secured
Party.
11. Where required to do so by the PPSA, the Secured Party shall give to the
Debtor the written notice required by the PPSA of any intended disposition
of the Collateral by serving such notice personally on the Debtor or by
mailing such notice by registered mail to the last known post office
address of the Debtor or by any other method authorized or permitted by the
PPSA.
12. If an event of default occurs, the Secured Party may take proceedings in
any court of competent jurisdiction for the appointment of a receiver
(which term shall include a receiver and manager) of the Collateral or may
by appointment in writing appoint any person to be a receiver of the
Collateral and may remove any receiver so appointed by the Secured Party
and appoint another in his stead; and any such receiver appointed by
instrument in writing shall, to the extent permitted by applicable law or
to such lesser extent permitted, have all of the rights, benefits and
powers of the Secured Party hereunder or under the PPSA or otherwise and
without limitation have power (a) to take possession of the Collateral, (b)
to carry on all or any part or parts of the business of the Debtor, (c) to
borrow money required for the seizure, retaking, repossession, holding,
insurance, repairing, processing, maintaining, protecting, preserving,
preparing for disposition, disposition of the Collateral and for any other
enforcement of this Agreement or for the carrying on of the business of the
Debtor on the security of the Collateral in priority to the security
interest created under this Agreement, and (d) to sell, lease or otherwise
dispose of the whole or any part of the Collateral at public auction, by
public tender or by private sale, lease or other disposition either for
cash or upon credit, at such time and upon such terms and conditions as the
receiver may determine provided that if any such disposition involves
5
deferred payment the Secured Party will not be accountable for and the
Debtor will not be entitled to be credited with the proceeds of any such
disposition until the monies therefor are actually received; and further
provided that any such receiver shall be deemed the agent of the Debtor and
the Secured Party shall not be in any way responsible for any misconduct or
negligence of any such receiver.
13. Any proceeds of any disposition of any Collateral may be applied by the
Secured Party to the payment of expenses incurred or paid in connection
with seizing, repossessing, retaking, holding, repairing, processing,
insuring, preserving, preparing for disposition and disposing of the
Collateral (including reasonable solicitor's fees and legal expenses and
any other reasonable expenses), and any balance of such proceeds may be
applied by the Secured Party towards the payment of the Obligations in such
order of application as the Secured Party may from time to time effect. All
such expenses and all amounts borrowed on the security of the Collateral
under paragraph 12 shall bear interest at the rate of 3% per annum over the
Prime Lending Rate of the Secured Party in effect from time to time, shall
be payable by the Debtor upon demand and shall be Obligations under this
Agreement. If the disposition of the Collateral fails to satisfy the
Obligations secured by this Agreement and the expenses incurred by the
Secured Party, the Debtor shall be liable to pay any deficiency to the
Secured Party on demand.
14. The Debtor and the Secured Party further agree that:
(a) the Secured Party may grant extensions of time and other indulgences, take
and give up security, accept compositions, grant releases and discharges
and otherwise deal with the Debtor, debtors of the Debtor, sureties and
others and with the Collateral or other security as the Secured Party may
see fit without prejudice to the liability of the Debtor and the Secured
Party's rights under this Agreement;
(b) this Agreement shall be considered as satisfied and discharged by the
payment of the Obligations and shall be in addition to and not in
substitution for any other security now or hereafter held by the Secured
Party;
(c) nothing in this Agreement shall obligate the Secured Party to make any loan
or accommodation to the Debtor or extend the time for payment or
satisfaction of the Obligations;
(d) any failure by the Secured Party to exercise any right set out in this
Agreement shall not constitute a waiver thereof; nothing in this Agreement
or in the Obligations secured by this Agreement shall preclude any other
remedy by action or otherwise for the enforcement of this Agreement or the
payment in full of the Obligations secured by this Agreement;
(e) all rights of the Secured Party under this Agreement shall be assignable
and in any action brought by an assignee to enforce such rights, the Debtor
shall not assert against the assignee any claim or defence which the Debtor
now has or may hereafter have against the Secured Party;
(f) all rights of the Secured Party under this Agreement shall enure to the
benefit of its successors and assigns and all obligations of the Debtor
under this Agreement shall bind the Debtor and its successors and assigns;
(g) if more than one Debtor executes this Agreement, their obligations under
this Agreement shall be joint and several, and the Obligations shall
include those of all or any one or more of them;
(h) if the Debtor is a corporation, the Limitation of Civil Rights Act of the
province of Saskatchewan shall have no application to this Agreement, or to
any agreement or instrument renewing or extending or collateral to this
Agreement or to the rights, powers or remedies of the Secured Party under
this Agreement;
(i) this Agreement shall be governed in all respects by the laws of the
Province of Ontario;
(j) the time for attachment of the security interest created hereby has not
been postponed and is intended to attach when this Agreement is signed by
the Debtor and attaches at that time to Collateral in which the Debtor then
has any right, title or interest and attaches to Collateral in which the
Debtor subsequently acquires any right, title or interest at the time when
the Debtor first acquires such right, title or interest.
6
The Debtor acknowledges receiving a copy of this Agreement.
The Debtor expressly waives the right to receive a copy of any financing
statement or financing change statement which may be registered by the Secured
Party in connection with this Agreement or any verification statement issued
with respect thereto where such waiver is not otherwise prohibited by law.
Signed this 31st day of March 2004.
---- -----
Debtor: INTERACTIVE NUTRITION INC.
--------------------------
By:
--------------------------
Name:
Title: I have authority to bind the Corporation
----------------------------------------
7
SCHEDULE "A"
(Description of Collateral)
8
SCHEDULE "B"
(Location of Collateral)
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
2. Units 360E and 420E, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
9
SCHEDULE 2.02
PURCHASE PRICE ADJUSTMENT
ARTICLE 1 INTERPRETATION
--------------
Whenever used in this Schedule 2.02, the following words and terms have the
meanings set out below:
"AFFILIATE" has the meaning ascribed thereto in the Canada Business Corporations
Act;
"ANCILLARY AGREEMENTS" means the Share Purchase Agreement, the Promissory Note,
and any other agreement, instrument or other document entered into by the
Obligors or the Holder in connection with this Schedule 2.02;
"BIO-ONE" means Bio-One Corporation;
"BUSINESS DAY" means any day, other than Saturday, Sunday or a statutory
holiday in Ottawa, Ontario;
"CERTIFIED NET SALES STATEMENTS" means the annual statements of Net Sales as
certified by the independent accountants of INII;
"EVENT OF DEFAULT" has the meaning ascribed thereto in section 7;
"GAAP" means generally accepted accounting principles in effect from time to
time in Canada, including those principles set forth in the Handbook published
by the Canadian Institute of Chartered Accountants or any successor institute,
consistently applied;
"HOLDER" means Interactive Nutrition Inc.;
"INII" means Interactive Nutrition International Inc.;
"INTEREST" has the meaning ascribed thereto in section 4;
"NET SALES" means all right, title and interest in goods sold by INII in the
ordinary course of its business at prices and upon terms usually charged for
such goods to arms-length third parties or to subsidiaries or Affiliates of INII
less any returns, allowances, destroyed goods or other adjustments. Net Sales
shall not include any freight or carriage charges or any taxes, levies, duties
or other governmental or quasi-governmental charges incurred or paid with
respect to such goods;
"OBJECTION NOTICE" has the meaning ascribed thereto in section 2.4;
"OBLIGATIONS" means, at any time, the outstanding Principal of this Schedule
2.02 together with accrued Interest thereon, if applicable;
"OBLIGORS" means Bio-One and INII;
"PERSON" or "PERSONS" includes any individual, legal or personal representative,
partnership, company, corporation, incorporated syndicate, unincorporated or
incorporated association, trust or governmental body, howsoever designated or
constituted;
"PRINCIPAL" means the sum of $3,500,000 in lawful currency of Canada;
"PROMISSORY NOTE" means the promissory note of even date for FIFTEEN MILLION
DOLLARS ($15,000,000.00) issued by Bio-One to the Holder;
"SHARE PURCHASE AGREEMENT" means the share purchase agreement of even date
entered into between Bio-One and the Holder;
"THIRD PARTY ACCOUNTANT" has the meaning ascribed thereto in section 2.4;
"TRIGGER EVENT" has the meaning ascribed thereto in section 2.2;
ARTICLE 2 PRINCIPAL PAYABLE
-----------------
2.1 As soon as possible, but not later than ninety (90) days,
following each of the first, second, third and fourth
anniversary of the date of the Share Purchase Agreement, the
Obligors shall at their expense cause INII's independent
accountants to audit and deliver to the Holder Certified Net
Sales Statements for INII prepared for the one (1) year period
directly preceding the close of business on the date of the
applicable anniversary hereof, prepared in accordance with
GAAP. Each of the Certified Net Sales Statements prepared in
accordance with this section shall contain a calculation of
the Net Sales of INII. The Obligors and, if applicable, the
Holder shall co-operate fully with each other in the
preparation of each of the Certified Net Sales Statements
prepared on the first, second, third or fourth anniversary of
the date of the Share Purchase Agreement.
2.2 Should any one (1) of the Certified Net Sales Statements
prepared on the first, second, third or fourth anniversary of
the date of the Share Purchase Agreement demonstrate that INII
achieved Net Sales which are greater than or equal to FORTY
MILLION DOLLARS ($40,000,000.00) during the one (1) year
period covered by such Certified Net Sales Statements (the
"TRIGGER EVENT"), the Principal shall be payable in accordance
with this Schedule 2.02.
2.3 Should none of the Certified Net Sales Statements prepared on
the first, second, third or fourth anniversary of the date of
the Share Purchase Agreement demonstrate that INII achieved
Net Sales which are greater than FORTY MILLION DOLLARS
($40,000,000.00), there shall be no payment obligations of the
Obligors pursuant to this Schedule 2.02.
2.4 The Holder shall have thirty (30) days from receipt of each of
the Certified Net Sales Statements within which to review such
Certified Net Sales Statements. For the purposes of this
review, the Obligors shall permit and shall cause INII and
INII's independent accountants to permit the Holder and its
authorized representatives to examine the working papers,
schedules and other documents and information used or prepared
by the Obligors or the INII's independent accountants in
connection with the preparation of such Certified Net Sales
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Statements. The Holder may dispute any of the items in the
Certified Net Sales Statements by written notice (an
"OBJECTION NOTICE") to the Obligors within the same thirty
(30) days. If the Holder has not delivered an Objection Notice
to the Obligors within this thirty (30) day period, the Holder
shall be deemed to have accepted the applicable Certified Net
Sales Statements. If the Holder delivers an Objection Notice,
the Holder and the Obligors shall attempt to resolve all of
the items in dispute within fifteen (15) days of receipt of
the Objection Notice. If all items in dispute are not resolved
within this 15 day period, ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP or such
other firm as the Obligors and Holder may agree upon (the
"THIRD PARTY ACCOUNTANT") shall be retained to resolve the
remaining items in dispute.
2.5 Each of the Obligors and Holder shall furnish to the Third
Party Accountant those working papers, schedules and other
documents, and information relating to the items in dispute,
that are available to that party or its independent
accountants (and in the case of the Obligors, INII's
independent accountants) as the Third Party Accountant may
require. The Third Party Accountant shall be instructed to
render its determination within twenty (20) days of being
retained, that the Third Party Accountant shall make its own
determination with no weight being given to the decision of
the INII's independent accountants, and the decision of the
Third Party Accountant with respect to any item in dispute
shall be in writing and shall be final and binding on the
Obligors and the Holder with no rights of challenge, review or
appeal to the courts in any manner. The Third Party
Accountant, in making its determination of any dispute, does
not act as an arbitrator and is not required to engage in a
judicial inquiry worked out in a judicial manner.
2.6 On agreement or decision, as the case may be, with respect to
all items in dispute, the Certified Net Sales Statements shall
be deemed to be amended as may be necessary to reflect the
agreement or the decision, as the case may be. In this event,
references in this Schedule 2.02 to the Certified Net Sales
Statements shall be references to the Certified Net Sales
Statements, as so amended.
2.7 The fees and expenses of the Third Party Accountant shall be
borne equally by the Vendors, on the one hand, and the Holder,
on the other hand, but each Party shall be responsible for its
own costs and expenses.
ARTICLE 3 PAYMENT
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Following the occurrence of the Trigger Event:
3.1 The Obligors shall pay to the Holder the Principal in twelve
(12) equal instalments, with the first instalment to be paid
on the first day of the fifth (5th) calendar month following
the fourth anniversary of the date of the Share Purchase
Agreement, and each subsequent instalment due on the first day
of each calendar month thereafter.
3.2 Any payment due hereunder shall be made in cash, certified
cheque, bank draft or by wire of immediately available funds,
or as the parties hereto may otherwise agree.
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3.3 Should a payment due hereunder be due on a day other than a
Business Day, such payment shall be due on the immediately
preceding day which is a Business Day.
3.4 All payments made hereunder shall be made in lawful money of
Canada at such place as the Holder may from time to time
designate in writing to the Obligors. All payments made
hereunder shall be applied first to accrued and unpaid
Interest and then to outstanding Principal.
3.5 All payments made hereunder shall be received prior to 2:00
p.m. Any payment received after such time shall be deemed to
have been received on the following Business Day.
3.6 The Obligors waive presentment, protest, presentation of this
Schedule 2.02 and any other condition precedent to payment to
the Holder.
3.7 All payments made hereunder shall be made unconditionally,
indefeasibly and in full without deduction, setoff,
recoupment, counterclaim or other defense, all of which are
hereby waived to the maximum extent permitted by applicable
law.
ARTICLE 4 INTEREST
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Following the occurrence of the Trigger Event, the Principal amount outstanding
from time to time hereunder shall not bear any interest unless and until the
occurrence of an Event of Default. Upon the occurrence of any Event of Default,
interest on any overdue but unpaid Principal shall accrue at the interest rate
charged by the Royal Bank of Canada to its commercial customers in the City of
Ottawa plus two percent (2%), compounded monthly and be payable by the Obligors
on demand by the Holder (the "INTEREST").
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