SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) October 30, 1996
TREASURY INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(exact name of Registrant as specified in its charter)
DELAWARE 0-28514 98-0160284
- --------------------------------- -------------- ------------------------
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation or organization) File No. identification number)
7040 Tranmere Drive, Mississauga, Ontario L5S-1L9
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 905-673-1700
1181 Finch Avenue West, Unit 21, North York, Ontario L5S 1L9
- --------------------------------------------------------------------------------
Former name or former address, if changed since last report
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
Acquisition. On October 30, 1996 (the "Closing Date"), Treasury
International, Inc. (the "Company") acquired all of the issued and outstanding
capital stock (the "Megatran Stock") of Megatran Investments Ltd. ("Megatran"),
which is the sole stockholder of Mega Blow Mouldings Limited ("Mega Blow").
Megatran is a corporation organized under the laws of the Province of Ontario,
Canada. Mega Blow is a corporation organized under the laws of Canada.
Mega Blow manufactures and sells plastic bottles and containers principally
used by the pharmaceutical, beauty and drug store industries. It leases a
building of approximately 45,633 square feet of office, manufacturing and
warehouse space at 7040 Tranmere Drive, Mississauga, Ontario, Canada. The
Company intends to continue Mega Blow's business at such premises.
Consideration Paid or Payable. Pursuant to an Agreement dated October 30,
1996, made by and among the Company, Megatran and each of the stockholders of
Megatran (William Sarantos, Toula Sarantos, Martin Maxwell, Louis Chelin, Verne
Chelin, David Bereskin as Trustee, Joseph Myers, Eleanor Maxwell, Berta
Lunenfeld and Douglas Ferguson, collectively, the "Selling Stockholders"), the
Company acquired the Megatran Stock for an aggregate purchase price of
$3,560,000.00 (CDN) (the "Purchase Price"), paid by delivery on the Closing Date
of $2,560,000 (CDN) in cash and its 0% Junior Subordinated Debenture in the
principal amount of $1,000,000 (CDN). Such Debenture is repayable in 3 equal
installments on the first, second and third anniversaries of the Closing Date
and is secured by a junior lien upon all the assets of Mega Blow (collectively,
the "Mega Blow Assets"). On each anniversary of the Closing Date one-third of
the principal amount of such Debenture is convertible into shares of the
Company's common stock at a price of US $.34 each. The Company also guaranteed
Mega Blow's indebtedness of approximately $255,106.00 (CDN) to Royal Bank of
Canada (the "Royal Bank"), which was borrowed on the Closing Date to satisfy
Mega Blow's indebtedness to another bank which certain of the Selling
Stockholders had guaranteed. The Company also agreed, within 10 days, to deliver
to certain of the Selling Stockholders an aggregate of 283,876 shares of the
Company's common stock as payment of the $130,583 (CDN) balance of certain
management bonuses due to certain Selling Stockholders based on the net
after-tax profits of Mega Blow for its fiscal year ended August 31, 1996.
The Purchase Price was agreed upon during arms length negotiations between
the President of the Company and the principal stockholders of Megatran taking
into account Mega Blow's earnings history, management and financial condition.
The Company did not retain any investment banker.
-2-
<PAGE>
Source of Funds. The Company obtained the cash portion of the Purchase
Price from the proceeds of Mega Blow's $300,000 (CDN) demand loan and a
$1,350,000 (CDN) six-year term loan from Royal Bank, each made on the Closing
Date and bearing interest at 1-1/2% to 1-3/4% above such Bank's prime rate and
secured by a first lien on the Mega Blow Assets, a pledge of all of the capital
stock of Mega Blow and the Company's guarantee. The Company paid the balance of
the Purchase Price from the proceeds of its sale, pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended, of US$500,000
principal amount of its Series A 8% Senior Subordinated Convertible Debentures
(the "Series A Debentures") and US$250,000 principal amount of its Series B 0%
Senior Subordinated Convertible Debentures (the "Series B Debentures"). The
Series A Debentures mature after one year and are convertible, at any time, into
shares of the Company's common stock at a rate equal to the lower of US$.75 per
share or 50% of the average high closing bid price over the five trading days
preceding the day of conversion. The Series B Debentures mature after one year
and are convertible, at any time, into shares of the Company's common stock at a
rate equal to the lower of US$.50 per share or 50% of the average high closing
bid price over the five trading days preceding the day of conversion.
ITEM 7. Financial Statements and Exhibits
Financial Statements of Acquiree.
Pursuant to the instructions to Item 7 of Form 8-K, inasmuch as it is
impracticable to presently provide the annual financial statements for
the acquiree required to be provided pursuant to General Instruction
C.3 to this Form 8-K, said financial statements will be filed within
75 days of the acquisition event reported herein.
Exhibits.
2. Acquisition Agreement
Signatures
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 20, 1996 TREASURY INTERNATIONAL, INC.
By: James Hal
--------------------------
James Hal, President
-3-
AGREEMENT
dated October 30, 1996
by and among
TREASURY INTERNATIONAL, INC.,
WILLIAM SARANTOS,
TOULA SARANTOS,
MARTIN MAXWELL,
LOUIS CHELIN,
VERNE CHELIN,
DAVID BERESKIN, IN TRUST,
JOSEPH MYERS,
ELEANOR MAXWELL,
BERTA LUNENFELD,
DOUGLAS FERGUSON
and
MEGATRAN INVESTMENTS LIMITED
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. SALE AND PURCHASE OF SHARES .................................... 2
1.1 Purchase Price ................................................... 2
1.2 Payment of Purchase Price ........................................ 2
1.3 Sharing of Profits ............................................... 3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF MEGATRAN AND ITS
STOCKHOLDERS.................................................. 4
2.1 Corporate Organization............................................ 4
2.2 Authorization..................................................... 5
2.3 Governmental Consents and Approval................................ 6
2.4 Capitalization.................................................... 6
2.5 Ownership of Shares............................................... 6
2.6 Joint Ventures.................................................... 7
2.7 Financial Statements.............................................. 7
2.8 Absence of Undisclosed Liabilities;
Books of Account................................................ 8
2.9 Absence of Certain Changes........................................ 9
2.10 Ownership of Properties........................................... 11
2.11 Real Property and Other Leases.................................... 13
2.12 Inventory......................................................... 13
2.13 Machinery and Equipment........................................... 13
2.14 Intellectual Property............................................. 14
2.15 Securities Matters................................................ 15
2.16 Accounts Receivable............................................... 15
2.17 Taxes............................................................. 15
2.18 Agreements, etc................................................... 19
2.19 Agreements Regarding Employees.................................... 20
2.20 Absence of Defaults............................................... 21
2.21 Compliance with Laws.............................................. 21
2.22 Compliance with Laws - Environmental.............................. 21
2.23 Litigation........................................................ 24
2.24 Violations........................................................ 24
2.25 Finders' Fees..................................................... 25
2.26 Restrictions on Business Activities............................... 25
2.27 Board Approval.................................................... 26
2.28 Questionable Payments............................................. 26
2.29 Accuracy of Representations and Warranties........................ 27
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF TREASURY.................... 27
3.1 Organization...................................................... 27
3.2 Corporate Authority, Etc.......................................... 27
3.3 Governmental Consents and Approvals............................... 28
3.4 Litigation........................................................ 28
3.5 Finders' Fees..................................................... 28
-i-
<PAGE>
ARTICLE IV. CLOSING....................................................... 29
4.1 Time and Place of Closing......................................... 29
4.2 Documents Delivered by Megatran................................... 29
4.3 Documents Delivered by Treasury................................... 30
4.4 Post-Closing Obligations ......................................... 31
ARTICLE V. SURVIVAL OF REPRESENTATIONS AND INDEMNITY ..................... 33
ARTICLE VI. MISCELLANEOUS................................................. 34
6.1 Further Assurances................................................ 34
6.2 Notices........................................................... 34
6.3 Entire Agreement.................................................. 35
6.4 Governing Law..................................................... 35
6.5 Interpretation.................................................... 36
6.6 Counterparts...................................................... 36
6.7 Parties in Interest............................................... 36
6.8 Severability...................................................... 36
6.9 Schedules......................................................... 36
6.10 Expenses.......................................................... 37
6.11 Prior Agreement Superseded........................................ 37
EXHIBITS AND SCHEDULES
Schedule 1.2 Names, addresses and share ownership of
record and beneficial stockholders of Megatran
Schedule 2.10 Encumbrances affecting the property of
Mega Blow and Megatran [TO COME]
Schedule 2.18 List of all material agreements
Schedule 2.19 Agreements affecting employees
-ii-
<PAGE>
AGREEMENT dated October 30, 1996 (the "Agreement") by and between TREASURY
INTERNATIONAL, INC., a Delaware corporation ("Treasury"), WILLIAM SARANTOS,
TOULA SARANTOS, MARTIN MAXWELL, LOUIS CHELIN, VERNE CHELIN, DAVID BERESKIN, IN
TRUST, JOSEPH MYERS, ELEANOR MAXWELL, BERTA LUNENFELD, DOUGLAS FERGUSON (each of
said individuals hereinafter referred to individually as a "Stockholder" and all
of them collectively as the "Stockholders"), and MEGATRAN INVESTMENTS LIMITED, a
corporation organized under the laws of the Province of Ontario (hereinafter
referred to as the "Megatran").
WHEREAS, Megatran is the sole stockholder of Mega Blow Moulding Limited, a
Canadian corporation ("Mega Blow"); and
WHEREAS, Stockholders wish to sell to Treasury and Treasury wishes to
purchase from Stockholders all of the issued and outstanding capital stock of
Megatran upon the terms and conditions hereinafter set forth; and
WHEREAS, the boards of directors of Treasury and Megatran (each hereinafter
referred as a "Board of Directors") deem it advisable and in the best interests
of their stockholders to engage in the transactions contemplated hereby pursuant
to which Treasury will acquire all of the issued and outstanding capital stock
of Megatran (the "Acquisition"); and
WHEREAS, the respective parties desire to make certain representations,
warranties and agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements set forth herein and such other good and
valuable consideration, the receipt
<PAGE>
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound hereby, agree as follows:
Article I. Sale and Purchase of Shares.
1.1 Purchase Price. Stockholders do hereby agree to sell and deliver
to Treasury, and Treasury does hereby agree to purchase from Stockholders, all
of the issued and outstanding capital stock of Megatran, aggregating two hundred
forty shares of common stock, without par value, for a total consideration of
$3,535,000.00 (CDN) (the "Purchase Price").
1.2 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) Stockholders acknowledge receipt, prior to the date hereof,
of $25,000 (US);
(b) simultaneously with the execution of this Agreement, Treasury
has delivered to David M. Bereskin, as nominee for all Stockholders, against
receipt from each Stockholder of one or more stock certificates representing the
number of shares of Megatran set forth opposite his name on Schedule 1.2,
endorsed to Treasury or accompanied by a signed stock power transferring such
shares to Treasury, together with all applicable stock transfer tax stamps
relative to said certificates, $2,535,000 (in Canadian dollars) less the
Canadian equivalent of the payment described in Section 1.2(a); and
(c) simultaneously with the execution of this Agreement, Treasury
has delivered to David M. Bereskin, as nominee for all Stockholders, a duly
executed convertible debenture in the principal amount (Canadian dollars) of
$1,000,000. Said debenture
-2-
<PAGE>
is secured by a second lien upon all machinery, furnishings and equipment of
Mega Blow located at 7040 Tranmere Drive, Mississauga, Ontario, Canada, as
evidenced by a security agreement provided by Treasury simultaneously with the
execution of this Agreement. Treasury represents and warrants that the security
interest granted by such agreement shall rank subsequent only to existing
registrations of MTC Leasing Inc., Newcourt Financial Ltd. and Royal Bank of
Canada which shall secure an indebtedness not to exceed $2,150,000.00.
1.3 Profits of Mega Blow. (a) The parties acknowledge and agree that
certain Stockholders are entitled to the sum of $130,583.00 (CDN) (the "1996
Profits"), representing the unpaid balance of the 1996 management bonus
described in Section 2.9(i) based on the net after-tax profits of Mega Blow for
the fiscal year ended August 31, 1996 as shown on the audited financial
statement of Mega Blow for the fiscal year ended August 31, 1996. The parties
agree that the equivalent value of the 1996 Profits is represented by 283,876
shares of Treasury common stock (the "Share Equivalent"). Within ten (10) days
after the date hereof, Treasury shall issue to each such Stockholder common
stock of Treasury representing his proportionate share of the Share Equivalent,
pursuant to written directions delivered to Treasury on the date hereof. The
determination of each Stockholder's proportionate share of the Share Equivalent
shall be made by multiplying the Share Equivalent by a fraction, the numerator
of which shall be the number of shares transferred by such Stockholder to
Treasury on the date hereof and the dominator of which shall be 240. Treasury
warrants and represents to the Stockholders that in the event the issuance of
the such shares is not exempt from the
-3-
<PAGE>
registration requirements of the U.S. Securities Act of 1933, as amended, by
reason of Regulation S promulgated thereunder, Treasury will, not later than
January 15, 1997, file a registration statement to register such shares under
the Act.
Article II. Representations and Warranties of Megatran and the
Stockholders. Megatran and Stockholders jointly and severally represent and
warrant to Treasury that:
2.1 Corporate Organization. Mega Blow is a corporation duly organized,
validly existing and in good standing under the laws of Canada and is duly
authorized to carry on its business where and as now conducted and to own, lease
and operate properties as it now does. Mega Blow is qualified to do business,
and is in good standing, in the Province of Ontario, Canada, which is the only
jurisdiction in which the nature of the business conducted by it or the
properties owned or leased by it requires qualification. Mega Blow has no
subsidiaries. Megatran is a corporation duly organized, validly existing and in
good standing under the laws of the Province of Ontario and is duly authorized
to carry on its business where and as now conducted and to own, lease and
operate properties as it now does. Megatran is in good standing in the Province
of Ontario, Canada, which is the only jurisdiction in which the nature of the
business conducted by it or the properties owned or leased by it requires
qualification. Megatran has no subsidiaries other than Mega Blow. The copy of
the certificates of incorporation and by-laws of Mega Blow and Megatran that
have been delivered to Treasury are complete and correct as of the date of this
Agreement, and the minute books of Mega Blow and Megatran which have been
exhibited to Treasury are complete in all material respects and accurately
reflect all material action taken prior to
-4-
<PAGE>
the date of this Agreement by the Boards of Directors of Mega Blow and Megatran
and their representative stockholders.
2.2 Authorization. (a) Megatran has full power and authority to enter
into this Agreement and to perform this Agreement in accordance with its terms;
the execution, delivery and performance of this Agreement by Megatran have been
duly authorized by its Board of Directors; neither Megatran nor Stockholders are
bound by any contractual or other obligation that would be violated by its or
their execution or performance of this Agreement; and this Agreement is a valid
and binding obligation of Megatran and Stockholders enforceable in accordance
with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by Megatran of any of the transactions contemplated herein nor
compliance by Megatran with the terms, conditions and provisions hereof or of by
agreement or instrument contemplated hereby will (i) conflict with, result in a
breach of, or constitute an event of default under the certificate of
incorporation or by-laws of Megatran, or any instrument, agreement, lease,
license, franchise, permit, judgment, order, award, decree or other
authorization, right, or obligation to which Megatran is a party or any of its
properties is subject or by which it is bound, or any statute, ordinance, rule
or regulation applicable to Megatran, or (ii) require the approval, consent or
authorization of, or the making of any declaration, filing or registration with,
any third party or any foreign, federal, state or local court, governmental
authority or regulatory body.
-5-
<PAGE>
2.3 Governmental Consents and Approvals. The execution, delivery and
performance of this Agreement by Megatran and Stockholders require no action by
or in respect of, or filing with, any government body, agency, official or
authority.
2.4 Capitalization. Mega Blow's authorized capitalization is an
unlimited number of common stock, without par value, of which 240 shares are
issued and outstanding. Megatran has no capital stock issued or outstanding
except for 240 common shares which are issued and outstanding. All the
outstanding shares of Mega Blow and Megatran were duly authorized for issuance
and are validly issued, fully-paid and non-assessable. There are no outstanding
options, warrants, calls, commitments or rights of any kind relating to the
issued or unissued capital stock or other securities or equity interests of Mega
Blow or Megatran (collectively, "Mega Blow Securities"). There are no existing
arrangements that require or permit any shares of Mega Blow or Megatran to be
voted by or at the discretion of anyone other than the record stockholders. Mega
Blow does not own any capital stock or other interest in any corporation or
other business entity. Megatran does not own any capital stock or other interest
in any corporation or other business entity except for the shares of Mega Blow.
Neither Mega Blow or Megatran is obligated to purchase, redeem or otherwise
acquire any securities of Mega Blow or Megatran or of any other party.
2.5 Ownership of Shares. (a) Stockholders are the record owners and
the beneficial owners of all of Megatran's issued and outstanding capital stock
as of the date hereof. Each
-6-
<PAGE>
Stockholder has the full and complete right and power to dispose of his stock in
accordance with the terms of this Agreement.
(b) Megatran is the record owner and the beneficial owner of all
of Mega Blow's issued and outstanding capital stock as of the date hereof.
Megatran owns all of its shares of Mega Blow free and clear of all liens and
encumbrances.
(c) Schedule 1.2 is a true and complete list of the record owners
and the beneficial owners of Megatran's issued and outstanding capital stock as
of the date hereof, and the addresses of such owners.
2.6 Joint Ventures.
(a) Mega Blow is not a party to or of any Joint Ventures. Except
for Mega Blow, Megatran is not a party to or of any Joint Ventures. For purposes
of this Agreement, "Joint Venture" means an entity in which Mega Blow or
Megatran, as the case may be, is, directly or indirectly, the beneficial owner
of 40% or more of any class of equity securities or equivalent profit
participation interest.
2.7 Financial Statements. (a) The following financial statements of
Mega Blow, copies of which have been delivered to Treasury, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis and present fairly the financial condition of Mega Blow at the
dates indicated and the results of its operations for the periods indicated:
(i) audited balance sheets of Mega Blow as of August 31, 1996 and
August 31, 1994, together with the related statements of operations and
stockholders' equity for the years then ended, reported on by Rosenberg
Smith and Partners; and
-7-
<PAGE>
(ii) unaudited balance sheet of Mega Blow as of May 31, 1996 and
August 31, 1995, together with the related statements of operations,
stockholders' equity and cash flows for the six and 12 month periods,
respectively, then ended.
(b) The following financial statements of Megatran, copies of
which have been delivered to Treasury, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly the financial condition of Megatran at the dates indicated and
the results of its operations for the periods indicated:
(i) unaudited balance sheets of Megatran as of December 31, 1994 and
December 31, 1995, together with the related statements of operations and
stockholders' equity for the years then ended, reported on by Rosenberg
Smith and Partners; and
(ii) unaudited balance sheet of Megatran as of September 30, 1996,
together with the related statements of operations, stockholders' equity
and cash flows for the one month period then ended.
2.8 Absence of Undisclosed Liabilities; Books of Account. Except to
the extent fully reflected or reserved against in the aforesaid May 31, 1996 and
September 30, 1996 balance sheets, Mega Blow and Megatran have no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, including, but
not limited to, any tax or other liabilities of any nature that were unknown or
undetermined as of that date but that, if then known or determined, would have
been required to be reflected in a balance sheet prepared in accordance with
generally accepted
-8-
<PAGE>
accounting principles applied on a consistent basis. Mega Blow does not know and
has no reasonable grounds to know of any basis for the assertion against Mega
Blow of any liability of any nature (and in any amount) not fully reflected or
reserved against in the May 31, 1996 balance sheet or not incurred in the
ordinary course of business thereafter. Megatran does not know and has no
reasonable grounds to know of any basis for the assertion against Megatran of
any liability of any nature (and in any amount) not fully reflected or reserved
against in the September 30, 1996 balance sheet or not incurred in the ordinary
course of business thereafter. All the books of account of Mega Blow and
Megatran have been exhibited or made available to Treasury and accurately record
all transactions of Mega Blow and Megatran during the respective periods covered
by them.
2.9 Absence of Certain Changes. Subject to the payment of the
management bonus referred to in Section 2.9(i), since August 31, 1996 and
September 30, 1996, Mega Blow and Megatran, respectively, have operated their
businesses in the ordinary course and consistent with past practices and there
has not been any material adverse change in the financial condition of Mega Blow
or Megatran, results of operations or businesses of Mega Blow or Megatran, and
neither Mega Blow nor Megatran has:
(a) entered into any transaction or incurred any liability or
obligation other than in the ordinary course of its business;
(b) made any declaration, set aside or paid any dividend or other
distribution in respect of any shares of its capital stock, nor purchased,
redeemed or otherwise acquired any
-9-
<PAGE>
outstanding shares of capital stock or other securities of, or other ownership
interests in, itself;
(c) paid any dividends or made any other distributions on, or
acquired, any shares of its capital stock or, directly or indirectly, made any
other payments or loans of any kind to any of its stockholders, except for (i)
repayment of approximately $144,000 (CDN) in loans made by certain Stockholders
to Mega Blow, and (ii) compensation for services rendered and reimbursement for
expenses in amounts consistent with past practices;
(d) except for the loans described in Section 2.9(c), incurred
any indebtedness for borrowed money, other than short term borrowing in the
ordinary course of business;
(e) issued any Mega Blow Securities, granted any options or
agreed to any amendment of any material term of any outstanding Mega Blow
Securities;
(f) sustained any material damage, destruction or other casualty
loss (whether or not covered by insurance) affecting its business or assets;
(g) made any material change in any method of accounting or
accounting practice, except for a change required by reason of a concurrent
change in generally accepted accounting principles;
(h) subject to the exception stated in Section 2.9(i) hereof,
other than in the ordinary course of business, (i) granted any severance or
termination pay to, or increased any compensation, bonus or other benefits
payable to, or entered into
-10-
<PAGE>
any written employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with, any of its directors, or any of
its officers or employees whose 1995 base annual salary exceeded $50,000, or
(ii) increased any benefit payable under any existing severance or termination
pay policies or employment agreements; or
(i) granted or agreed to grant any general increase in any rate or
rates of salaries or compensation to its employees or any specific increase in
the salary or compensation to any employee or agent, or paid or agreed to pay
any bonus to any of its employees, other than in the ordinary course of business
and other than a management bonus to be paid to the Stockholders in the
aggregate amount of $310,000 (CDN) for the fiscal year ended August 31, 1996,
the unpaid outstanding balance of $130,583 (CDN) of which will be paid to
certain Stockholders pursuant to Section 1.3 hereof.
2.10 Ownership of Properties. (a) Except as set forth in Schedule
2.10, Mega Blow has good and marketable title, free and clear of any claim,
lien, mortgage, security interest, pledge, restriction, charge or encumbrance,
to all its property and assets (by ownership outright) including its property
and assets reflected on the August 31, 1996 balance sheet, except for tangible
personal property sold or otherwise disposed of since that date in the ordinary
course of business. Except as set forth in Schedule 2.10, Mega Blow owns
outright, free and clear of any claim, lien, security interest, pledge,
restriction, charge or encumbrance, all leasehold improvements, equipment,
inventory and other personal property used in its business or presently located
in any of its
-11-
<PAGE>
premises, except for leased property listed on Schedule 2.10 and for the lien,
if any, of current taxes not yet due and payable. Except for its lease of the
Premises (as defined in Section 4.4(a)) from Lamda Venture Investments Limited,
in which officers and directors of Mega Blow are shareholders, Mega Blow does
not use or lease any property that is owned by any officer, director or
affiliate of Mega Blow, or any relative of any thereof.
(b) Except as set forth in Schedule 2.10, Megatran has good and
marketable title, free and clear of any claim, lien, mortgage, security
interest, pledge, restriction, charge or encumbrance, to all its property and
assets (by ownership outright) including its property and assets reflected on
the September 30, 1996 balance sheet, except for tangible personal property sold
or otherwise disposed of since that date in the ordinary course of business.
Except as set forth in Schedule 2.10, Megatran owns outright, free and clear of
any claim, lien, security interest, pledge, restriction, charge or encumbrance,
all leasehold improvements, equipment, inventory and other personal property
used in its business or presently located in any of its premises, except for
leased property listed on Schedule 2.10 and for the lien, if any, of current
taxes not yet due and payable. Megatran does not use or lease any property that
is owned by any officer, director or affiliate of Mega Blow, or any relative of
any thereof.
-12-
<PAGE>
2.11 Real Property and Other Leases. All leases of real property
and/or other property by Mega Blow or Megatran, and amendments and modifications
thereof, are in full force and effect and have not been modified or amended in
any material respect, all rents and additional rents due to date under each such
lease have been paid, the lessee has been in peaceable possession since the
commencement of the original term of such lease, and there exists no default
under such leases by Mega Blow or Megatran or by the lessor under any of such
leases, nor any event which with notice or lapse of time or both would
constitute a default thereunder by Mega Blow.
2.12 Inventory. All of the inventory of Mega Blow consists of items
that are currently usable or salable in the ordinary course of its business and
are carried on its books at the lower of cost (on a FIFO basis) or market value.
Megatran does not own any inventory.
2.13 Machinery and Equipment. All machinery and equipment owned or
leased by Mega Blow or Megatran is in good operating condition and in good
condition of maintenance and repair, normal wear and tear excepted, and the use
thereof is in conformance with all applicable ordinances and regulations, and
all building, zoning and other laws. All such machinery and equipment is
suitable for the uses to which it is currently employed, has been regularly and
properly maintained and is not in need of repair or replacement.
-13-
<PAGE>
2.14 Intellectual Property.
(a) There is no infringement by Mega Blow or Megatran upon the
patents, trademarks, trade names, service marks, trade secrets, copyrights or
other intellectual property rights of others ("Intellectual Property Rights").
(b) There are no inventions which are the subject of issued
letters patent or an application therefor which are owned and used or licensed
for use by Megatran or Mega Blow.
(c) Since August 31, 1995, neither Mega Blow nor Megatran has
been notified of, either orally or in a writing received by Mega Blow or
Megatran or their representatives, or has been a defendant or plaintiff in, any
claim, suit, action or proceeding which involves, a claim of infringement of any
Intellectual Property Rights, and to the knowledge of Mega Blow and Megatran,
there are no claims by any other person of infringement of Intellectual Property
Rights by Mega Blow or Megatran.
(d) There are no proceedings (including pending applications for
reissue or reexamination of a patent) before any patent or trademark authority
to which Mega Blow or Megatran is a party.
(e) Mega Blow and Megatran have taken adequate measures to
maintain the confidentiality of their process and formulae, research and
development results and other know-how, the value of which to Mega Blow or
Megatran is contingent upon maintenance of the confidentiality thereof.
-14-
<PAGE>
2.15 Securities Matters.
(a) Neither Mega Blow nor Megatran has made any filings with the
United States Securities and Exchange Commission ("SEC").
(b) Neither Mega Blow nor Megatran has made any non-public
offerings since August 31, 1995.
2.16 Accounts Receivable. All of the accounts receivable of Mega Blow
and Megatran arose from bona fide transactions in the ordinary course of
business and are collectible in full net of reserves, and none is subject to any
defense, set-off or counterclaim.
2.17 Taxes.
(a) For the purposes of this Agreement, "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means, for any entity, (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding on amounts
paid to or by such entity or any subsidiary thereof, payroll, employment,
excise, severance, stamp, occupation, property, environmental or windfall profit
tax, or other tax, together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental authority responsible for the
imposition of any such tax (domestic or foreign) (a "Taxing Authority"), and
(ii) liability of such entity or any subsidiary thereof for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any taxable period, and
(iii) liability of such entity or any
-15-
<PAGE>
subsidiary thereof for the payment of any amounts of the type described in
clauses (i) or (ii) as a result of any express or implied obligation to
indemnify any other person.
(b) (i) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports)
required to be filed with any Taxing Authority with respect to any
Taxable period ending on or before the date of this Agreement by or on
behalf of Mega Blow or Megatran (collectively, the "Mega Blow Tax
Returns"), have been or will be filed when due (subject to any
extensions of such due date) and, to the knowledge of Mega Blow and
Megatran, each Mega Blow Tax Return is correct and complete in all
material respects as filed;
(ii) Mega Blow and Megatran have timely paid, withheld or
made provision on their books for all Taxes shown as due and payable
on Mega Blow Tax Returns that have been filed;
(iii) all Mega Blow Tax Returns relating to income or
franchise Taxes filed with respect to Taxable years of Mega Blow and
Megatran ending on or before August 31, 1989, have been examined by
appropriate tax authorities and closed or are Mega Blow Tax Returns
with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has
expired (the period of time that Revenue
-16-
<PAGE>
Canada, Taxation may review a tax return being three years after the
date of the Notice of Assessment);
(iv) neither Mega Blow nor Megatran has granted any
extension or waiver of the limitation period applicable to any Mega
Blow Tax Returns;
(v) there is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened in a writing received by Mega
Blow or Megatran against or with respect to Mega Blow or Megatran in
respect of any Tax or assessment;
(vi) there are no requests for rulings in respect of any Tax
pending between Mega Blow or Megatran and any Taxing Authority;
(vii) none of the property owned by Mega Blow or Megatran is
"tax-exempt use property" within the meaning of Section 168(h) of the
Code and/or any similar provision of Canadian tax law;
(viii) neither Mega Blow nor Megatran nor any other person
on behalf of either of them has entered into nor will it enter into
any agreement or consent pursuant to Section 341(f) of the Code or any
similar provision of Canadian tax law;
(ix) there are no liens for Taxes upon the assets of Mega
Blow or Megatran except liens for current Taxes not yet due;
-17-
<PAGE>
(x) to the knowledge of Mega Blow and Megatran, they will
not be required to include any adjustment in Taxable income for any
Tax period (or portion thereof) ending after the Closing Date pursuant
to Section 481(c) of the Code (or any similar provision of the Tax
laws of any jurisdiction) as a result of a change in method of
accounting for any Tax period (or portion thereof) ending on or before
the date hereof or pursuant to the provisions of any agreement entered
into with any Taxing Authority with regard to the Tax liability of
Mega Blow or Megatran for any Tax period (or portion thereof) ending
on or before the date hereof;
(xi) neither Mega Blow nor Megatran has been a member of an
affiliated group other than one of which Megatran was the common
parent, or filed or been included in a combined, consolidated or
unitary Tax return other than one filed by Mega Blow or Megatran, or a
return for a group consisting solely of its predecessors, or
participated in any other similar arrangement whereby any income,
revenues, receipts, gains, losses, deductions, credits or other Tax
items of Mega Blow or Megatran was determined or taken into account
for Tax purposes with reference to or in conjunction with any such
items of another person other than Mega Blow or Megatran or any
predecessor;
-18-
<PAGE>
(xii) neither Mega Blow nor Megatran is currently under any
contractual obligation to pay to a Taxing Authority the income or
franchise tax obligations of, or with respect to transactions relating
to, any other person or to indemnify any other person with respect to
any income or franchise tax; and
(xiii) neither Mega Blow nor Megatran has signed any letter
or entered into any agreement or arrangement in writing consenting to
the surrender or sharing of any deductions, credits or other Tax
attributes with any other person or transferred or assigned to any
other person for Tax purposes any such items.
(c) Within the five-year period preceding the date of this
Agreement, neither Mega Blow nor Megatran has been a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
2.18 Agreements, etc. Schedule 2.18 contains a true and complete list
of: (a) all agreements and other commitments by Mega Blow or Megatran for the
purchase of any materials, supplies or inventory other than those that do not
extend beyond three months; (b) all notes and agreements relating to any
indebtedness of Mega Blow or Megatran for borrowed money; (c) all leases or
other rental agreements under which Mega Blow or Megatran is either lessor or
lessee which call for annual lease payments in excess of $10,000 individually;
(d) all other agreements (including, but not limited to, employment agreements,
commitments and understandings, written
-19-
<PAGE>
or oral) to which Mega Blow or Megatran is a party or by which any of them is
bound which require payment by Mega Blow or Megatran of more than $10,000 and
which cannot be terminated by Mega Blow or Megatran, without liability, on
notice of thirty days or less; (e) the name of each bank in which Mega Blow or
Megatran has an account, credit line or safe deposit box and the name of each
person presently authorized to draw thereon or have access thereto; and (f) all
fire, liability and other insurance carried by Mega Blow or Megatran with
respect to its business and properties. All leases, agreements, commitments and
understandings of Mega Blow and Megatran (including, but not limited to,
commitments for the purchase of inventory) were entered into in the ordinary
course of business, and all of its respective commitments for inventory were
entered into on an arm's-length basis and are at prices believed by Mega Blow
and Megatran to be reasonable and consistent with current business requirements.
True and complete copies of all leases, agreements, commitments and
understandings referred to on Schedule 2.18 have been delivered to Treasury.
There are no such oral agreements.
2.19 Agreements Regarding Employees. (a) Neither Mega Blow nor
Megatran is a party to or bound by any employment agreement, or any collective
bargaining or other labor agreement, or any pension, retirement, stock option,
stock purchase, savings, profit sharing, deferred compensation, retainer,
consultant, bonus, group insurance or other incentive or welfare agreement, plan
or arrangement, except as set forth on Schedule 2.19. True and
-20-
<PAGE>
complete copies of each agreement, plan or arrangement listed on Schedule 2.19
have been delivered to Treasury.
(b) Since August 31, 1995, neither Mega Blow nor Megatran has
granted a salary increase to any officer or key employee, except as set forth on
Schedule 2.19.
(c) Neither Mega Blow nor Megatran maintains any employee benefit
plans (the "Plans") subject to the Employee Retirement Income Security Act of
1974 ("ERISA") or any similar Canadian law and does not participate in any
multiemployer plans.
2.20 Absence of Defaults. There is no existing default by any party
under any lease, agreement, commitment or understanding to which Mega Blow or
Megatran is a party or by which it is bound.
2.21 Compliance with Laws. Mega Blow has received, or applied for,
approval from the appropriate United States regulatory agencies to market its
products in the United States. Neither Mega Blow nor Megatran is, in any
material respect, in violation of, and has not violated, any applicable
provisions of any laws, statutes, ordinances or regulations or any term of any
judgment, decree, injunction or order binding against it.
2.22 Compliance with Laws-Environmental. (a) For purposes of this
Section 2.22:
"Hazardous Material" shall mean any material or substance that,
whether by its nature or use, is now or hereafter defined as hazardous waste,
hazardous substance, pollutant or contaminant under any Environmental Law
(defined below), or which is toxic, explosive, corrosive, flammable, infectious,
radioactive,
-21-
<PAGE>
carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter
regulated under any Environmental Law, or which is or contains petroleum,
gasoline, diesel fuel or another petroleum hydrocarbon product, lead paint,
asbestos, asbestos-containing materials or polychlorinated biphenyls;
"Environmental Laws" means those United States, Canadian, state,
provincial or local laws, statutes, ordinances, rules, regulations, orders and
decrees (including any amendments thereto) relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of Hazardous Materials, pollutants (as defined under the
Federal Water Pollution Control Act ss.502, 33 U.S.C. ss.1362), wastewater
(other than non-contact cooling or process water), or wastes constituting
hazardous substances (as defined in Section 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C.
ss.9601(14)) in, into, onto or upon the environment (including, without
limitation, ambient air, surface water, groundwater, or land), or otherwise
relating to the processing, distribution, use, treatment, collection,
accumulation, storage, disposal, transport, or handling of Hazardous Materials,
and including but not limited to: CERCLA; the Resource Conservation and Recovery
Act, 42 U.S.C. ss.6901 et. seq.; the Federal Water Pollution Control Act, 33
U.S.C. ss.1251 et. seq.; the Clean Air Act, 42 U.S.C. ss.1857 et. seq.; and the
Toxic Substances Control Act, 15 U.S.C. ss.2601 et. seq. and any similar laws of
Canada or the Province of Ontario.
-22-
<PAGE>
(b) No Hazardous Material is currently located at, in, on, under
or about any of the Premises in a manner which violates any Environmental Law,
or which requires cleanup or corrective action of any kind under any
Environmental Law.
(c) Mega Blow and Megatran have obtained and now maintain
currently valid and effective permits, licenses and other authorizations which
are required under Environmental Laws for the operation of their manufacturing
and distribution facilities (the "Facilities").
(d) Mega Blow and Megatran and the operations of the Facilities
are in compliance with Environmental Laws and with all terms and conditions of
any applicable and enforceable rules, regulations, orders, decrees, plans,
codes, judgments, injunctions, notice or demand letters, prohibitions,
schedules, timetables, standards, conditions or requirements issued, entered,
approved or promulgated thereunder.
(e) (i) Neither Mega Blow nor Megatran has received (A) any
notice of the violation or alleged violation of, or noncompliance or alleged
noncompliance with, any Environmental Law, permit, license or other
authorization; (B) any notice, demand, claim, order or request for the
performance of, or the payment of costs or expenses for, any test,
investigation, assessment, examination, cleanup, removal, remediation,
mitigation, response, treatment or restoration with regard to environmental
conditions at the Facilities (which has not been performed or satisfied); or (C)
any notice of any disposal, emission, discharge, release or threatened release
of any Hazardous Materials at, in,
-23-
<PAGE>
into, onto, upon, by or from any real property owned, operated or possessed by
Mega Blow or Megatran or with respect to Hazardous Material shipped by Mega Blow
or Megatran for disposal; and (ii) there is not now and has not been any
disposal, emission, discharge, release or threatened release of any Hazardous
Materials at, in, into, onto, upon, by or from any real property at any time
owned, operated, possessed or used by Mega Blow or Megatran.
2.23 Litigation. There is no litigation, proceeding or governmental
investigation pending or, so far as is known to Mega Blow and Megatran,
threatened, or any order, injunction or decree outstanding, against or relating
to Mega Blow or Megatran or their properties or businesses, and there exists no
reasonable basis for the commencement of any thereof.
2.24 Violations. The improvements located on real estate owned or
leased by Mega Blow or Megatran and the continuation of the present use,
occupancy and operation of said improvements comply in full with all zoning
requirements and do not depend on or require, to any extent, any further
ordinance, variance, special exception or other special governmental approval
for its continuing legality. There is no violation of any recorded restriction,
condition or agreement affecting said real estate and neither Mega Blow nor
Megatran has received notice of, and there does not exist, and continuation of
the present uses, occupancies and operations will not result in a violation of,
building, health, safety, environmental pollution control, fire or similar law,
ordinance, order or regulation respecting said real estate. No
-24-
<PAGE>
notice has been received by Mega Blow or Megatran alleging any such violation.
2.25 Finders' Fees. Neither Mega Blow nor Megatran nor any Stockholder
has employed or utilized the services of any broker, finder or other
intermediary in connection with this Agreement or the transaction contemplated
by this Agreement. Notwithstanding the foregoing, Stockholders shall pay any
brokerage commission or finder's fee due any broker, finder or other
intermediary engaged by Mega Blow, Megatran or any Stockholder. If any claim for
a broker's commission, finder's fee or other like payment in connection with the
negotiation, execution or consummation of the transaction herein provided is
asserted against Treasury, Megatran or Mega Blow, Stockholders shall jointly and
severally indemnify, defend and hold harmless Treasury, Megatran and Mega Blow
from and against any and all loss, damage, liability or expense, including costs
and reasonable attorneys' fees, which Treasury, Megatran or Mega Blow may incur
or sustain by reason of such claim if the claim is based upon any statement,
representation or agreement shown to have been made or entered into by Mega
Blow, Megatran or any Stockholder.
2.26 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Mega Blow or Megatran which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing (a) the ability of Mega Blow or Megatran to conduct their
business in any geographic area or field of use, (b) any acquisition of property
by Mega Blow or Megatran, or (c) the conduct of business by Mega Blow
-25-
<PAGE>
or Megatran as currently conducted or as currently proposed to be conducted by
Mega Blow or Megatran.
2.27 Board Approval. The Boards of Directors of Mega Blow and Megatran
have unanimously determined that the Acquisition is in the best interests of
Mega Blow, Megatran and Stockholders and is on terms that are fair to Mega Blow,
Megatran and Stockholders.
2.28 Questionable Payments. Neither Mega Blow nor Megatran, nor, to
the best knowledge of either, any director, officer or other employee of Mega
Blow or Megatran has: (i) made any payments or provided services or other favors
in the United States of America, Canada or in any foreign country in order to
obtain preferential treatment or consideration by any governmental entity with
respect to any aspect of the business of Mega Blow or Megatran; or (ii) made any
political contributions which would not be lawful under the laws of the United
States, Canada and the foreign country in which such payments were made. Neither
Mega Blow nor Megatran nor, to the best knowledge of either, any director,
officer or other employee of Mega Blow or Megatran, or any customer or supplier
of any of them, has been the subject of any inquiry or investigation by any
governmental entity in connection with payments or benefits or other favors to
or for the benefit of any governmental or armed services official, agent,
representative or employee with respect to any aspect of the business of Mega
Blow or Megatran or with respect to any political contribution.
-26-
<PAGE>
2.29 Accuracy of Representations and Warranties. No representation or
warranty by Mega Blow, Megatran or Stockholders in this Agreement and no written
statement made to Treasury or contained in any certificate or instrument
delivered or to be delivered to Treasury pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
Article III. Representations and Warranties of Treasury. Treasury
represents and warrants to Stockholders as follows:
3.1 Organization. Treasury is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Treasury
has the corporate power and authority to own or lease its properties and to
carry on its business as now conducted and as proposed to be conducted.
3.2 Corporate Authority, Etc.
(a) Treasury has full power and authority to enter into this
Agreement and to perform this Agreement in accordance with its terms; the
execution, delivery and performance of this Agreement by Treasury and the
consummation of the Acquisition have been duly authorized by its Board of
Directors and Treasury is not bound by any contractual or other obligation that
would be violated by the execution or performance of this Agreement; and
(b) Neither the execution and delivery of this Agreement nor the
consummation by Treasury of any of the transactions contemplated herein nor
compliance by Treasury with
-27-
<PAGE>
the terms, conditions and provisions hereof or of any agreement or instrument
contemplated hereby will (i) conflict with, result in a breach of, or constitute
an event of default under the certificate of incorporation or by-laws of
Treasury, or any material instrument, agreement, lease, license, franchise,
permit, judgment, order, award, decree or other authorization, right, or
obligation to which Treasury is a party or any of its properties is subject or
by which they are bound, or any statute, ordinance, rule or regulation
applicable to Treasury, or (ii) require the approval, consent or authorization
of, or the making of any declaration, filing or registration with, any third
party or any foreign, federal, state or local court, governmental authority or
regulatory body.
3.3 Governmental Consents and Approvals. The execution, delivery and
performance by Treasury of this Agreement and the consummation of the
Acquisition by Treasury requires no action by or in respect of, or filing with,
any governmental body, agency, official or authority.
3.4 Litigation. There are no suits, claims, proceedings or
investigations pending or, to the knowledge of Treasury, threatened against
Treasury which question the legality of the transactions contemplated by this
Agreement.
3.5 Finders' Fee. Treasury has not employed or utilized the services
of any broker, finder or other intermediary in connection with this Agreement or
the transactions contemplated by this Agreement.
-28-
<PAGE>
Article IV. Closing.
4.1 Time and Place of Closing. The parties have delivered the
documents referred to in Sections 4.2 and 4.3 at the offices of Garvey, Ferriss,
Royal Bank Plaza, South Tower, Toronto, Ontario, simultaneously with the
execution of this Agreement.
4.2 Documents Delivered by Megatran. Megatran has delivered to
Treasury the following:
(a) a copy of resolutions of the board of directors of Megatran,
authorizing the execution, delivery and performance of this Agreement and the
consummation of the Acquisition by Megatran, and a certificate of Megatran's
secretary or assistant secretary, dated as of the date hereof, that such
resolutions were duly adopted and are in full force and effect;
(b) a certificate (dated as of the date hereof) executed by the
chief executive officers of Mega Blow and Megatran certifying that (i) all
representations and warranties of Mega Blow and Megatran contained in the
Agreement among Treasury, Mega Blow and Megatran, dated June 25, 1996 (the
"Prior Agreement"), are true and correct at and as of the date hereof with the
same effect as though made again at and as of the date hereof, and (ii) Mega
Blow and Megatran have performed and complied with all obligations and covenants
required by the Prior Agreement to be performed or complied with by them prior
to or at the date hereof, which is deemed to be the "Closing Date" under the
Prior Agreement;
(c) stock certificates from Stockholders representing ownership
of all issued and outstanding shares of Megatran, endorsed to Treasury or
accompanied by a signed stock
-29-
<PAGE>
power transferring to Treasury all of such shares, together with all applicable
stock transfer stamps relative to said certificates;
(d) the resignation of all directors and officers of Megatran and
Mega Blow as requested by Treasury;
(e) promissory notes, marked "paid", evidencing all loans made to
Mega Blow by all Stockholders; and
(f) a properly executed notice in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) which states that
shares of capital stock of Megatran do not constitute "United States real
property interests" under Section 897(e) of the Code.
4.3 Documents Delivered by Treasury. Treasury has delivered to David
M. Bereskin, as nominee for all Stockholders, the following:
(a) a copy of resolutions of the Board of Directors of Treasury,
authorizing the execution, delivery and performance of this Agreement and the
consummation of the Acquisition by Treasury, and certificates of the secretary
or assistant secretary of Treasury, dated as of the date hereof, that such
resolutions were duly adopted and are in full force and effect;
(b) a certificate (dated as of the date hereof) executed by the
chief executive officer of Treasury certifying that (i) all representations and
warranties of Treasury contained in the Prior Agreement are true and correct at
and as of the date hereof with the same effect as though made again at and as of
the date hereof, and (ii) Treasury has performed and complied with all
obligations and covenants required by the Prior Agreement to be
-30-
<PAGE>
complied with by it prior to or at the date hereof, which is deemed to be the
"Closing Date" under the Prior Agreement; and
(c) the cash and debenture described in Section 1.2.
4.4 Post-Closing Obligations.
(a) Treasury, in its capacity as sole shareholder of Megatran,
shall cause Mega Blow to honor all of its obligations pursuant to the lease
between Mega Blow and Lamda Venture Investments Limited dated December 15, 1993,
covering the premises known as 7040 Tranmere Drive, Mississauga, Ontario, Canada
(the "Premises"); and
(b) In the event of the bankruptcy or receivership of Mega Blow
prior to the later to occur of (i) the third anniversary of the date hereof,
(ii) the date Mega Blow vacates the Premises, or (iii) the date Mega Blow's
lease for the Premises is terminated by the landlord due to Mega Blow's default
thereunder, Stockholders, either collectively or individually, shall have a
right of first refusal to purchase all or substantially all (but not part) of
the assets of Mega Blow, as the same shall exist at such time (the "Right of
First Refusal"). The following procedure shall govern the Right of First
Refusal:
(i) Notice (the "Notice of Contract") of the existence of a
written contract to sell all or substantially all of the assets of
Mega Blow to a third party (the "Third Party Contract") shall be sent
to Stockholders at the addresses listed on Schedule 1.2 or at such
other address of which any of said Stockholders
-31-
<PAGE>
has notified Treasury in writing. The Notice of Contract shall contain
all of the material terms of the Third Party Contract;
(ii) Stockholders shall have ten (10) days following their
receipt of the Notice of Contract to give Treasury written notice of
their exercise of the Right of First Refusal (the "Notice of
Exercise"). A Stockholder's failure to respond within said ten (10)
day period shall constitute said Stockholder's election to not
exercise the Right of First Refusal;
(iii) a Stockholder's exercise of the Right of First Refusal in
accordance with the term of this Section 4.4(b) shall constitute said
Stockholder's unconditional and irrevocable agreement to purchase all
of Mega Blow's assets at the price and upon the other terms contained
in the Third Party Contract;
(iv) the transfer of all the assets of Mega Blow to the
Stockholders who have exercised the Right of First Refusal in
accordance with this Section 4.4(b) and the payment by said
Stockholders of the purchase price set forth in the Third Party
Contract (the "Purchase Price") and compliance by said Stockholders
with all of the other terms of the Third Party Contract shall occur at
the offices of Treasury on the date which is seven (7) business days
following receipt by Treasury of the last timely Notice of Exercise.
Time shall be of the essence with respect to the closing date;
-32-
<PAGE>
(v) if none of Stockholders elect in writing to exercise the
Right of First Refusal or if all Stockholders fail to timely respond
to the Notice of Contract, Treasury may then cause Mega Blow to
proceed with the sale of all of the assets of Mega Blow pursuant to
the Third Party Contract;
(vi) if none of Stockholder elect in writing to exercise the
Right of First Refusal or if all Stockholders fail to timely respond
to the Notice of Contract, and the purchase under the Third Party
Contract is not consummated, then the terms of this Section 4.4(b)
shall apply to any subsequent Third Party Contract; and
(vii) Treasury shall not enter into any Third Party Contract
which is not bona fide and arms-length.
(c) Treasury shall use reasonable good faith efforts to cause any
bankruptcy trustee or receiver who has been appointed with respect to Treasury
or its assets to perform in accordance with Section 4.4(b).
(d) Until the indebtedness evidenced by the debenture described
in Section 1.2 has either been paid in full or converted into common stock of
Treasury, William Sarantos shall be an authorized signatory on checks drawn by
Mega Blow, but his signature shall not be required on such checks.
Article V. Survival of Representations and Indemnity. (a) The
representations, warranties, covenants and agreements by Stockholders shall
survive the Acquisition.
-33-
<PAGE>
(b) Stockholders do hereby agree to jointly and severally
indemnify, defend and hold harmless Treasury of and from any and all claims,
demands, damages, losses, injuries, liabilities, penalties, costs, expenses
(including without limitation reasonable attorneys' fees), suits, actions,
investigations, judgments and fees which may be imposed upon, incurred or
suffered by or asserted against Treasury arising out of or in connection with
any one or more of the following:
(i) any failure to perform or comply with any agreements,
obligations or undertakings on the part of Megatran or any Stockholder
to be performed pursuant to this Agreement; and
(ii) any breach of any representation, warranty, covenant or
agreement made by Megatran or any Stockholder in this Agreement, or in
respect of the facts associated therewith.
Article VI. Miscellaneous.
6.1 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instructions, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement.
6.2 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed given when
delivered personally or by reputable overnight
-34-
<PAGE>
courier or mailed by registered or certified mail, return receipt requested, to
the parties at the following addresses (or to such other address as a party may
have specified by notice to the other parties pursuant to this provision):
(a) if any Stockholder, to it in care of:
David M. Bereskin, Esq.
418 North Service Road East
Unit 3B
Oakville, Ontario, Canada L6H 5R2
(b) if to Treasury: at
1181 Finch Avenue West, Unit 21
North York, Ontario
CANADA M3J 2V8
Attn: Mr. James Hal
with a copy to
Hofheimer Gartlir & Gross, LLP
633 Third Avenue
New York, New York 10017
Attn: Richard G. Klein, Esq.
6.3 Entire Agreement.
This Agreement (with its schedules and exhibits) contains, and is
intended as, a complete statement of all the terms of the agreements among the
parties with respect to the matters provided for, supersedes any previous
agreements and understanding among the parties with respect to those matters,
and cannot be changed or terminated except by a writing signed by the parties.
6.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the Province of Ontario, Canada,
without respect to its choice of law principles.
-35-
<PAGE>
6.5 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
6.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
6.7 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
6.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
6.9 Schedules. Any information furnished in a schedule to this
Agreement shall be deemed to be furnished under any other schedule which calls
for the furnishing of the same information
-36-
<PAGE>
whether or not that information is separately stated in such other
schedule.
6.10 Expenses. Each party shall bear its own expenses incurred in
connection with the negotiation and preparation of this Agreement and in
connection with all duties and obligations required to be performed by it under
this Agreement. Neither Mega Blow nor Megatran has incurred any such expense
which is not reasonable.
6.11 Prior Agreement Superseded. Except as set forth in Sections
4.2(b) and 4.3(b), this Agreement shall supersede the Agreement among Treasury,
Mega Blow and Megatran, dated June 25, 1996.
IN WITNESS WHEREOF, Treasury, Mega Blow and Stockholders have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TREASURY INTERNATIONAL, INC.
By:/s/ James Hal
----------------------------
Name: James Hal
Title: Chief Executive Officer
MEGATRAN INVESTMENTS LIMITED
By:/s/ William Sarantos
----------------------------
Name: William Sarantos
Title: President
/s/ William Sarantos
-------------------------------
William Sarantos
/s/ Toula Sarantos
-------------------------------
Toula Sarantos
/s/ Martin Maxwell
-------------------------------
Martin Maxwell
-37-
<PAGE>
/s/ Louis Chelin
-------------------------------
Louis Chelin
/s/ Verne Chelin
-------------------------------
Verne Chelin
/s/ David Bereskin
-------------------------------
David Bereskin, In Trust
/s/ Joseph Myers
-------------------------------
Joseph Myers
/s/ Eleanor Maxwell
-------------------------------
Eleanor Maxwell
/s/ Berta Lunenfeld
-------------------------------
Berta Lunenfeld
/s/ Douglas Ferguson
-------------------------------
Douglas Ferguson
-38-
<PAGE>
SCHEDULE 1.2
Number of
Name of Shareholder Address Shares
- ------------------- ------- ------
William Sarantos 7 Avenue Road 38
Richmond Hill, Ontario
L4C 6B6
Toula Sarantos 7 Avenue Road 37
Richmond Hill, Ontario
L4C 6B6
Martin Maxwell 2 Denmark Crescent 51
Downsview, Ontario
M2R 1J4
Louis Chelin 30 East Beaver Creek Road 26
Richmond Hill, Ontario
L4B 1Z6
Verne Chelin 7 Pearwood Crescent 25
Don Mills Ontario
M3B 2C1
David Bereskin, in Trust 418 North Service Road East 51
Suite 3B
Oakville, Ontario
L6H 5R2
Joseph Myers 83 Tansley Road 4
Thornhill, Ontario
L4J 3Z5
Eleanor Maxwell 2 Denmark Crescent 4
Downsview, Ontario
M2R 1J4
Berta Lunenfeld Apt. 1405 2
1166 Bay Street
Toronto, Ontario
M5S 2X8
Douglas Ferguson 511 Blenheim Crescent 2
Oakville, Ontario
L6J 6P5
<PAGE>
SCHEDULE 2.18
(a) Nil
(b) See Attachment A
(c) Lease between Lamda Venture Investments Limited and Mega Blow Moulding
Limited;
Lease with Newcourt Financial Limited with respect to a 1995 Daewoo
forklift truck; and
Lease with MTC Leasing Inc. with respect to a Point-of-Use & Filter Reverse
Osmosis Cooler model #CYCDS1KV.
(d) Lease dated December 15, 1993 between Lamda Venture Investments Limited
(landlord) and Mega Blow Mouldings Limited (tenant).
(e) The Toronto-Dominion Bank - William Sarantos plus anyone of Louis Chelin
and Martin Maxwell.
(f) See Attachment B
<PAGE>
SCHEDULE 2.19
Group insurance provided through National Life for ten (10) employees.
