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Exhibit C
SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made as of the 22ND day of October, 1999.
BETWEEN:
SOUTHBRIDGE EQUITIES INC., a corporation
incorporated under the laws of the Province of Ontario,
(hereinafier referred to as "Southbridge"),
OF THE FIRST PART,
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INTERNATIONAL MENU SOLUTIONS INC., a
corporation incorporated under the laws of the
Province of Ontario,
(hereinafter referred to as the "IMSI"),
OF THE SECOND PART,
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INTERNATIONAL MENU SOLUTIONS CORPORATION, a corporation
incorporated under the laws of the State of Nevada
(hereinafter referred to as the "Corporation")
OF THE THIRD PART,
WHEREAS Southbridge desires to acquire Special Warrants of IMSI, and
IMSI is amenable to such investment;
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NOW THEREFORE, in consideration of the premises and the covenants
and agreements herein contained, the parties hereto agree as follows:
1. INTERPRETATION
1.1 Definitions. In this Agreement, unless something in the subject matter or
context is inconsistent therewith:
(a) "Agreement" means this agreement and all schedules and exhibits
hereto and all amendments made hereto and thereto by written
agreement between all the parties hereto.
(b) "Agreements" means the Agreement, the IMSI/IMSC Support Agreement,
the Escrow Agreement, the Special Warrants and each of the
agreements attached as Schedule 5.1(a)(xi) , Schedule 5.1(a)(xiii)
and Schedule 4.1(k).
(c) "Assets" means the assets and undertaking of the Corporation and the
Subsidiaries.
(d) "Audited Financial Statements" means the consolidated audited
financial statements of the Corporation as at and for the financial
periods ended December 31, 1998 and December 31, 1997, including the
notes thereto and the report of Deloitte & Touche LLP thereon.
(e) "Board" means the board of directors of the Corporation.
(f) "Business Day" means a day other than a Saturday, a Sunday or a
statutory or civic holiday in Ontario.
(g) "Claims" means all losses, damages, expenses, liabilities (whether
accrued, actual, contingent, latent or otherwise), claims and
demands of whatever nature or kind including, without limitation,
all legal fees and costs on a solicitor and client basis.
(h) "Class X Shares" means the Class X Shares of IMSI.
(i) "Closing Date" means October 22, 1999 or such other date as may be
agreed to in writing between IMSI and the Purchaser.
(j) "Common Shares" means the common shares in the capital stock of the
Corporation.
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(k) "Control" means de facto control, being the power to direct the
management and policies of a person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise.
(l) "Corporation" means International Menu Solutions Corporation, its
successors and permitted assigns.
(m) "DC Foods Nominee" means the nominee to the Board to be selected by
Donald Kilimnik, Deborah Kilimnik, Robert Curik and Anjela Curik the
previous shareholders of 100559 Ontario Limited pursuant to the sale
of their shares in the capital stock of 100559 Ontario Limited to
IMSI as evidenced by the Share Purchase Agreement dated May 10,
1999.
(n) "Disclosure Schedule" means the list, set out in Schedule 3.1 of
exceptions to the representations and warranties in Section 3.1.
(o) "Escrow Agreement" means an escrow agreement in the form attached as
Schedule 2.3.
(p) "Financial Statements" means the Unaudited Financial Statements and
the Audited Financial Statements.
(q) "FOF/BMCC Nominee" means the nominee to the Board to be jointly
selected by the First Ontario Fund and Bank of Montreal Capital
Corporation pursuant to a loan agreement among the Corporation,
IMSI, the First Ontario Fund and Bank of Montreal Capital
Corporation dated May 10, 1999.
(r) "IMSI Disclosure Schedule" means the list, set out in Schedule 3.5
of exceptions to the representations and warranties in Section 3.5.
(s) "Intellectual Property" means all intellectual property of the
Corporation and the Subsidiaries existing as of the Time of Closing
and used or currently being developed for use in the Corporation and
the Subsidiaries and all rights of the Corporation and the
Subsidiaries therein, worldwide, whether registered or unregistered,
including without limitation:
(i) Copyrights - all copyrights used in the business of the
Corporation and the Subsidiaries and all applications and
registrations of such copyrights;
(ii) Trade-marks - all trade-marks, trade-names, service marks,
brand names, logos or the like used in the business ofthe
Corporation and the Subsidiaries, including without
limitation, those trade-marks listed in Schedule 3.1 (m) and
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all applications, registrations, renewals, modifications and
extensions of such trade-marks; and
(iii) Knowbow - all knowhow created, developed or acquired by the
Corporation and the Subsidiaries including without limitation,
all recipes, techniques, processes, procedures, methods, trade
secrets, research and technical data, records, formulae,
specifications, equipment and plans for new or revised
products.
(t) "Leases" means all leases or agreements in the nature of a lease and
any interest therein, whether of real or personal property, to which
the Corporation or any Subsidiary is a party, whether as lessor or
lessee, relating to the Assets.
(u) "Lien" includes any security interest, mortgage, encumbrance,
option, pledge, lien or charge of any kind, including any limitation
on transfer, use, receipt of income or other exercise of any
attributes of ownership of the Assets.
(v) "Purchaser" means Southbridge.
(w) "Securities" means the Southbridge Special Warrants.
(x) "SI Nominees" means such nominees (selected from time to time by
Southbridge) to the board of directors of the Corporation as the
Corporation covenants to appoint in accordance with Section 4.1(d)
hereof.
(y) "Southbridge Special Warrants" means the 1,555,556 Special Warrants
to be issued to Southbridge under this Agreement.
(z) "Special Warrants" means the special warrants of IMSI to be issued
hereunder with the terms set out in the form of special warrant
certificate attached hereto as Schedule 1.1(z).
(aa) "Subsidiary" shall have the meaning given thereto in the Business
Corporations Act (Ontario) and "Subsidiaries" shall have the
corresponding meaning.
(bb) "Time of Closing" means 10:00 a.m. (local Kitchener time) on the
Closing Date.
(cc) "Unaudited Financial Statements" means the consolidated unaudited
financial statements of the Corporation as at and for the six month
periods ended June 30, 1999 and 1998 including the notes thereto
prepared by management of the Corporation.
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1.2 Extended Meanings. In this Agreement words importing any gender include all
genders and words importing persons include individuals, partnerships,
associations, trusts, unincorporated organizations and corporations.
1.3 Accounting Principles. Wherever in this Agreement reference is made to a
calculation to be made or an action to be taken in accordance with generally
accepted accounting principles, such reference will be deemed to be to the
generally accepted accounting principles from time to time approved by the
American Institute of Certified Public Accountants, or any successor institute,
applicable as at the date on which such calculation or action is made or taken
or required to be made or taken in accordance with generally accepted accounting
principles.
1.4 Currency. Unless otherwise specified, all references to currency herein are
to lawful money of Canada.
1.5 Schedules. The following are the Schedules attached hereto and incorporated
by reference and deemed to be part hereof
Schedule 1.1(z) - Form of Special Warrant
Schedule 2.3 - Escrow Agreement
Schedule 3.1 - Disclosure Schedule
Schedule 3.1(e) - Share Conditions
Schedule 3.1(k) - Financial Statements
Schedule 3.1(m) - Trademarks
Schedule 3.5 - IMSI Disclosure Schedule
Schedule 3.5(e) - IMSI Share Conditions
Schedule 5.1(a)(xi) - Registration Rights Agreement
Schedule 4.1(k) - Support Agreement
Schedule 5.1(a)(xiii) - Second Voting Agreement
Schedule 5.1(a)(xiv) - Opinion of Counsel
1.6 Reference to Material. In this Agreement, reference to "material",
"materially" and/or "materially adverse" shall be deemed to refer in monetary
terms to amounts in excess of $50,000.
2. SALE AND PURCHASE
2.1 Purchase of Securities by Southhridge. In reliance upon the representations
and warranties set out in Section 3.1, Southbridge hereby agrees to buy, and the
IMSI hereby agrees to issue to Southbridge, the Southbridge Special Warrants
for an aggregate purchase price of U.S.$4,666,668, being a purchase price of
U.S.$3.00 per Southbridge Purchased Share.
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2.2 Closing. The issuance and purchase of the Securities contemplated by Section
2.1, shall be completed in Kitchener at the Time of Closing at the offices of
Gowling, Strathy & Henderson, solicitors to Southbridge. At the closing, the
Corporation shall deliver to Southbridge a certificate representing the
Securities duly executed and issued by the Corporation.
2.3 Escrow. At the closing a portion ofthe purchase price equal to
US$2,666,666.70 and the number of Southbridge Special Warrants corresponding to
such portion of the purchase price (888,889 Southbridge Special Warrants) shall
be deposited in escrow pursuant to the terms of the Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Corporation. Subject to Section 3.2,
the Corporation represents and warrants to the Purchaser at the date hereof and
at the Closing Date that:
(a) Corporate - The Corporation and each of the Subsidiaries is a
corporation duly incorporated, organized and subsisting under the
laws of the jurisdiction set out in the Disclosure Schedule or with
the corporate power to own its assets and to carry on its business.
The Corporation and each of the Subsidiaries is duly registered to
carry on business in those jurisdictions where it operates.
(b) Authority - The Corporation has good and sufficient power, authority
and right to enter into and deliver this Agreement, and the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated under this Agreement
have been duly and validly authorized and approved by all necessary
corporate action on the pan of the Corporation.
(c) Binding Agreement - This Agreement constitutes a valid and legally
binding obligation of the Corporation, enforceable against the
Corporation in accordance with its terms subject to applicable
bankruptcy and insolvency laws and to equitable remedies being
always in the discretion of a court.
(d) Authorized Capital - The authorized capital of the Corporation
consists of 25,000,000 shares of common stock, par value of $0.001
per shares and 10,000,000 Class N Shares, par value $0.0001, of
which 10,248,350 Common Shares and 3,703,810 Class N Shares are
validly issued and are outstanding as fully paid and non-assessable;
all other previously issued shares in the capital of the Corporation
have been repurchased or redeemed by the Corporation and have been
canceled.
(e) Share Conditions - The rights, privileges, restrictions and
conditions attached to the shares of the Corporation are as set out
in Schedule 3.1(e) attached hereto.
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(f) No Shareholder Agreements - At the Closing Date there will exist no
agreement which gives any existing or previous shareholder of the
Corporation any right to appoint a member of the board of directors
of the Corporation or any right to participate in the management of
the Corporation after the date hereof, save and except that Michael
Steele has undertaken with the four previous shareholders of
Transcontinental Gourmet Foods Inc. to support their nominee for
election to the board of directors of the Corporation during the
three year period from December 1, 1998 and certain shareholders
entered into a voting agreement dated April 16, 1999, and the
Corporation has agreed to support the DC Foods Nominee as provided
in the agreement referred to in the definition of such term, and to
support the FOF/BMCC Nominee as provided in the agreement referred
to in the definition of such term.
(g) No Options on Shares - Except as set out in Section 3.1(g) of the
Disclosure Schedule, there is no contract, option or any other right
of another binding upon or which at any time in the future may
become binding upon the Corporation to allot or issue any of the
unissued shares of the Corporation or to create any additional class
of shares.
(h) No Options on Assets - Except for Liens set out in Section 3.1(r) of
the Disclosure Schedule, there is no contract, option or any other
right of another binding upon or which at any time in the future may
become binding upon the Corporation or any Subsidiary to sell,
transfer, assign, or in any other way dispose of any of the Assets,
except pursuant to purchase orders accepted by the Corporation or
any Subsidiary in the usual and ordinary course of its business.
(i) No Conflict - Except as set out in Section 3.1(i) of the Disclosure
Schedule, neither the entering into nor the delivery of this
Agreement nor the completion of the transactions contemplated hereby
by the Corporation will result in the violation of:
(i) any of the provisions of the constating documents or by-laws
of the Corporation,
(ii) any agreement or other instrument to which the Corporation is
a party or by which the Corporation is bound, or
(iii) any applicable law, rule or regulation.
(j) Books and Records - The books and records of each of the Corporation
and the Subsidiaries present fairly and disclose in all material
respects the financial position of the Corporation and the
Subsidiaries, and all material financial transactions of the
Corporation and the Subsidiaries have been accurately recorded in
such books and
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records and such books and records have been prepared in accordance
with generally accepted accounting principles consistently applied.
(k) Financial Statements - Except as set out in Section 3.1(k) of the
Disclosure Schedule, the Financial Statements, copies of which are
attached hereto as Schedule 3.1(k):
(i) are in accordance with the books and accounts of the
Corporation and the Subsidiaries, as at the respective dates
of such Financial Statements;
(ii) are true and correct in all material respects and present
fairly the financial position of the Corporation, as at the
respective dates of such Financial Statements;
(iii) have been prepared in accordance with generally accepted
accounting principles consistently applied; and
(iv) present fairly all of the assets and liabilities of the
Corporation and the Subsidiaries, as at the respective dates
of such Financial Statements, including, without limiting the
generality of the foregoing, all contingent liabilities of the
Corporation and the Subsidiaries, as at the respective dates
of such Financial Statements.
(l) Financial Position - Since June 30, 1999, each of the Corporation
and the Subsidiaries has carried on its business in the usual and
ordinary course and neither the Corporation nor any Subsidiary has
entered into any transaction (including any transfer or sale of
assets) out of the usual and ordinary course of business except as
set out in Section 3.1(l) of the Disclosure Schedule. Since June 30,
1999, there has been no material adverse change in the affairs,
business, prospects, operations or condition of the Corporation or
any Subsidiary, financial or otherwise, whether arising as a result
of any legislative or regulatory change, revocation of any licence
or right to do business, fire, explosion, accident, casualty, labour
dispute, flood, drought, riot, storm, condemnation, act of God,
public force or otherwise, except changes occurring in the usual and
ordinary course of business which have not adversely affected the
affairs, business, prospects, operations or condition of the
Corporation or any Subsidiary, financial or otherwise. Except as set
out in the Disclosure Schedule, no dividends have been declared or
paid on or in respect of the shares of the Corporation or any
Subsidiary and no other distribution on any of its securities or
shares has been made by the Corporation since June 30, 1999, and all
dividends which to the date hereof have been declared or paid by the
Corporation or any Subsidiary have been duly and validly declared or
paid. Since June 30, 1999, neither the Corporation nor any
Subsidiary has incurred any liabilities except
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liabilities that have been incurred or have arisen in the usual and
ordinary course of business except as set out in Section 3.1(l) of
the Disclosure Schedule.
(m) Intellectual Property - Except as disclosed in Section 3.1(m) of the
Disclosure Schedule or Section 3.1(v) of the Disclosure Schedule,
the Corporation or the Subsidiaries own all the Intellectual
Property, and have sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party
in respect thereof) to the use thereof or the material covered
thereby. Schedule 3.1(m) sets forth a full, complete and true list
of the registered and unregistered trade-marks, and any applications
therefor included in the Intellectual Property, and specifies the
jurisdictions in which each such trade-mark has been issued or
registered or in which an application for such issuance and
registration has been filed, including the respective registration
or application numbers. Neither the Corporation nor any Subsidiary
is the owner or assignee of any patents or applications therefor.
Neither the Corporation nor any Subsidiary is the owner of any
software. To the best of the knowledge of the Corporation, there is
no and has not been any unauthorized use, infringement or
misappropriation of any of Intellectual Property by any person,
former employee or other third party.
(n) Leases - The Leases represent the entire agreement of the
Corporation and the respective parties to such Leases with respect
to the subject matter of such Leases. All such Leases are not in
material default or breach but rather are in good standing and, to
the best of the knowledge of the Corporation, there exists no
condition, event or act that, with the giving of notice or lapse of
time or both, would constitute such a default or breach. All such
Leases are in full force and effect without amendment thereto and,
except as disclosed in the Disclosure Schedule, the Corporation is
entitled to all benefits thereunder, and the Corporation has
performed all material obligations required to be performed by it
under such Leases.
(o) Infringement - To the best of the knowledge of the Corporation, the
Intellectual Property does not infringe upon or violate any
intellectual property right, including copyrights, patents, trade
secrets or other proprietary rights, of any third party. The
Corporation has not entered into any agreement to indemnify any
other person against any charge of infringement of any of the
Intellectual Property.
(p) Litigation - Except as disclosed in Section 3.1(p) of the Disclosure
Schedule, there are no actions, suits or proceedings pending or, to
the best of the knowledge of the Corporation, threatened against or
adversely affecting, or which could adversely affect the Corporation
or any of the Subsidiaries, the Intellectual Property, or the other
Assets or before or by any federal, provincial, state, municipal or
other governmental court, department, commission, board, bureau,
agency or instrumentality, domestic or foreign, whether or not
insured.
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(q) Orders - There are no outstanding orders, notices or similar
requirements relating to the Corporation issued by any building,
environmental, fire, health, labour or police authorities or from
any other federal, state or municipal authority including, without
limitation, occupational health and safety authorities and there are
no matters under discussion with any such authorities relating to
orders, notices or similar requirements.
(r) No Encumbrances - The Corporation or the Subsidiaries is the owner
of the Intellectual Property and the other Assets with a good and
marketable title, free and clear of all Liens and any other rights
of others, other than as set out in Section 3.1(r) of the Disclosure
Schedule. Except as set out in Section 3.1(r) of the Disclosure
Schedule, there are no material outstanding liabilities against the
Corporation except debts incurred in the usual and ordinary course
of business.
(s) Accounts Receivable and Payables - Except as set forth in the
Financial Statements, the accounts receivable of the Corporation and
of the Subsidiaries are good accounts receivable collectible in
accordance with the respective customer contract and are not subject
to any defense, counterclaim or set-off. Since June 30, 1999, the
accounts payable of the Corporation and each Subsidiary have been
paid in the normal course of business and none of the Corporation or
any Subsidiary has any outstanding accounts payable which are over
120 days old.
(t) Contracts and Commitments - Except as disclosed in Section 3.1(t) of
the Disclosure Schedule, neither the Corporation nor any subsidiary
is a party to any contract or commitment outside the usual and
ordinary course of business of the Corporation or any Subsidiary
and, except for premises leases, equipment leases and automobile
leases, is a party to any contract or commitment relating to the
Corporation or any Subsidiary extending for a period of time longer
than 12 months or except for purchases to be made in order to
fulfill customer contracts, involving expenditures by the
Corporation or any Subsidiary in the aggregate in excess of
$100,000, except such contracts or commitments as are listed in
Section 3.1(t) of, Section 3.1(v) of, or elsewhere in, the
Disclosure Schedule. Neither the Corporation nor any Subsidiary is
in material default or breach of any contract or commitment to which
it is a party and there exists no condition, event or act which,
with the giving of notice or lapse of time or both would constitute
such a default or breach and all such contracts and commitments are
in good standing and in full force and effect without amendment
thereto and the respective Corporation or Subsidiary is entitled to
all benefits thereunder.
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(u) Guarantees - Except as disclosed in Section 3.1(u) of the Disclosure
Schedule, neither the Corporation nor any Subsidiary is a party to
or is it bound by any guarantee, indemnification, surety or similar
obligation other than product warranties.
(v) No Royalties - Except as disclosed in Section 3.1(v) of the
Disclosure Schedule, the Corporation is not a party to or bound by
any contract or commitment to pay any royalty, licence fee or
management fee pertaining to the Corporation or any Subsidiary.
(w) Non-Disclosure - Except as disclosed in Section 3.1(w)(ii) of the
Disclosure Schedule each of the senior managers and employees
involved in product development of the Corporation and of each
Subsidiary listed in Section 3.1(w)(i) of the Disclosure Schedule
has executed and delivered to the Corporation or the Subsidiary, as
applicable, a confidentiality, non-disclosure, full-time commitment,
non-competition, and intellectual property ownership agreement in
the Corporation's or Subsidiary's then current standard form, which
agreement (i) assigns to the Corporation or the Subsidiary as
applicable all ownership rights in any recipes, formulae or other
intellectual property developed by the senior manager or product
developer; (ii) obligates such person to maintain the
confidentiality of all of the trade secrets of the Corporation and
the Subsidiaries; (c) commits such person to devote all of his or
her work time to the Corporation or the Subsidiary as applicable;
and restricts such person from competing with the Corporation or the
Subsidiary as applicable for a certain period of time being not less
than one year after such person ceases to be an employee of the
Corporation or the Subsidiary as applicable. Except as disclosed in
Section 3.1(w)(iii) of the Disclosure Schedule, the Corporation is
not aware of any breaches of any of such
confidentiality/non-disclosure/full-time
commitment/non-competition/intellectual property ownership
agreement. To the best of the knowledge of the Corporation, the
employment by the Corporation or any Subsidiary of any employee does
not violate any non-disclosure or non-competition agreement between
an employee and a third party.
(x) Loans to Shareholders; Benefit Plans - No current or former
director, officer, shareholder, employee or independent contractor
of the Corporation or Subsidiary or any person not dealing at arm's
length within the meaning of the Income Tax Act (Canada) with any
such person is indebted to the Corporation or Subsidiary. All
benefit plans (including without limitation, all pension plans) have
been duly registered where required by, and are in good standing
under, all applicable legislation including, without limiting the
generality of the foregoing, the Income Tax Act (Canada) and the
Pension Benefits Act (Ontario) and all required employer
contributions under any such plans have been made and the applicable
funds have been funded in accordance with the terms thereof of the
plans and no past service funding liabilities exist thereunder.
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(y) Collective Agreement - Neither the Corporation nor any Subsidiary is
bound by or a party to any collective bargaining agreement, (except
such agreements and plans as are listed in Section 3.1(v) of the
Disclosure Schedule).
(z) Bargaining Rights - Except for such agreements, plans and trade
unions as listed in Section 3.1(y) of the Disclosure Schedule, no
trade union, council of trade unions, employee bargaining agency or
affiliated bargaining agent:
(i) holds bargaining rights with respect to any of the
Corporation's or Subsidiaries' employees by way of
certification, interim certification, voluntary recognition,
designation or successor rights,
(ii) has applied to be certified as the bargaining agent of any of
the Corporation's employees, or
(iii) has applied to have the Corporation or any Subsidiary declared
a related employer or successor employer pursuant to
applicable labour legislation.
(aa) Compliance With Rules - Except with respect to the sale of food
products by the Corporation's Subsidiaries to purchasers in
jurisdictions outside of the Province of Ontario, neither the
Corporation nor any Subsidiary conducts business in any jurisdiction
other than the Province of Ontario. Except as disclosed in Section
3.1 (aa) of the Disclosure Schedule, to the best of the knowledge of
the Corporation, the Corporation and the Subsidiaries are conducting
their businesses in compliance with all applicable laws, rules,
regulations, notices, approvals and orders of Canada and the
Province of Ontario, and is not in breach of any such laws, rules,
regulations, notices, approvals or orders and is duly licensed,
registered or qualified in the Province of Ontario, to carry on its
business as now conducted and to own its assets, and all such
licences, registrations and qualifications are valid and subsisting
and in good standing and none of the same contains any term,
provision, condition or limitation which has or may have a adverse
effect on the operation of the Corporation or the Subsidiaries or
which may be adversely affected by the completion of the
transactions contemplated hereby.
(bb) Taxes - Except as disclosed in Section 3.1(bb) of the Disclosure
Schedule, all tax returns filed by the Corporation and the
Subsidiaries were in all respects true, complete and correct and
prepared in accordance with the requirements of the income tax or
other tax laws applicable to the Corporation. Except as disclosed in
the Audited Financial Statements, the Corporation and the
Subsidiaries have paid all taxes that are or have been due and
payable, including without limitation, income and sales taxes, and
any other federal, state or local taxes, or required to be paid and
has
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filed all related tax returns required to be filed. Neither the
Corporation nor any Subsidiary has any liability, obligation or
commitment for the payment of income taxes, corporation taxes or any
other taxes or duties of whatever nature or kind, or interest or
penalties with respect thereto, except such as are disclosed in the
Audited Financial Statements or such taxes or duties not yet due as
have arisen since December 31, 1998 in the usual and ordinary course
of business and for which adequate provision in the accounts of the
Corporation or the Subsidiaries has been made, and neither the
Corporation nor any Subsidiary is in arrears with respect to any
required withholdings or instalment payments of any tax or duty of
any kind nor has filed any waiver for a taxation year of the
Corporation or any Subsidiary under the Income Tax Act (Canada) or
any other legislation imposing tax on the Corporation and the
Subsidiaries.
(cc) Insurance - Each Subsidiary currently maintains and in the future
shall maintain in force with reputable insurers insurance with
respect to losses of or damage to their respective assets from such
risks, casualties and contingencies and of such types and in such
amounts and subject to such deductible amounts as are customary in
the case of persons engaged in the same or similar business with
similar assets.
(dd) Environmental Compliance
(i) The leased premises of the Corporation and the Subsidiaries
("Leased Premises") and the owned premises of the Corporation
and the Subsidiaries (the "Owned Premises") are in compliance
with all Environmental Laws and environmental permits.
(ii) Neither the Corporation nor any Subsidiary as tenant of its
Leased Premises or as owner of its Owned Premises has released
or emitted into the natural environment or discharged or
disposed of, at or on, or otherwise acquiesced or participated
in the discharge or disposal of, at or on, the Leased Premises
or the Owned Premises or any adjoining properties of any
Hazardous Substances.
(iii) There are no Hazardous Substances brought in or produced by
the Corporation or any Subsidiary existing at, in, on, below
or within the Leased Premises or the Owned Premises, or at,
in, on, below or within any adjoining properties that causes
or may cause any adverse environmental effects on or in regard
to the Leased Premises or the Owned Premises or the use
thereof including any environmental conditions which may be
considered to be hazardous to the health of any employees of
the Corporation or any Subsidiary.
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(iv) Neither the Corporation nor any Subsidiary is aware of any
notices of noncompliance, complaints, summons, legal actions,
charges, work orders, control orders, stop orders, remedial
and waste removal or other orders relating to the natural
environment made against the Corporation or any Subsidiary
under Environmental Laws by any court, governmental authority
or third party and there is no judicial, governmental or third
party complaint, action or investigation, and there are no
facts of which the Corporation or any Subsidiary has written
notice which could give rise to any such complaint, action or
investigation, in respect of the existence on the Leased
Premises or Owned Premises of Hazardous Substances brought on
or introduced by the Corporation or any Subsidiary.
(v) All environmental permits required in order to conduct the
business of the Corporation or any Subsidiary and the
operations pertaining to the Corporation or any Subsidiary or
conducted on the Leased Premises or Owned Premises have been
obtained, are valid and in full force and effect and are now
being complied with.
(vi) Neither the Corporation nor any Subsidiary has ever been
convicted of any offence under Environmental Laws or been
found liable in any proceeding to pay any fine or judgment to
any person or governmental authority or been required to
conduct any clean-up or remediation of the Leased Premises or
Owned Premises or any adjoining properties in each case as a
result of a release by the Corporation or any Subsidiary of
any Hazardous Substances from the Leased Premises or Owned
Premises into the environment or the creation of a nuisance.
(vii) Any polychlorinated biphenyls ("PCBs") in use by the
Corporation, in storage or existing on the Leased Premises or
Owned Premises are being used, have been stored or exist in
such concentration or quantities as, in each case, to comply
with all Environmental Laws.
(viii) To the best of the knowledge of the Corporation, there is no
asbestos or asbestos containing materials in or on the Leased
Premises or Owned Premises.
For the purposes of this subsection:
"Hazardous Substances" means any contaminant, pollutant or dangerous
substance which may cause, immediately, or at some future time,
material harm or degradation to the environment or material risk to
human life, health and safety, including, without limitation, any
pollutant, contaminant, waste, hazardous waste, toxic
<PAGE> 15
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substance or dangerous goods which is defined or identified in any
Environmental Laws or which is present in the environment in such
quantity or concentration as to contravene any Environmental Laws;
"Environmental Laws" means all statutes, regulations, municipal
by-laws, codes, ordinances, decrees, rules, protocols, orders,
judicial or administrative or ministerial or regulatory judgments,
orders, decisions and rulings, guidelines and policies applicable to
the Corporation or any Subsidiary, and the Leased Premises or Owned
Premises relating to the protection of the natural environment,
health and safety matters or conditions, Hazardous Substances,
including but not limited to storage, transportation, treatment and
disposal of Hazardous Substances, employee and product safety,
releases of pollutants, contaminants, chemical or industrial, toxic
or Hazardous Substances into the environment or any building or
structure or otherwise relating to the manufacture, processing,
distributing, using, treating, storing, transporting or handling of
Hazardous Substances.
(ee) Year 2000
(i) In this Section 3.1(ee), the term "Year 2000 Compliant" when
used in reference to a software application means that the
software application is able to provide all of the following
functions: (a) correctly process date information before,
during and after January 1, 2000 including without limitation
accepting date input, providing date output, and performing
calculations and comparisons on dates or portions of dates,
(b) function accurately and without interruption before,
during and after January 1, 2000 without change in operations
associated with the advent of the new century, (c) respond to
two-digit year date input in a way that resolves the ambiguity
as to century in a disclosed, defined and predetermined
manner, (d) correctly handle date field information containing
non-date information and correctly handle date information in
a non-date field, (e) correctly process any date with a year
specified as "99" or "00", regardless of other subjective
meanings attached to these concerns (including without
limitation 9999 or September 9, 1999), (f) process year 2000
(February 29, 2000) as a leap year, and (g) store and provide
output of date information in ways that are unambiguous as to
century; and
(ii) Except as disclosed in Section 3.1 (ee) of the Disclosure
Schedule, all material software applications and systems used
internally in the business of the Corporation or any
Subsidiary are Year 2000 Compliant.
(ff) SEC Reports - The Corporation has filed a registration statement on
Form 10-SB (the "10-SB") with the U.S. Securities and Exchange
Commission (the "SEC") on
<PAGE> 16
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or about July 16, 1999 which went effective on or about September
14, 1999. The Corporation has received comments from the SEC on the
such filing and the Corporation is presently working with its
counsel and auditors to file an amendment to the 10-SB to respond
and comply with the SEC comments. The Corporation has not filed any
other documents or reports with the SEC pursuant to Section 12 or 13
of the Securities Exchange Act of 1934, as amended. To the
Corporation's knowledge and except as disclosed in Section 3.1 (ff)
of the Disclosure Schedule, the 10-SB, as of the date thereof
(including all exhibits and schedules thereto and documents
incorporated by reference therein) did not contain nor did it omit
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(gg) Full Disclosure - To the best of the knowledge of the Corporation,
no representation, warranty or statement of the Corporation and the
Subsidiaries in this Agreement omits or will omit at the Time of
Closing to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under
which made, not misleading.
3.2 Survival of Representations, Warranties and Covenants of the Corporation.
(a) The representations and warranties of the Corporation set forth in
Section 3.1 will survive the completion of the transactions
contemplated by this Agreement and, notwithstanding such completion,
will continue in full force and effect for the benefit of the
Purchaser:
(i) in the case of representations and warranties relating in any
manner to taxation, until the day following the expiration of
all periods allowed for any assessment or reassessment by any
taxing authority;
(ii) in the case of the representations and warranties in Sections
3.1(d), 3.1(f), 3.1(g), 3.1(m), 3.1(o) and 3.1(r),
indefinitely; and
(iii) in the case of all other representations and warranties other
than those referred to in Sections 3.2(a)(i) and (ii) hereof,
for a period of three years from the Closing Date.
(b) The covenants of the Corporation set forth in this Agreement (other
than the covenant set forth in Section 4.1(b), 4.3(a)(i)(B) with
respect to representations and warranties being true at the Time of
Closing) will survive the completion of the sale and issuance of the
Securities herein provided for and, notwithstanding such
<PAGE> 17
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completion, will continue in full force and effect for the benefit
of the Purchaser in accordance with the terms thereof and subject to
Section 3.2(a) hereof.
3.3 South bridge's Representations and Warranties. Southbridge represents and
warrants to the Corporation at the date hereof and on the Closing Date that:
(a) Southbridge is a corporation incorporated and existing under the
laws of Ontario;
(b) Southbridge has good and sufficient power, authority and right to
enter into and deliver this Agreement and to complete the
transactions to be completed by Southbridge contemplated hereunder,
and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated under this
Agreement have been duly and validly authorized and approved by all
necessary action on the part of Southbridge;
(c) this Agreement constitutes a valid and legally binding obligation of
Southbridge, enforceable against Southbridge in accordance with its
terms subject to applicable bankruptcy and insolvency laws and to
equitable remedies being always in the discretion of a court; and
(d) neither the entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by Southbridge
will result in the violation of:
(i) any of the provisions of the constating documents or by-laws
of Southbridge,
(ii) any agreement or other instrument to which Southbridge is a
party or by which Southbridge is bound, or
(iii) any applicable law, rule or regulation.
(e) Southbridge is purchasing the Southbridge Special Warrants as
principal for its own account and not for the benefit of any other
person and is purchasing a sufficient number of Southbridge Special
Warrants such that the aggregate acquisition cost to Southbridge of
such Securities is not less than $150,000.
<PAGE> 18
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3.4 Survival of Purchaser's Representations, Warranties and Covenants
(a) The representations and warranties of the Purchaser set forth in
Section 3.3, will survive the completion of the sale and issuance of
the Securities herein provided for and, notwithstanding such
completion, will continue in full force and effect for the benefit
of the Corporation for a period of three years from the Closing
Date.
(b) The covenants of the Purchaser set forth in this Agreement (other
than the covenant set forth in Section 4.2(b) with respect to
representations and warranties being true at the Time of Closing)
will survive the completion of the sale and issuance of the
Securities herein provided for and, notwithstanding such completion,
will continue in full force and effect for the benefit of the
Corporation in accordance with the terms thereof and subject to
Section 3.4(a) hereof.
3.5 IMSI's Representations and Warranties. Subject to Section 3.6, IMSI
represents and warrants to the Purchaser at the date hereof and at the Closing
Date that:
(a) Corporate - IMSI is a corporation duly incorporated, organized and
subsisting under the laws of Ontario with the power to own its
assets and to carry on its business. IMSI is duly registered to
carry on business in those jurisdictions where it operates.
(b) Authority - IMSI has good and sufficient power, authority and right
to enter into and deliver this Agreement, and the execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated under this Agreement have been duly
and validly authorized and approved by all necessary corporate
action on the part of IMSI.
(c) Binding Agreement - This Agreement constitutes a valid and legally
binding obligation of IMSI, enforceable against IMSI in accordance
with its terms subject to applicable bankruptcy and insolvency laws
and to equitable remedies being always in the discretion of a court.
(d) Authorized Capital - The authorized capital of IMSI consists of an
unlimited number of common shares, an unlimited number of Class X
shares, an unlimited number of Class B Special Shares, an unlimited
number of Class C Special Shares, an unlimited number of Class D
Special Shares, 250,000 Class E Special Shares Series 1, 250,000
Class E Special Shares Series 2, 250,000 Class E Special Shares
Series 3, 250,000 Class E Special Shares Series 4, 250,000 Class E
Special Shares Series 5 and 250,000 Class E Special Shares Series 6
of which (after giving effect to the transactions contemplated in
connection with this Agreement) 10,000 common shares, 3,110,795
Class X shares, 300,000 Class B Special Shares, 100,000 Class C
Special Shares, 59,000 Class D Special Shares, 250,000 Class E
Special Shares
<PAGE> 19
- 19 -
Series 1, 250,000 Class E Special Shares Series 2, 250,000 Class E
Special Shares Series 3, 250,000 Class E Special Shares Series 4,
250,000 Class E Special Shares Series S and 250,000 Class E Special
Shares Series 6 are validly issued and are outstanding as fully paid
and non-assessable; all other previously issued shares in the
capital of IMSI have been repurchased or redeemed by IMSI and have
been canceled.
(e) Share Conditions - The fights, privileges, restrictions and
conditions attached to the shares of IMSI are as set out in Schedule
3.5(e) attached hereto.
(f) No Shareholder Agreements - At the Closing Date there will exist no
agreement which gives any existing or previous shareholder of IMSI
any right to appoint a member of the board of directors of IMSI or
any right to participate in the management of IMSI after the date
hereof, save and except and to the same extent as disclosed in
Section 3.1(g).
(g) No Options on Shares - Except as set out in Section 3.5(2) of the
IMSI Disclosure Schedule, there is no contract, option or any other
right of another binding upon or which at any time in the future may
become binding upon IMSI to allot or issue any of the unissued
shares of IMSI or to create any additional class of shares.
(h) No Conflict - Except as set out in Section 3.5(h) of the IMSI
Disclosure Schedule, neither the entering into nor the delivery of
this Agreement nor the completion of the transactions contemplated
hereby by IMSI will result in the violation of:
(i) any of the provisions of the constating documents or by-laws
of IMSI,
(ii) any agreement or other instrument to which IMSI is a party or
by which IMSI is bound, or
(iii) any applicable law, rule or regulation.
3.6 Survival of IMSI's Representations, Warranties and Covenants
(a) The representations and warranties of IMSI set forth in Section 3.5
will survive the completion of the sale and issuance of the
Securities herein provided for and, notwithstanding such completion,
will continue in full force and effect for the benefit of the
Purchaser:
(i) in the case of the representations and warranties in Sections
3.5(d), 3.5(f) and 3.5(g), indefinitely; and
<PAGE> 20
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(ii) in the case of all other representations and warranties other
than those referred to in Sections 3.6(a)(i) hereof, for a
period of three years form the Closing Date.
(b) The covenants of IMSI set forth in this Agreement will survive the
completion of the sale and issuance of the Securities herein
provided for and, notwithstanding such completion, will continue in
full force and effect for the benefit of the Purchaser in accordance
with the terms thereof and subject to Section 3.6(a) hereof
4. COVENANTS; INDEMNIFICATION
4.1 Covenants of the Corporation.
(a) In addition to the other indemnities provided by the Corporation
herein, the Corporation shall indemnify, save, hold harmless,
discharge and release the Purchaser from and against any and all
Claims arising from or based on:
(i) subject to Section 3.2(a), any inaccuracy in any of the
representations or warranties made by the Corporation and/or
IMSI in this Agreement or any other agreement to be entered
into in connection with the transactions contemplated hereby
or any certificates delivered or to be delivered by or on
behalf of the Corporation and/or IMSI pursuant to the terms of
this Agreement (collectively, the "Documents"); and
(ii) any breach of any covenant of the Corporation and/or IMSI set
forth in this Agreement or in the Documents.
(b) The Corporation will use reasonable efforts to ensure that the
representations and warranties of the Corporation are true and
correct at the Time of Closing and that the conditions of closing
for the benefit of the Purchaser have been performed or complied
with by the Time of Closing.
(c) The Corporation covenants and agrees that the proceeds of the
issuance of the Securities shall be used to fund the cash portion of
future or previously completed acquisitions, capital expansion, the
completion of the purchases and the amalgamation of various
subsidiaries and to satisfy certain fees, commissions and expenses
owing by the Corporation.
(d) The Corporation shall, while the Purchaser and or its Affiliates
beneficially own or control Common Shares, Class N Shares and/or any
other voting shares or voting rights or instruments exercisable or
exchangeable, without the payment of additional consideration, into
Common Shares (the "Threshold Amount of Shares") of the
<PAGE> 21
- 21 -
Corporation representing at least ten percent (10%) of the aggregate
number of outstanding Common Shares, Class N Shares and any other
voting shares or voting rights or instruments exercisable or
exchangeable, without the payment of additional consideration, into
Common Shares of the Corporation on a non-diluted basis, include as
nominee(s) by management for the board of directors of the
Corporation as set out in managements' information circular in
respect of each shareholders' meeting at which directors are to be
elected that number of individuals such that the number of nominees
of the Purchaser (the "SI Nominees") elected to the board of
directors of the Corporation shall be as set out in the following
table:
<TABLE>
<CAPTION>
Total number of Board Members
of the Corporation Number of SI Nominees
------------------ ---------------------
<S> <C>
8 2
9 2
10 2
11 3
12 3
13 3
14 3
</TABLE>
Where it is proposed that the number of directors of the Corporation
be increased to ten (10), the Corporation shall at such time instead
increase the number of directors to eleven so that the third SI
Nominee is appointed/elected at the same time as the tenth director.
The Corporation covenants and agrees that so long as the Purchaser
and its Affiliates beneficially own or control shares equal to or
greater than the Threshold Amount of Shares it shall not adopt any
by-law nor amend its articles of incorporation to increase the
number of directors of the Corporation to greater than 14 directors.
As long as the Purchaser and its Affiliates beneficially own or
control 5.0% or more of the Common Shares, Class N Shares and/or any
other voting shares or voting rights or instruments exercisable or
exchangeable, without the payment of additional consideration, into
Common Shares of the Corporation at least one nominee of the
Purchaser shall be so nominated to the board of directors of the
Corporation. The Purchaser at its sole discretion, but after
consultation with the Corporation, shall designate those individuals
to be its nominee(s) for director and the Corporation shall use its
best efforts to provide for the election of such person(s) as
director(s) of the Corporation. Prior to their election to the
Board, the SI Nominees shall be entitled to attend and shall receive
notice of all meetings of the Board and will be provided the same
information as provided to the directors in respect of any such
meeting. To the extent that pursuant to the provisions set out above
the Purchaser is no longer entitled to a nominee or nominees to the
Board of
<PAGE> 22
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Directors of the Corporation, upon notification from the
Corporation, the Purchaser covenants to cause its nominee or
nominees to forthwith resign from the Board.
(e) The Corporation shall take all actions necessary at its next
shareholders' meeting to approve the increasing of the size of the
Board so as to permit the election of the Purchaser's nominees to
the Board.
(f) The Corporation shall elect to the board of directors of
International Menu Solutions Inc. ("IMSI") those nominees of the
Purchaser which it is required to include as nominees to the board
of directors of the Corporation pursuant to paragraph (e) above.
(g) The Corporation covenants and agrees that it shall use its best
efforts (including, without limitation, making all filings with the
Securities Exchange Commission as required) to maintain the
quotation of the Common Shares on the OTC Bulletin Board by no fewer
than three registered market makers or to obtain and maintain a
listing or quotation of the Common Shares on the NASDAQ Stock
Market, the American Stock Exchange, the New York Stock Exchange
and/or The Toronto Stock Exchange (each a "Recognized Exchange").
(h) The Corporation covenants and agrees to use its best efforts to
obtain directors' and officers' indemnity insurance in an amount not
less than $3,000,000 (such coverage to extend to the directors and
officers of each Subsidiary) as long as the premiums and other terms
are reasonable in the sole opinion of the Board.
(i) The Corporation covenants and agrees that at any reasonable time and
from time to time upon reasonable prior notice, which in any event
shall not be less than 3 days, it will, within the limits of its
powers and the law, permit Purchaser or any authorized
representative thereof, at the expense and risk of the Purchaser, to
inspect the Corporation's and any Subsidiary's assets and properties
and to examine and make copies of any financial information in its
possession relating to its records and books of account.
(j) The Corporation covenants and agrees that it shall not, and that it
shall not permit any Subsidiary to, without prior approval by the
Corporation's board of directors, (i) acquire assets other than
assets required in the normal course of business for the carrying on
of business; (ii) acquire assets in any event in an amount in excess
of $500,000; or (iii) acquire the shares of another corporation or
merge, amalgamate, or enter into a plan of arrangement or joint
venture agreement with another person.
(k) The Corporation shall as soon as practicable following the closing
execute and deliver and shall cause IMSI to execute and deliver an
amended and restated Support
<PAGE> 23
- 23 -
Agreement substantially in the form attached as Schedule 4.1(k) and
upon such execution and delivery shall require its U.S. legal
counsel to opine to Southbridge as to the enforceability of said
agreement.
The rights of the Purchaser and the obligations of the Corporation set forth in
Sections 4.1(d) to 4.1(f) inclusive, 4.1(h), 4.1(i) and 4.1(j) shall terminate
when the Purchaser no longer owns the number of Common Shares required to be
owned by the Purchaser in order to have a right to have at least one nominee
named to the Board as set out in Section 4.1(d).
4.2 Covenants of the Purchaser.
(a) In addition to the other indemnities provided by the Purchaser
herein, the Purchaser shall indemnify, save, hold harmless,
discharge and release the Corporation from and against any and all
Claims arising from or based on:
(i) subject to Section 3.4(a), any inaccuracy in any
representation or warranty made by the Purchaser in this
Agreement or any other agreement to be entered into in
connection with the transactions contemplated hereby or any
certificates delivered or to be delivered by or on behalf of
the Purchaser pursuant to the terms of this Agreement
(collectively, in respect of such Purchaser only, the
"Purchaser's Documents"); and
(ii) any breach of any covenant of the Purchaser set forth in this
Agreement or in the Purchaser's Documents.
(b) The Purchaser will ensure that the representations and warranties of
the Purchaser are true and correct at the Time of Closing and that
the conditions of closing for the benefit of the Corporation have
been performed or complied with by the Time of Closing.
(c) The Purchaser understands and agrees that it has a responsibility to
protect and avoid the unauthorized use of or disclosure by the
Purchaser of Confidential Information of the Corporation and its
Subsidiaries as follows:
(i) Confidential Information. For purposes of this Agreement, the
term "Confidential Information" means all information that is
not generally known to the public and which: (i) the Purchaser
obtains from the Corporation, and (ii) relates directly to the
business or assets of the Corporation. The term "Confidential
Information" shall include, but shall not be limited to:
inventions, discoveries, knowhow, ideas, product information;
research and development information; lists of clients and
other information relating
<PAGE> 24
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thereto; financial data and information; business plans and
processes; and any other information of the Corporation that
the Corporation informs the Purchaser pursuant to this
Agreement, or which the Purchaser should know by virtue of its
position or the circumstances in which the Purchaser learned
it, is to be kept confidential. Confidential Information also
includes information obtained by the Corporation in confidence
from its suppliers or customers. Confidential Information may
or may not be labeled as "confidential".
Confidential Information does not include any information that
(i) has been generally available to the public, (ii) becomes
generally available to the public by no fault of the
Purchaser, (iii) was known to the Purchaser prior to the
receipt of it from the Corporation, (iv) is disclosed to the
Purchaser by a third party having a right to disclose the same
without restriction, (v) is independently developed by the
Purchaser without use in any way of the Confidential
Information, or (vi) the Purchaser and the Corporation agree
in writing to release from the terms of this covenant.
(ii) Obligation to Protect Confidential Information. The Purchaser
agrees not to disclose to others (except for those officers,
directors, employees, shareholders and representatives of the
Purchaser who have a need to know such Confidential
Information and who have been specifically informed of the
confidentiality provisions set out herein), use for its own
benefit (other than is contemplated hereunder, including
without limitation, to evaluate the fiscal performance of the
Corporation) or for the benefit of anyone other than the
Corporation, or otherwise appropriate or copy, any
Confidential Information. The Purchaser shall take all
reasonable measures to protect Confidential Information from
any accidental, unauthorized or premature use, disclosure or
destruction.
(iii) Obligation to Comply with Applicable Law. The Purchaser
acknowledges and agrees with the Corporation to comply with
all applicable laws and regulations arising from and in
connection with the receipt by the Purchaser of Confidential
Information including without limitation delivery by the
Corporation to the Purchaser of information required to be
delivered by the Corporation to the Purchaser pursuant to this
Agreement.
4.3 Covenants of IMSI.
(a) In addition to the other indemnities provided by IMSI herein, IMSI
shall indemnify, save, hold harmless, discharge and release the
Purchaser from and against any and all Claims arising from or based
on:
<PAGE> 25
- 25 -
(i) subject to Section 3.6(a), any inaccuracy in any of the
representations or warranties made by IMSI and/or the
Corporation in this Agreement or any other agreement to be
entered into in connection with the transactions contemplated
hereby or any certificates delivered or to be delivered by or
on behalf of IMSI and/or the Corporation pursuant to the terms
of this Agreement (collectively, the "Documents"); and
(A) any breach of any covenant of IMSI and/or the
Corporation set forth in this Agreement or in the
Documents.
(B) IMSI will use reasonable efforts to ensure that the
representations and warranties of IMSI are true and
correct at the Time of Closing and that the conditions
of closing for the benefit of the Purchaser have been
performed or complied with by the Time of Closing.
(b) IMSI covenants and agrees that the proceeds of the issuance of the
Securities shall be used to fund the cash portion of future or
previously completed acquisitions, capital expansion, the completion
of the purchases and the amalgamation of various subsidiaries and to
satisfy certain fees, commissions and expenses owing by IMSI.
4.4 Notice: Right to Defend. Each party shall give prompt written notice to the
other of the assertion or commencement of any Claim in respect of which
indemnity is or may be sought hereunder, other than Claims in which the parties
are litigating claims against each other. The failure by any party to give such
notice to the other party shall relieve such other party of its obligations
under Section 4.1(a) or 4.2(a) if and to the extent that it has been materially
prejudiced by the lack of timely and adequate notice. The indemnifying party
shall have the right and obligation to assume the defense or settlement of any
third party Claim in respect of which it is obligated to provide indemnity
hereunder; provided, however, that the indemnifying party shall not settle or
compromise any such Claim without the indemnified party's prior written consent
thereto, unless the terms of such settlement or compromise discharge and release
the indemnified party from any and all liabilities and obligations thereunder.
Notwithstanding the foregoing: (i) the indemnified party at all times shall have
the right, at its option and expense, to participate fully in the defense or
settlement of such Claim provided that, subject to the other provisions of this
Section 4.4, control of such defense or settlement shall remain with the
indemnifying party; and (ii) if the indemnifying party does not proceed
diligently to defend or settle such Claim within 10 days after its receipt of
notice of the assertion or commencement thereof, then (a) the indemnified party
shall have the right, but not the obligation, to undertake the defense or
settlement of such Claim for the account and at the risk of the indemnifying
party, and (b) the indemnifying party shall be bound by any defense or
settlement that the indemnified party may make as to such Claim. The parties
hereto agree that, for the purpose of enforcing any right of indemnity hereunder
the indemnified party may join the indemnifying party in any third-party Claim
as to which such right of indemnity would or might
<PAGE> 26
- 26 -
apply. Each party shall cooperate fully in defending or settling any third party
Claim, and the defending or settling party shall have reasonable access to the
books and records and personnel of the other party that are relevant to such
Claim.
5. CONDITIONS
5.1 Conditions for the Benefit of the Purchaser.
(a) The purchase of the Securities by the Purchaser is subject to the
following conditions, which are for the exclusive benefit of the
Purchaser and which are to be performed or complied with at or prior
to the Time of Closing:
(i) the representations and warranties of the Corporation set
forth in Section 3.1 will be true and correct at the Time of
Closing with the same force and effect as if made at and as of
such time except:
(A) insofar as such representations and warranties are given
as of a particular date and relate solely to such date;
or
(B) to the extent any of such representations and warranties
have been waived by the Purchaser or affected by the
transactions between the parties contemplated hereby;
(ii) the representations and warranties of IMSI set forth in
Section 3.5 will be true and correct at the Time of Closing
with the same force and effect as if made at and as of such
time except:
(A) insofar as such representations and warranties are given
as of a particular date and relate solely to such date;
or
(B) to the extent any of such representations and warranties
have been waived by the Purchaser or affected by the
transactions between the parties contemplated hereby;
(iii) each of IMSI and the Corporation will have performed or
complied with all of the terms, covenants and conditions of
this Agreement to be performed or complied with by IMSI or the
Corporation, respectively at or prior to the Time of Closing;
(iv) the Purchaser will be furnished with such certificates or
other instruments (including, without limiting the generality
of the foregoing, a certified copy of (i) resolutions of the
board of directors of IMSI approving the issuance of
<PAGE> 27
- 27 -
the Securities to the Purchaser and (ii) resolutions of the
board of directors of the Corporation approving the reserving
of 2,053,334 Common Shares to be issued in exchange for the
Class X Shares of IMSI and approving the execution of this
Agreement and the Support Agreement) of the Corporation and/or
IMSI or of officers of the Corporation and/or IMSI as the
Purchaser or the Purchaser's counsel may reasonably think
necessary in order to establish that the terms, covenants and
conditions contained in this Agreement to have been performed
or complied with by the Corporation and/or IMSI at or prior to
the Time of Closing have been performed or complied with and
that the representations and warranties of the Corporation
and/or IMSI herein given are true and correct at the Time of
Closing, subject to Section 5.1(a)(i) hereof;
(v) there will have been obtained from all appropriate federal,
provincial, state, municipal or other governmental or
administrative bodies such approvals or consents as are
required to permit the transactions contemplated hereby;
(vi) no action or proceeding will be pending or threatened by any
person, government, governmental authority, regulatory body or
agency to enjoin, restrict or prohibit the purchase of the
Securities as contemplated hereby.
(vii) no action or proceeding will be pending or threatened by any
person, government, governmental authority, regulatory body or
agency to enjoin, restrict or prohibit the exchange of the
Class X Shares for common shares of the Corporation;
(viii) no material damage by fire or other hazard to the Assets will
have occurred from the date hereof to the Time of Closing;
(ix) all necessary steps and proceedings will have been taken to
permit the Securities to be issued;
(x) IMSI shall have executed and delivered special warrant
certificates representing the Special Warrants;
(xi) the Corporation and the Purchaser shall have executed and
delivered a Registration Rights Agreement in the form attached
as Schedule 5.1 (a)(xi)
(xii) on or before the Time of Closing, the Purchaser shall be fully
satisfied, in its sole discretion, with the results of its due
diligence inquiries;
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(xiii) the Corporation, the Purchaser, Michael Steele, 125489
Ontario Inc., and other parties will have entered into a
second voting agreement in the form attached as Schedule
5.1(a)(xiii) hereto;
(xiv) the Corporation will have delivered to the Purchaser a
favorable opinion of their counsel licensed to practice in
the State of Nevada substantially in the form attached
hereto as Schedule 5.1(a)(xiv);
(xv) the Corporation, IMSI and the Purchaser shall have executed
and delivered IMSI/IMSC Support Agreement in the form
attached as Schedule 5.1 (a)(xv);
(xvi) the Corporation will have delivered to the Purchaser a
favourable opinion of their securities counsel as a form
acceptable to the Purchaser's counsel;
(xvii) nothing shall have occurred prior to the Time of Closing
which would have a material adverse effect on the business,
operations, properties, condition (financial or otherwise)
of the Corporation or on the ability of the Corporation to
perform its obligations hereunder;
(xviii) the Corporation shall have satisfied the account of
Purchaser's Canadian legal counsel Gowling, Strathy &
Henderson and U.S. legal counsel Stradley, Ronon, Stevens &
Young, LIP; and
(xix) the Corporation shall have executed and delivered the Escrow
Agreement.
(b) In case any term or covenant of the Corporation or condition to be
performed or complied with for the benefit of the Purchaser at or
prior to the Time of Closing has not been performed or complied with
at or prior to the Time of Closing, the Purchaser, without limiting
any other right that the Purchaser has, may at its sole option,
either:
(i) rescind this Agreement by notice to the Corporation and in
such event the Purchaser will be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part;
and, if the Purchaser rescinds this Agreement pursuant to Section
5.1(b)(i), the Corporation will also be released from all
obligations hereunder.
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5.2 Conditions for the Benefit of the Corporation.
(a) The sale of the Securities is subject to the following conditions,
which are for the exclusive benefit of the Corporation and which are
to be performed or complied with at or prior to the Time of Closing:
(i) the representations and warranties of the Purchaser set forth
in Section 3.3 will be true and correct at the Time of Closing
with the same force and effect as if made at and as of such
time;
(ii) the Purchaser will have performed or complied with all of the
terms, covenants and conditions of this Agreement to be
performed or complied with by the Purchaser at or prior to the
Time of Closing;
(iii) the Corporation will be furnished with such certificates or
other instruments (including, without limiting the generality
of the foregoing, a certified copy of a resolution of the
board of directors of the Purchaser approving the transactions
contemplated by this Agreement) of the Purchaser or of
officers of the Purchaser as the Corporation or its counsel
may reasonably think necessary in order to establish that the
terms, covenants and conditions contained in this Agreement to
have been performed or complied with by the Purchaser at or
prior to the Time of Closing have been performed or complied
with and that the representations and warranties of the
Purchaser herein given are true and correct at the Time of
Closing.
(b) In case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Corporation at or
prior to the Time of Closing has not been performed or complied with
at or prior to the Time of Closing, the Corporation, without
limiting any other right that the Corporation have, may at its sole
option, either:
(i) rescind this Agreement by notice to the Purchaser, and in such
event the Corporation will be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part;
and, if the Corporation rescinds this Agreement pursuant to Section 5.2(b)(i),
the Purchaser will also be released from all obligations hereunder.
<PAGE> 30
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6. EXAMINATION RIGHTS
6.1 Examination of Records and Assets. Until the Time of Closing, the
Corporation and the Subsidiaries will forthwith make available to the Purchaser
and their authorized representatives all leases, certificates of trade marks and
copyrights, contracts and commitments in its possession or under its control
relating to any of the Assets or the Corporation or the Subsidiaries; and the
Corporation and the Subsidiaries will forthwith make available to the Purchasers
and their authorized representatives for examination all books of account and
accounting records relating to the Corporation or the Subsidiaries, and the
Corporation and the Subsidiaries will, if reasonably requested, provide copies,
at the cost of the Corporation, of the following records maintained in
connection with the Corporation and the Subsidiaries: financial statements,
records of past sales, customer lists, supplier lists, payroll records,
inventory data, inventory master records, accounts receivable data and all other
business and technical records requested by the Purchaser. The Corporation and
the Subsidiaries will give the Purchaser and its authorized representatives
every reasonable opportunity to have access to and to inspect the Assets. The
exercise of any rights of access or inspection by or on behalf of the Purchaser
under this Section 6.1 will not affect or mitigate the covenants,
representations and warranties of the Corporation or IMSI hereunder which will
continue in full force and effect.
7. GENERAL
7.1 Further Assurances. IMSI, the Corporation and the Purchaser will from time
to time execute and deliver all such further documents and instruments and do
all acts and things as the other party may, either before or after the Closing
Date, reasonably require to effectively carry out or better evidence or perfect
the full intent and meaning of this Agreement.
7.2 Time of the Essence. Time is of the essence of this Agreement.
7.3 Commissions. The Corporation and IMSI will indemnify and save harmless the
Purchaser from and against all Claims for any commission or other remuneration
payable or alleged to be payable to any person in respect of the sale and
purchase of the Securities where such person has acted for the Corporation or
IMSI in connection with the sale of the Securities.
7.4 Fees. The Corporation or IMSI will pay the legal costs and expenses incurred
by the Purchaser in connection with the preparation, negotiation, execution
delivery and enforcement of this Agreement and all documents and instruments
executed pursuant hereto. All fees payable pursuant to this Section 7.4 will be
paid by the Corporation or IMSI at closing.
7.5 Benefit of the Agreement. This Agreement will enure to the benefit of and be
binding upon the successors and permitted assigns of the parties hereto.
<PAGE> 31
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7.6 Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject mailer hereof and cancels and
supersedes any prior understandings and agreements between the parties hereto
with respect thereto including, without limitation, the term sheet dated August
4, 1999 and accepted as of September 14, 1999 on its face between the
Corporation and the Purchaser. There are no representations, warranties, terms,
conditions, undertakings or collateral agreements, express, implied or
statutory, between the parties other than as expressly set forth in this
Agreement.
7.7 Amendments and Waivers. No amendment to this Agreement will be valid or
binding unless set forth in writing and duly executed by all of the parties
hereto. No waiver of any breach of any provision of this Agreement will be
effective or binding unless made in writing and signed by the party purporting
to give the same and, unless otherwise provided, will be limited to the specific
breach waived.
7.8 Assignment. Neither this Agreement nor any rights hereunder may be assigned
by any party hereto without the written consent of all the other parties hereto.
7.9 Notices. Any demand, notice or other communication to be given in connection
with this Agreement will be given in writing and will be given by personal
delivery, by registered mail or by fax addressed to the recipient as follows:
To Southbridge: c/o Southbridge Capital Inc.
150 Water Street South
Cambridge, Ontario
N1R 3E2
Attention: Lynda King
Fax No.: (519) 621-8144
To the Corporation: International Menu Solutions Corporation
350 Creditstone Road
Concord, Ontario
L4K 3Z2
Attention: President
Fax No.: (905) 660-4585
<PAGE> 32
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To IMSI: International Menu Solutions Inc.
350 Creditstone Road
Concord, Ontario
L4K 3Z2
Attention: President
Fax No.: (905) 660-4585
or to such other address, individual or fax number as may be designated by
notice given by either party to the other. Any demand, notice or other
communication given by personal delivery will be conclusively deemed to have
been given on the day of actual delivery thereof and, if given by registered
mail, on the fifth Business Day following the deposit thereof in the mail and,
if given by fax, on the day of transmittal thereof if given during the normal
business hours of the recipient and on the next Business Day if not given during
such hours on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system that might affect the delivery of mail, any such demand, notice or
other communication may not be mailed but must be given by personal delivery or
by fax.
<PAGE> 33
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7.10 Governing Law. This Agreement is governed by and will be construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
IN WITNESS WHEREOF the parties have executed this Agreement.
SOUTHBRIDGE EQUITIES INC.
By: /s/ Michael Petersen
-------------------------------------
Name: Michael Petersen
Title: Vice-President
By: /s/ Lynda King
-------------------------------------
Name: Lynda King
Title: Vice-President, Finance
INTERNATIONAL MENU SOLUTIONS INC.
c/s
By: /s/ Michael Steele
-------------------------------------
Name: Michael Steele
Title: President
INTERNATIONAL MENU SOLUTIONS
CORPORATION
c/s
By: /s/ Michael Steele
-------------------------------------
Name: Michael Steele
Title: President
