<PAGE> 1
U.S. 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
Date of Report (Date of earliest event reported):
OCTOBER 14, 1999 (OCTOBER 1, 1999)
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STEARNS & LEHMAN, INC.
(Exact Name of Registrant as Specified in its Charter)
OHIO 0-21879 34-1579817
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File No.) Identification No.)
30 PARAGON PARKWAY
MANSFIELD, OHIO 44903
(Address of principal executive offices) (Zip code)
(419) 522-2722
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 1. Not Applicable.
ITEM 2. ACQUISITIONS OR DISPOSITIONS OF ASSETS.
On October 1, 1999, pursuant to the terms of a Share Purchase Agreement
("Agreement"), dated October 1, 1999, between Stearns & Lehman, Inc. (the
"Company") and Wargo Holdings Ltd. ("Wargo"), the Company's newly established
Canadian subsidiary 19035 Yukon Inc. ("Yukon") acquired all of the outstanding
shares of Oscar Skollsberg's Food Technique Limited ("Oscars"), a Canadian
Company registered in British Columbia. Oscars is in the business of producing
and marketing coffee and espresso flavoring syrups throughout Canada, the United
States and several foreign countries. Oscars reported unaudited sales of
$1,827,551 CDN and unaudited net income of $83,167 CDN for the calendar year
ended December 31, 1998.
As consideration for the shares of Oscars, the Company paid $1,205,000 CDN plus
or minus adjustments pursuant to Part 3 of the Agreement. Part 3 of the
Agreement indicates that the purchase price will be adjusted upwards or
downwards by the amount in which the Net Equity of Oscars differs from $161,291
CDN as of close of business on September 30, 1999. Yukon used funds available
under a business loan agreement with First Knox National Bank guaranteed by the
Company. This loan agreement provided $800,000 U.S. and is filed herewith as
Exhibit 99(a).
In addition, in conjunction with the Agreement, Jan Skollsberg signed a
non-competition agreement dated October 1, 1999 with the Company, Yukon, Oscars
and Wargo in which Mr. Skollsberg will not directly or indirectly manufacture,
procure, sell, or distribute any products or services materially similar to
those products of Oscars' or the Company's for a period of four years. In
consideration for this non-competition agreement, the Company will pay Mr.
Skollsberg $13,350 CDN per month for the four year period. This non-competition
agreement is filed herewith as Exhibit 99(b).
The transaction has been previously been publicly announced by the Company and a
copy of the press release issued by the Company on October 7, 1999 is included
herewith as Exhibit 99(c).
The description contained herein of the Agreement is qualified in its entirety
by reference to the Stock Purchase Agreement dated October 1, 1999 which is
filed herewith as Exhibit 2 and incorporated by reference.
ITEM 3 - 6. Not Applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) AND (b). Not applicable in accordance with Regulation S-X 11.3-05(b)(2)(i).
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(c). EXHIBITS.
Exhibit #2 - Share Purchase Agreement between Stearns & Lehman, Inc. and
Wargo Holdings Ltd. dated October 1, 1999.
Exhibit 99(a) - Business Loan Agreement between 19035 Yukon Inc. and First
Knox National Bank.
Exhibit 99(b) - Non-competition agreement between Stearns & Lehman, Inc. and
Jan Skollsberg dated October 1, 1999.
Exhibit 99(c) - Press release issued by Stearns & Lehman, Inc. on October 7,
1999.
ITEMS 8 - 9. Not applicable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized,
Date: October 14, 1999 STEARNS & LEHMAN, INC.
(Registrant)
/s/ William C. Stearns
----------------------
William C. Stearns
President
/s/ John A. Chuprinko
---------------------
John A. Chuprinko
Chief Financial Officer
(Principal Accounting Officer)
2
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- 1 - Exhibit #2
SHARE PURCHASE AGREEMENT
THIS AGREEMENT dated as of October 1, 1999 is among:
WARGO HOLDINGS LTD., (BCCA incorporation No. 0327852)
of 10600 Seaham Crescent, Richmond, British Columbia, V7V 3V3
(the "Vendor")
AND
JAN SKOLLSBERG, of 10600 Seaham Crescent, Richmond,
British Columbia, V7V 3V3
("Skollsberg")
AND
19035 YUKON INC., of Suite 200, 304 Jarvis Street, Whitehorse,
Yukon, Y1A 2H2
(the "Purchaser")
AND
STEARNS & LEHMAN, INC., an Ohio corporation, of 30 Paragon
Pkwy, Mansfield, Ohio, 44903
("S&L")
AND
OSCAR SKOLLSBERG'S FOOD TECHNIQUE LIMITED, (Federal
Corporation No. 1241991 and extra provincially registered in
British Columbia under No. A-0029524 ) of 185 - 11960
Hammersmith Way, Richmond, British Columbia, V7A 5C9
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- 2 - Exhibit #2
(the "Company")
WHEREAS the Vendor is the legal and beneficial owner of all of the
issued and outstanding shares in the capital of the Company, being 200 common
shares (the "Shares").
AND WHEREAS the Vendor has agreed to sell, and the Purchaser has agreed
to purchase, the Shares on the terms set out in this Agreement.
AND WHEREAS Skollsberg is a 50% shareholder and President of the Vendor
and S&L owns all of the issued and outstanding shares in the capital of the
Purchaser.
AND WHEREAS Skollsberg, S&L and the Company are party to this Agreement
for the purpose of making the representations, warranties and covenants
hereinafter set out.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which each Party acknowledges, the Parties to this Agreement agree as follows:
PART 1
INTERPRETATION
1.1 DEFINED TERMS. In this Agreement, including the Recitals, the following
terms will have the following meanings:
"ACCOUNTANTS" means PricewaterhouseCoopers LLP.
"ACT" means the Income Tax Act (Canada).
"BUSINESS DAY" means a day which is not a Saturday, Sunday or statutory
holiday in British Columbia.
"CANADIAN DOLLAR EQUIVALENT" means the net amount in Canadian dollars
received by converting the Deposit into Canadian dollars at a financial
institution determined by S&L.
"CLOSING" means the completion of the transactions set out herein on the
Closing Date.
"CLOSING DATE" means the date of this Agreement.
"CLOSING STATEMENTS" means the financial statements of the Company
prepared as at the Closing Date, comprising a balance sheet, a statement
of earnings and retained earnings, a
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- 3 - Exhibit #2
statement of cash flows, changes in financial equity statement,
including full note disclosure, to be prepared by the Accountants
pursuant to Section 3.2.
"COMPANY'S SOLICITORS" means Campbell Froh May & Rice, Richmond, British
Columbia.
"CONSULTING AGREEMENT" means the consulting agreement dated the date
hereof between Skollsberg and the Company.
"DEPOSIT" means the deposit of U.S. $65,000 posted by S&L with the
Escrow Agent pursuant to the terms and provisions of the Escrow
Agreement.
"DESIGNATED PERSON" means a senior Chartered Accountant agreed to by the
Vendor and Purchaser or, in absence of agreement, designated by the
President of the Institute of Chartered Accountants in British Columbia.
"ENVIRONMENTAL LAW" means any Requirement of Law relating to public
health, safety or the environment, including, without limitation, those
relating to the protection of the environment, health or safety of
Persons in connection with environmental matters, natural resources,
conservation, wildlife, waste management, hazardous substance
management, removal and remedial cost recovery, and pollution,
including, without limitation, regulation of releases and disposals to
air, land, water and groundwater.
"ESCROW AGENT" means First-Knox National Bank.
"ESCROW AGREEMENT" means the Security Deposit Escrow Agreement dated
August 5, 1999 among S & L, Skollsberg and the Escrow Agent.
"GAAP" means Canadian generally accepted accounting principles applied
on a consistent basis with past fiscal years of the Company.
"GOVERNMENTAL APPROVALS" means all licences, permits, consents, material
authorizations and approvals from any and all Governmental Authorities
required for any specified purpose.
"GOVERNMENTAL AUTHORITY" means the government of Canada or the United
States, or the government of any province, state, municipality or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions.
"GUARANTEE" means any obligation (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) of a Person guaranteeing or, in effect, guaranteeing (or
indemnifying any Person in respect of) or supporting any indebtedness,
dividend or other obligation, of any other Person in any manner, whether
directly or indirectly.
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- 4 - Exhibit #2
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste, special
or hazardous waste, toxic or hazardous substance or material (other than
alcohol based flavouring materials required in the business of the
Company) which, when released into the natural environment, is likely to
cause harm or risk to the natural environment or to human or animal
health, including without limitation, any substance considered hazardous
under any Environmental Law.
"INFORMATION" means all proprietary technology, know-how, trade secrets,
information concerning the ownership and business, documentation,
records, data, customer lists and information, supplier lists and
information, business prospects, materials, samples and prototypes and
like information relevant to or used in connection with the business or
ownership of the Company, which is not generally known and available in
the public domain, existing as of the Closing Date.
"LABOUR AND EMPLOYMENT AGREEMENTS" means any labour agreement,
employment agreement, pension plan, profit sharing plan, bonus plan,
group insurance plan, and like agreements or arrangements (whether
written or oral) between the Company and its employees.
"LEASES" means all leases of real property (including buildings and
other fixtures thereon) held by the Company, except the Shareholder
Lease.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind including any agreement to grant any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to file any
financing statement under the applicable legislation of any jurisdiction
in connection with any of the foregoing.
"MATERIAL CONTRACT" means, (other than the Consulting Agreement and
Shareholder Lease) whether written or oral:
(a) any contract between the Company and any party with
whom the Vendor, Skollsberg or the Company does not
deal with at arm's length, as such term is defined in
the Act;
(b) any agreement in respect of the provision of banking
and other finance related services to the Company
(whether by financial institutions or any other
Person), including for greater certainty, all loan
agreements and security agreements;
(c) the Leases;
<PAGE> 5
- 5 - Exhibit #2
(d) the Labour and Employment Agreements;
(e) any lease of personal property, service agreement,
sale agreement, supply agreement or other agreement
of any kind to which the Company is a party, which:
(i) involves payments of more than $2,000 in the
aggregate;
(ii) cannot be cancelled at will by the Company
without liability; or
(iii) is material to the Company or the operation
of the business of the Company;
and all quotations, orders, or tenders for such types
of contracts which remain open for acceptance.
"MATERIAL PERSONAL PROPERTY" means, other than the Material Contracts,
each item of personal property owned by the Company having a book value
of $1000 or more.
"NET EQUITY" means the aggregate of all assets of the Company reduced by
the aggregate of all liabilities of the Company, determined and set out
in the Closing Statements.
"OBSOLETE INVENTORY" means:
(a) stock items where there has been no movement for one
year but will not include stock items moved from one
warehouse location to another, such inventory to be
specifically identified and priced to reflect
realizable market value that could be obtained, net
of any reasonable costs of disposal, as agreed to by
the Vendor and the Purchaser acting reasonably;
(b) items of redundant stock brought in for a specific
use or customer and not required, such inventory to
be specifically identified and priced to reflect
realizable market value, net of any reasonable costs
of disposal, that could be obtained, as agreed to by
the Vendor and the Purchaser acting reasonably; and
(c) damaged goods to be specifically identified and
priced at a discount to reflect realizable market
value, net of any reasonable costs of disposal, that
could be obtained, as agreed to by the Vendor and the
Purchaser acting reasonably.
"PARTIES" means the Vendor, Skollsberg, the Purchaser, S&L and the
Company and "PARTY" means any one of them.
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- 6 - Exhibit #2
"PERMITTED LIENS" means:
(a) Liens arising in the ordinary course of business of
the Company and not incurred in connection with any
financial obligation, including encumbrances in the
nature of zoning restrictions, easements, rights and
restrictions of record on the use of real property,
and landlord's and lessor's Liens;
(b) Liens in the form of security given to a public
utility or any Governmental Authority in connection
with the operations of the Company in the ordinary
course of its business;
(c) the reservations, limitations, provisos and
conditions, if any, expressed in any original grants
from the Crown;
(d) Liens in respect of matters arising in the ordinary
course of business of the Company which will be fully
accounted or reserved for in the Closing Statements
including:
(i) Liens for taxes, assessments or governmental
charges not then due and delinquent or which
are being contested in good faith by
appropriate proceedings;
(ii) Liens in connection with worker's
compensation, social security taxes or
similar charges; and
(iii) Liens created pursuant to borrowings from
Canadian Imperial Bank of Commerce; and
(e) purchase money Liens and lease obligations in respect
of equipment and motor vehicles which have been
disclosed to the Purchaser and are noted in the
records of the Company, including without limitation,
those obligations with respect to which financing
statements have been filed in the Personal Property
Security Registry ("PPR") as disclosed in a PPR
search dated September 30, 1999 with a currency date
of September 25, 1999.
"PERSON" means an individual, a partnership, a corporation, a trust, an
unincorporated organization, a Governmental Authority and the heirs,
executors, administrators or other legal representatives of an
individual.
"PRIME RATE" means the prime interest rate per annum for Canadian dollar
commercial loans in Canada declared by Canadian Imperial Bank of
Commerce from time to time.
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- 7 - Exhibit #2
"PURCHASE PRICE" has the meaning set out in Section 2.2.
"PURCHASER'S SOLICITORS" means Davis & Company, Vancouver, British
Columbia.
"REAL PROPERTY" means all real property interests of any nature
(including any options, rights to purchase or like interests) held by
the Company, other than the Leases or Shareholder Lease.
"REQUIREMENT OF LAW" means, as to any Person, the charter documents,
by-laws or other organizational or governing documents of such Person,
and any Canadian or United States federal, provincial, state or local
statute, law, regulation, order, consent, decree, judgment, permit,
licence, code, covenant, deed restriction, common law, treaty,
convention, ordinance or determination of an arbitrator or a court or
other competent authority, in each case applicable to or binding upon
such Person or any of the property of such Person.
"SHAREHOLDER LEASE" means the lease among the Company and Skollsberg
dated the date of this Agreement in respect of those lands and premises
located at 185 - 11960 Hammersmith Way, Richmond, BC.
"SHARES" has the meaning set out in Recital A.
"S&L" means Stearns & Lehman, Inc.
"SKOLLSBERG ENTERPRISES CONSULTING AGREEMENT" means the consulting
agreement dated January 1, 1999 between Skollsberg Enterprises Inc. and
the Company providing for a consulting fee to be paid by the Company in
the amount of Cdn. $30,000 per month.
"SPOT RATE" means, in relation to the conversion of one currency into
another currency, the rate of exchange for such conversion as quoted by
Bank of Canada (or if not quoted, the spot rate of exchange quoted for
wholesale transactions by Canadian Imperial Bank of Commerce in
accordance with its standard money market practices) at approximately
noon (Toronto time) on the Business Day such conversion is to be made.
"SUBSIDIARY" has the meaning set out in the Canada Business Corporations
Act.
1.1 SCHEDULES. The following are the Schedules attached to and incorporated
in this Agreement by reference and are considered to be a part of this
Agreement:
Schedule 1 - Financial Statements
Schedule 2 - [Intentionally Deleted]
Schedule 3 - Material Contracts
Schedule 4 - Leases
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- 8 - Exhibit #2
Schedule 5 - Labour and Employment Agreements
Schedule 6 - Schedule of Removed Assets
Schedule 7 - Consulting Agreement
PART 2
SALE AND PURCHASE
2.1 SALE AND PURCHASE. The Vendor hereby agrees to sell the Shares to the
Purchaser free and clear of any Liens, and the Purchaser, relying on the
representations, warranties and covenants of the Vendor and Skollsberg as set
out in Part 4, hereby agrees to purchase the Shares, on the Closing Date, on the
terms contained in this Agreement.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares is Cdn. $1,205,000 plus or minus any adjustments pursuant to Part 3,
which Purchase Price will be proportionately allocated to the Shares.
2.3 PAYMENT OF THE PURCHASE PRICE. The Purchaser will at the Closing pay,
on account of the Purchase Price, $1,205,000:
(a) by causing S&L to direct the Escrow Agent to deliver at
Closing the Canadian Dollar Equivalent of the Deposit as at
September 30, 1999; and
(b) by delivering the difference between $1,205,000 and the amount
referred to in (a) above;
in each case by certified cheque, bank draft or solicitor's trust cheque made
payable to the Company's Solicitors, in trust, on behalf of the Vendor.
2.4 ESCROW MATTERS. S&L and Skollsberg agree:
(a) to make the direction to the Escrow Agent referred to in
Section 2.3(a);
(b) to further direct the Escrow Agent to deliver any interest
accrued on the Deposit to S&L; and
(c) that S&L will pay to the Escrow Agent its fees and
disbursements in respect of the Escrow Agreement.
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PART 3
PRICE ADJUSTMENT
3.1 PRICE ADJUSTMENT. The Purchase Price will be adjusted:
(a) upwards by the amount, if any, that the Net Equity as of the
Closing Date as shown in the Closing Statements exceeds
$161,291;
(b) downward by the amount, if any, that the Net Equity as of the
Closing Date as shown in the Closing Statements is less than
$161,291;
(c) downward by the amount, if any, that the Company as at the
Closing Date is deficient in payment of taxes pursuant to the
Income Tax Act (federal), Corporation Capital Tax Act, Excise
Tax Act (federal), Social Service Tax Act and Municipal Act
(unless such amounts are already accrued and provision is made
therefor in the Closing Statements); and
(d) up or down, as required, by the amount of any difference
between the Canadian Dollar Equivalent of the Deposit actually
transferred to the Purchaser's counsel's trust account and the
amount calculated in section 2.3(a) and any transfer fees
charged by financial institutions relating to wiring the
Deposit to a Canadian Bank or converting the Deposit to
Canadian Dollars.
3.2 PREPARATION OF THE CLOSING STATEMENTS. The Vendor and Purchaser will
take all steps reasonably required, forthwith after the Closing Date, to cause
the Closing Statements to be prepared at the cost of the Company, in the manner
hereinafter described:
(a) the Closing Statements will be prepared as of 12.01 a.m. on
the Closing Date in accordance with GAAP on a "Review
Engagement Report" basis;
(b) all management estimates used in preparing the Closing
Statements will be made on a basis consistent with management
estimates made in previous fiscal years, of the Company and
the Closing Statements will include reasonable reserve for
unpaid accounts;
(c) the Closing Statements will be reported upon by the
Accountants;
(d) the Accountants will be authorized and required to review,
during the course of and following the review, their working
papers and findings with the Purchaser, the Purchaser's
representatives, and the Vendor and the Vendor's
representatives;
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(e) the Vendor and the Purchaser will use their best efforts to
cause the Closing Statements to be produced within sixty (60)
days after the Closing Date in final draft form, together with
the Accountants' draft report thereon, whereupon they will be
forthwith delivered by the Accountants to the Vendor and the
Purchaser. The Accountant's draft report will be accompanied
by a statement by the Accountants to the effect that the
Accountants are prepared to deliver the same in "reviewed"
form, subject to any dispute which may be raised by the Vendor
or the Purchaser;
(f) if any of the Vendor or the Purchaser wishes to dispute any
matter in the Closing Statements, such Party may do so by
notice in writing delivered to the other Party within thirty
(30) days of the final draft Closing Statement being delivered
to that Party. The notice of dispute will specify the nature
and reason for the dispute;
(g) if the Vendor and the Purchaser are not able to resolve the
matter in dispute within fourteen (14) days following the date
of delivery of the notice of dispute, the matter will be
referred to the Designated Person for determination. The
Designated Person's determination will be final and binding on
the Vendor and the Purchaser for the purposes of settling the
Purchase Price, provided that such determination will in no
way limit or prejudice the Vendor's or the Purchaser's right
to bring a claim for breach of covenant or representation and
warranty within the time limits provided for herein or at law;
(h) if no Designated Person is able or willing to be designated
within fourteen (14) days after the Vendor and the Purchaser
commence seeking such appointment, or if for whatever reason
the Designated Person is unwilling or unable to make a
determination referred to in (g) above within a reasonable
period of time after selection, the provisions of Part 7 will
apply to settlement of the dispute;
(i) the Accountants will, if there is no dispute, deliver the
Closing Statements, together with their report thereon and
their final account for preparation of the Closing Statements
to the Vendor and the Purchaser immediately following the
expiration of the thirty (30) days following the day on which
the final draft thereof is delivered in accordance with (e)
above or, if there is a dispute, immediately following the
resolution of the dispute by the Vendor and the Purchaser or
by a determination by the Designated Person as contemplated in
(f) above and such Closing Statements will give effect to such
resolution or determination. The report of the Accountants may
be further qualified with respect to any issue that is
disputed and resolved or determined in accordance with the
foregoing if they are of the view that such resolution or
determination is not in accordance with GAAP; and
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(j) the fees of the Designated Person in respect of the dispute of
any matter in the Closing Statements will be borne by the
Vendor and the Purchaser in such proportion as the Designated
Person deems appropriate.
3.3 INVENTORY AND FIXED ASSETS. The inventory and fixed assets of the
Company will be determined as at Closing Date as follows:
(a) the inventory of the Company will be listed and manually
counted or weighed by the Company, in a method acceptable to
standard audit practices, and the inventory count will be
observed by an independent financial auditor of the Purchaser,
who will be entitled to be in attendance at all reasonable
times;
(b) the fixed asset listing will set out the acquisition cost and
date of acquisition of each fixed asset as at Closing Date,
which shall be prepared by the Company and be provided to an
independent financial auditor of the Purchaser;
(c) the cost of the independent financial auditor of the Purchaser
will be borne by the Purchaser.
3.4 PAYMENT OF ADJUSTMENT AMOUNTS. Any adjustment to the Purchase Price
owing from one Party to the other Party pursuant to Section 3.1 will be payable
within thirty (30) days after delivery of the Closing Statements pursuant to
Section 3.2(f) together with interest thereon from the Closing Date to the date
of payment at a rate of 7.75% calculated and compounded monthly.
3.5 PURCHASE OF UNCOLLECTED ACCOUNTS RECEIVABLE. Any accounts receivable
of the Company as of the Closing Date that, after reasonable efforts by the
Company to effect collection, remain outstanding after March 31, 2000 will at
the request of the Company be purchased by the Vendor, and Skollsberg agrees to
cause the Vendor to so purchase, for a price equal to the amount recorded on the
Closing Statement therefor net of any allowance therefor set forth on the
Closing Statements; provided that, at the request of the Vendor the Company will
assign such outstanding accounts receivable to the Vendor against payment under
this Section 3.5.
3.6 LISA SKOLLSBERG. With respect to the employment of Lisa Skollsberg by
the Company after the Closing Date, the Vendor and the Purchaser agree as
follows:
(a) if the Company terminates the employment of Lisa Skollsberg
(expressly or constructively) on or before February 29, 2000,
the Vendor will, and Skollsberg will cause the Vendor to, pay
all severance pay and other termination amounts owing and will
indemnify and save the Company harmless from all costs,
expenses and liabilities in connection therewith; and
<PAGE> 12
- 12 - Exhibit #2
(b) if the Company terminates the employment of Lisa Skollsberg
(expressly or constructively) after February 29, 2000, neither
the Vendor nor Skollsberg will have any liability in
connection therewith and the Company will pay all severance
pay and other termination amounts owing.
3.7 RICK DAVIES. The Purchaser acknowledges that it has received from the
Company, and accordingly relies upon, a written confirmation from the physician
of Rick Davies, advising that Rick Davies is fit to return to work as of
September 27, 1999.
PART 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE VENDOR AND SKOLLSBERG
4.1 INDUCEMENTS - THE VENDOR AND SKOLLSBERG. In order to induce S&L and
the Purchaser to enter into and consummate this Agreement, the Vendor and
Skollsberg jointly and severally represent and warrant to and covenant with the
S&L and the Purchaser as follows:
(a) OWNERSHIP. The Shares constitute all of the issued and
outstanding shares in the capital of the Company and the
Vendor is the legal and beneficial owner of the Shares, free
of all Liens.
(b) COMPETING RIGHTS TO SHARES. No Person has any agreement or
option, or a right capable of becoming an agreement, for the
purchase of any of the Shares.
(c) SHARES DELIVERED FREE AND CLEAR. The Vendor will, at the
Closing, transfer to the Purchaser legal and beneficial title
to, and ownership of, the Shares, free and clear of any Liens
and subject to section 4.5, the said transfer will not result
in any fees, duties, taxes, assessments or other amounts being
payable by the Company.
(d) STATUS OF VENDOR. The Vendor is a corporation duly
incorporated, validly existing, and in good standing with
respect to annual filings under the laws of the Province of
British Columbia.
(e) CAPACITY OF VENDOR. The Vendor has the requisite power and
capacity to own the Shares and to enter into this Agreement
and to perform its obligations hereunder and the execution,
delivery or observance or performance of this Agreement is not
a contravention or breach, or will not be a contravention or
breach, of the constating documents or resolutions of
directors and shareholders of the Vendor or the terms of any
agreement, trust or other document or any Requirement of Law
applicable to the Vendor.
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-13 - Exhibit #2
(f) OWNERSHIP OF VENDOR. Skollsberg and Anne Christine Skollsberg
are the owners of all of the issued and outstanding shares in
the capital of the Vendor.
(g) STATUS OF COMPANY. The Company is a corporation duly
incorporated, validly existing, and in good standing with
respect to the filing of annual reports under the laws of
Canada, is duly extra-provincially registered in the Province
of British Columbia and has the power and capacity to own its
assets, to carry on its business and to enter into this
Agreement and carry out its terms.
(h) MEMORANDUM AND ARTICLES. The Memorandum and Articles of the
Company have not been altered since its incorporation other
than as disclosed to the Purchaser in writing prior to the
date of this Agreement.
(i) CAPACITY OF COMPANY. The Company has the requisite power and
capacity to own its assets and carry on its business as
conducted prior to Closing and to enter into this Agreement
and to perform its obligations hereunder and the execution,
delivery or observance or performance of this Agreement by the
Company is not a contravention or breach, or will not be a
contravention or breach, of the constating documents or
resolutions of directors and shareholders of the Company or
the terms of any agreement, trust or other document or,
subject to section 4.5, any Requirement of Law applicable to
the Company.
(j) AUTHORIZED CAPITAL. The authorized capital of the Company is
10,000 common shares. No Person has any agreement or option or
a right capable of becoming an agreement for the purchase of
any of the shares of the Company or any right capable of
becoming an agreement for the purchase, subscription or
issuance of any of the unissued shares in the capital of the
Company.
(k) CONSENTS AND APPROVALS. Subject to section 4.5, the Vendor,
Skollsberg and the Company have together obtained all required
Governmental Approvals and all consents or approvals of any
Person applicable to or required by them in respect of the
entering into and completion by them of the transactions
contemplated in this Agreement, except that, with respect of
any required consents of the lessors under the Leases, the
Vendor, Skollsberg and the Company have made reasonable
efforts to obtain such consents.
(l) AUTHORIZATION AND BINDING EFFECT OF AGREEMENT. This Agreement
has been duly authorized in the case of the Vendor and the
Company and duly executed and delivered by each of the Vendor,
Skollsberg and the Company and constitutes valid and legally
binding obligations of the Vendor, Skollsberg and the Company,
enforceable against each of them in accordance with its terms,
subject to the fact that
<PAGE> 14
- 14 - Exhibit #2
specific performance is an equitable remedy available only in
the discretion of the courts.
(m) THE VENDOR. The Vendor has no material obligations to any
Person which could materially adversely affect the Company or
the transactions contemplated by this Agreement.
(n) RESIDENCY. The Vendor is a resident of Canada and not a
non-resident of Canada for the purposes of the Act.
4.2 INDUCEMENTS - COMPANY BUSINESS MATTERS. In order to induce S&L and the
Purchaser to enter into and consummate this Agreement, the Vendor and Skollsberg
jointly and severally represent and warrant to and covenant with S&L and the
Purchaser as follows:
(a) BUSINESS. The Company carries on business in the Province of
British Columbia and does not directly or indirectly carry on
business in any other Province or Territory of Canada or in
any other country other than by way of the sale of its
products.
(b) LICENCES AND PERMITS. All Governmental Approvals required for
the conduct, in the ordinary course, of the business of the
Company have been obtained and are in good standing and none
of such licences and permits will be cancelled or terminated,
nor, subject to the provisions of section 4.5, will additional
such licences and permits be required, as a result of the
closing of this Agreement.
(c) FINANCIAL STATEMENTS. The financial statements of the Company
as at December 31, 1998, December 31, 1997, December 31, 1996,
December 31, 1995 and December 31, 1994, which are attached to
this Agreement as Schedule 1, have been prepared on a "Notice
to Reader" basis, and as such present fairly the condition of
the Company, and are true and correct in every material
respect as at the dates for the years then ended and have been
prepared on a basis consistent with those of previous fiscal
years. Without limiting the generality of the foregoing:
(i) the revenues of the Company for fiscal year 1998 are
as set out in the December 31, 1998 financial
statements attached hereto;
(ii) the accounts receivable recorded on the December 31,
1998 financial statements attached hereto were
recorded at the lower of cost and net realizable
value;
(iii) the capital assets recorded on the December 31, 1998
financial statements attached hereto were recorded at
cost, less accumulated depreciation;
<PAGE> 15
- 15 - Exhibit #2
(iv) management estimates underlying the financial
statements were made on a basis consistent with those
of previous fiscal years.
(d) INDEBTEDNESS TO RELATED PARTIES. The Company is not indebted
to or under any obligation of any nature to any of:
(i) the Vendor;
(ii) Skollsberg; or
(iii) any Person who does not deal at arm's length (as such
term is defined in the Act) from any of the Vendor,
Skollsberg, the Company or any director or officer of
the Company, other than Lisa Skollsberg as provided
in Section 3.5.
For greater certainty, the Skollsberg Enterprises Consulting
Agreement and the employment arrangements with Jan Skollsberg
and Anne-Christine Skollsberg and have been terminated as of
the Closing Date without liability to the Company.
(e) INDEBTEDNESS OF RELATED PARTIES. None of the:
(i) the Vendor;
(ii) Skollsberg; or
(iii) any Person who does not deal at arm's length (as such
term is defined in the Act) from any of the Vendor,
Skollsberg, the Company or any director, officer or
employee of the Company;
is now indebted to the Company.
(f) DISTRIBUTIONS AND DIVIDENDS. Except in respect of the
Skollsberg Enterprises Consulting Agreement, and except for
the repayment of a $45,000 loan by the Company to Skollsberg
Enterprises Inc., or otherwise as disclosed to S&L or the
Purchaser in writing, prior to the Closing Date, since
December 31, 1998 no dividends, indebtedness or other
distribution of funds of the Company have been paid to:
(i) the Vendor;
(ii) Skollsberg; or
<PAGE> 16
-16 - Exhibit #2
(iii) any Person who does not deal at arm's length (as such
term is defined in the Act) from any of the Vendor,
Skollsberg, the Company or any director, officer or
employee of the Company.
(g) GUARANTEES. The Company is not party to any Guarantee, or has
agreed to grant any Guarantee.
(h) ABSENCE OF CHANGES. Since December 31, 1998:
(i) there has not been any material adverse change in the
financial position or condition of the Company or any
damage, loss or other change in circumstances
materially affecting the business of the Company as
conducted prior to Closing or property of the Company
or its right to carry on business;
(ii) the Company has not waived or surrendered any right
of material value; and
(iii) the business of the Company has been carried on in
the ordinary course.
(i) CUSTOMERS AND ACCOUNTS. The relationship between the Company
and its significant suppliers and customers is good and
neither the Company or Skollsberg knows, or has reasonable
grounds to believe, that any such significant supplier or
customer does not intend to continue dealing with the Company
after the date of this Agreement on a basis consistent with
past practices. Without limiting the generality of the
foregoing, of the Company's eight (8) largest customers
(during the fiscal year ended December 31, 1998):
(i) sales to five (5) of them were between Cdn. $50,000
and Cdn. $100,000 each;
(ii) sales to two (2) of them were between Cdn. $150,000
and Cdn. $200,000 each; and
(iii) sales to one (1) of them was between Cdn. $200,000
and Cdn. $250,000.
(j) MATERIAL CONTRACTS. The agreements listed in Schedule 3
comprise a complete list of all Material Contracts, a true
copy of each (including all amendments thereto) of which has
been delivered to the Purchaser or in the case of oral
contracts, has been disclosed in full to the Purchaser in
writing prior to the date of this Agreement. The Company has
the full benefit of the Material Contracts and each Material
Contract is in full force and effect and unamended except as
disclosed in Schedule 3. The Company is not in default in any
material respect under the terms of any Material Contract
except as disclosed in Schedule 3 and the leases of 145- and
170-11960 Hammersmith Way, Richmond, BC, if it is unable to
obtain the prior written consent
<PAGE> 17
- 17 - Exhibit #2
of the landlords with respect to change in control of the
tenant before the Closing Date, nor has it waived any of its
rights thereunder or released any party from its obligations
with respect thereto. The Company has the capacity, including
necessary personnel, equipment, and supplies, to perform all
of its obligations under the Material Contracts.
(k) SUGAR SUPPLY. The Company purchases sugar from only Rogers
Sugars Ltd. and from no other source.
(l) LEASES. The leases listed in Schedule 4 comprise a complete
list of all Leases, a true copy of each (including all
amendments thereto) of which has been delivered to Purchaser.
The Company has the full benefit of the Leases and each Lease
is in full force and effect and unamended except as disclosed
in Schedule 4. The Company is not in default in any material
respect under the terms of any Lease nor has it waived any of
its rights thereunder or released any party from its
obligations with respect thereto, except the Vendor has failed
to obtain consent to a change in control of the tenant in
favour of the Purchaser of the Lease for 170 - 11960
Hammersmith Way, Richmond, BC.
(m) LABOUR AND EMPLOYMENT AGREEMENTS. There are no Labour and
Employment Agreements affecting the Company other than those
specified in Schedule 5 and there are no onerous or unusual
provisions in any contract with employees of the Company which
would cause such employees to be made redundant, or be deemed
constructively terminated, directly or indirectly as a result
of the completion of the transactions set out in this
Agreement or the resignations of Persons as directors or
officers of the Company or which would cause the Company to be
liable in any manner as a result thereof.
(n) MATERIAL PERSONAL PROPERTY. [Deleted]
(o) INVENTORIES. All inventories of the Company as exist at the
Closing Date, except Obsolete Inventories, are of normal
merchantable quality, free from defects and such inventories
consist of the types and quantities of items as is consistent
with the operations of the Company in the ordinary course
prior to the date of this Agreement.
(p) INFORMATION. The Company is the sole legal and beneficial
owner of the Information.
(q) INSURANCE. The Company maintains such insurance against loss
or damage to its assets (including business interruption
insurance) and concerning public liability as is reasonably
prudent for companies of similar size and in similar
businesses and such insurance is in effect and the Company has
not, to the best of the Vendor's and
<PAGE> 18
- 18 - Exhibit #2
Skollsberg's knowledge, done anything which would render such
insurance void or unenforceable.
(r) ACCOUNTS RECEIVABLE. No accounts receivable held by the
Company have been the subject of any factoring and all
accounts receivable held by the Company as of the date of this
Agreement are bona fide, good and collectible without set-off
or counterclaim, except to the extent of the allowance
therefor set forth on the Closing Statements.
(s) BOOKS AND RECORDS. The Company maintains books, records and
accounts in reasonable detail which accurately and fairly
reflect its transactions and business affairs, and maintains a
system of internal accounting controls sufficient to provide
reasonable assurances that transactions are executed in
accordance with management's general or specific authorization
and to permit preparation of financial statements in
accordance with GAAP. All material transactions of the Company
have been promptly and properly recorded or filed in or with
its books and records. The minute book of the Company contain
all records of the meetings and proceedings of shareholders
and directors.
(t) REAL PROPERTY. The Company owns no Real Property.
(u) OWNERSHIP INTERESTS. The Company owns no shares in the capital
of any other corporation or ownership interests in other
entities of any nature.
(v) ASSETS. The Company has good and marketable title to all its
properties and assets free of all Liens except for Permitted
Liens.
(w) CONDITION OF ASSETS. The Company has the assets necessary to
operate its business in the ordinary course after the date of
this Agreement in a manner consistent with that prior to the
date of this Agreement and such assets, taken as a whole, have
been properly maintained and are in good working order for the
purposes of ongoing operation, subject to ordinary wear and
tear for assets of comparable age and use.
(x) NON-OWNERSHIP OF ASSETS. Except for the property described in
the Shareholder Lease and the assets listed on Schedule 6,
none of the Vendor, Skollsberg or any Person who does not deal
at arm's length (as such term is defined in the Act) from any
of the Vendor or Skollsberg owns any property or assets which
are used by the Company or which are necessary or useful in
the conduct of its business in a manner consistent with the
operations of the Company in the ordinary course prior to the
date of this Agreement. The Vendor and Skollsberg hereby
covenant that, prior to December 31, 1999, they shall purchase
or cause a third party to purchase for sale to the Company a
Kettle/processor and lightning mixer (for $1,500 plus
applicable
<PAGE> 19
- 19 - Exhibit #2
taxes) and racking (for $250 plus applicable taxes) replacing
those particular assets listed on Schedule 6.
(y) FINANCING ARRANGEMENTS. The Company is not party to any
banking or borrowing arrangements which cannot be terminated
and repaid without penalty or bonus on 30 days' notice or less
other than the operating line and demand instalment loan in
favour of Canadian Imperial Bank of Commerce.
(z) ABSENCE OF CONFLICTING AGREEMENTS. The performance of this
Agreement will not be in violation of any agreement or
Material Contract to which the Company is a party except the
lease of 170-11960 Hammersmith Way, Richmond, BC, if the
Company is unable to obtain the prior written consent of the
landlords with respect to change in control of the tenant
before the Closing Date, and will not, except as aforesaid,
give any Person any right to terminate or cancel any agreement
or Material Contract or any right enjoyed by the Company, will
not, subject to section 4.5, result in the creation or
imposition of any lien, encumbrance or restriction of any
nature whatsoever in favour of a third party upon or against
the assets of the Company and will not result in any fees,
duties, taxes, assessments or other amounts relating to the
Company's assets becoming due or payable.
(aa) LITIGATION. There are no actions, suits, judgments,
investigations or proceedings outstanding or pending or, to
the Vendor's knowledge, threatened against or affecting the
Company at law or in equity or before or by any Governmental
Authority.
(bb) COMPLIANCE WITH REQUIREMENT OF LAW. The Company is not in
default with respect to any Requirement of Law relating to it.
Without limiting the generality of the foregoing, the Company:
(i) is not in violation of any Environmental Law
applicable to it;
(ii) does not own, control or is responsible for any
property onto which Hazardous Substances have been
released, disposed of or are present (including, for
greater certainty, the property which is the subject
of the Leases and the Shareholder Lease);
(iii) has not released or disposed of any Hazardous
Substances into the environment or onto the property
of any Person; or
(iv) is not subject to any litigation, investigation,
order or proceeding in connection with Hazardous
Substances or Environmental Laws.
<PAGE> 20
- 20 - Exhibit #2
(cc) DISCLOSURE. No representation or warranty of the Vendor or
Skollsberg made in this Agreement, and no statement in any
schedule hereto, omits to state a material fact necessary to
make the statements, in light of the circumstances in which
they were made, not misleading. There is no fact known to any
of the Vendor or Skollsberg that has not been disclosed to the
Purchaser and S&L that has specific application to the
Purchaser, the Company or the business, assets or future
profitability of the Company that could reasonably be expected
to be considered by the Purchaser or S&L to be materially
adverse in nature.
4.3 INDUCEMENTS - TAXATION. In order to induce S&L and the Purchaser to
enter into and consummate this Agreement, the Vendor and Skollsberg jointly and
severally represent and warrant to and covenant with S&L and the Purchaser as
follows:
(a) TAXES. All tax returns required to be filed by the Company in
any jurisdiction have been filed, and all taxes, assessments,
fees and other governmental charges upon the Company or upon
any of its property, income or franchises, which are due and
payable, have been paid timely or within appropriate extension
periods or contested in good faith by appropriate proceedings.
The Company has collected, deducted, withheld and remitted to
the proper taxing authorities when due all taxes required to
be collected, deducted, withheld and remitted.
(b) PROVISIONS FOR TAXES. Adequate provision has been made for
taxes payable for the current period for which tax returns are
not yet required to be filed and there are no agreements,
waivers, or other arrangements providing for an extension of
time concerning the filing of any tax return by, or payment
of, any tax, governmental charge or deficiency by the Company.
There are no contingent tax liabilities or any grounds which
would prompt a reassessment of returns filed including
aggressive treatment of income and expenses in filing earlier
tax returns.
(c) TAX ASSESSMENTS. The Company has received no notice of
reassessment for federal and provincial income tax for all
years to and including the fiscal year of the Company ended
December 31, 1997 and has been assessed concerning its return
for the year ended December 31, 1998.
(d) ELECTIONS. The Company has not prior to the date of this
Agreement:
(i) made any election under Section 85 of the Act
concerning the acquisition or disposition of any
property;
(ii) made any election under Section 83 or 196 of the Act;
<PAGE> 21
- 21 - Exhibit #2
(iii) except for the property described in the Shareholder
Lease, acquired or had the use of any property from a
Person with whom it was not dealing at arm's length
(as such term is defined in the Act);
(iv) disposed of anything to a Person with whom the
Company was not dealing at arm's length (as such term
is defined in the Act) for proceeds less than the
fair market value thereof; or
(v) discontinued carrying on business in respect of which
its non-capital losses were incurred.
(e) DISTRIBUTIONS. The Company has made all elections required to
be made under the Act in connection with any distributions by
the Company and all such elections were true and correct and
in the prescribed form and were made within the prescribed
time periods.
(f) MANUFACTURER. Since 1993, the Company has been and is carrying
on "manufacturing and processing in Canada of goods for sale
or lease" within the meaning given to the phrase and the words
therein under the Act and any administrative pronouncements
published by the Department of National Revenue, Taxation.
(g) DEDUCTIONS CLAIMED. There are no amounts outstanding and
unpaid for which the Company has previously claimed a
deduction under the Act.
4.4 INDUCEMENTS - FUTURE MATTERS. In order to induce S&L and the Purchaser
to enter into and consummate this Agreement, the Vendor and Skollsberg jointly
and severally represent and warrant to and covenant with the S&L and the
Purchaser as follows:
(a) CLOSING STATEMENTS. The Closing Statements will be true and
correct in every material respect and present fairly the
financial position of the Company as at the date of this
Agreement, in accordance with GAAP.
(b) LIABILITIES. There are no liabilities, contingent or
otherwise, of the Company as at the date of this Agreement
which will not be fully and accurately quantified and
accounted for in the Closing Statements.
(c) INFORMATION. The Vendor and Skollsberg will use diligent
efforts to ensure the Purchaser's representatives are
thoroughly informed of the Information.
(d) GOVERNMENTAL MATTERS. The Vendor and Skollsberg will [at the
request of the Company, acting reasonably] assist and
cooperate with the Purchaser and Company
<PAGE> 22
- 22 - Exhibit #2
in resolving any questions, enquiries or disputes with any
Governmental Authority in connection with the Company and its
business and assets.
(e) "OSCAR SKOLLSBERG'S FOOD TECHNIQUE". The Vendor and Skollsberg
will, on request and at the expense of the Company, assist and
cooperate with the Purchaser and the Company in obtaining
trade-mark protection of "Oscar's", to the extent possible, or
other commercial rights in respect of the words "Oscar
Skollsberg's Food Technique" and "Oscars" and will sign all
consents and documents reasonably requested by the Company in
connection therewith. The Vendor and Skollsberg hereby
acknowledge and agree that the Company is solely entitled to
the use of the corporate name "Oscar Skollsberg's Food
Technique Limited" and to registered trademark rights to the
word "Oscars", and neither the Vendor nor Skollsberg have nor
will assert any interest therein.
(f) Neither the Vendor nor Skollsberg will commercially use or
assert rights in the use, nor register under Canadian or
American corporate or trademark registries the words "Oscar
Skollsberg", "Skollsberg Food", "Skollsberg Foods", without
the prior written consent of the Company, but the foregoing
shall not be interpreted as prohibiting Skollsberg from using
or registering the name "Skollsberg" in isolation or in
combinations other than the foregoing.
(g) Neither the Purchaser, nor after closing, the Company, will
commercially use or assert rights in the use, nor register
under Canadian or American corporate or trademark registries
the word "Skollsberg", save and except as part of the complete
corporate name of the Company: "Oscar Skollsberg's Food
Technique Limited".
4.5 LIMITATION ON VENDOR'S AND SKOLLSBERG'S REPRESENTATIONS AND
WARRANTIES. The representation and warranties of the Vendor and Skollsberg set
out in sections 4.1(c), 4.1(i), 4.1(k) and 4.2(b) and 4.2(z) are subject to the
limitation that, with respect to any matters specifically related to the
Purchaser's status as an American controlled public corporation, the
representations and warranties of the Vendor and Skollsberg are given solely "to
the best of the knowledge of the Vendor and Skollsberg, after due enquiry".
4.6 SURVIVAL. The representations and warranties given to, and covenants
made with, S&L and the Purchaser by the Vendor and Skollsberg under Part 4 will
survive Closing until October 1, 2003, four (4) years after the Closing Date.
<PAGE> 23
- 23 - Exhibit #2
PART 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PURCHASER
5.1 INDUCEMENTS. In order to induce the Vendor and Skollsberg to enter
into and consummate this Agreement, S&L and the Purchaser jointly and severally
represent and warrant to and covenant with the Vendor and Skollsberg as follows:
(a) STATUS OF PURCHASER. The Purchaser is a corporation duly
incorporated under the Business Corporations Act (Yukon), is a
valid and subsisting corporation and is in good standing with
respect to the filing of annual returns required under that
Act.
(b) AUTHORIZATION - PURCHASER. The Purchaser has the requisite
corporate power and capacity to enter into the transactions
contemplated by this Agreement, and to perform its obligations
hereunder, and the execution and delivery or observance or
performance of this Agreement is not a contravention or breach
of the constating documents or resolutions of directors and
shareholders of the Purchaser or the terms of any agreement,
trust or other document or any Requirement of Law applicable
to the Purchaser and this Agreement has been duly authorized
by all necessary corporate action on the part of the Purchaser
and constitutes valid and legally binding obligations of the
Purchaser enforceable against it in accordance with its terms,
subject to the fact that specific performance is an equitable
remedy available only in the discretion of the courts.
(c) STATUS OF S&L. S&L is a corporation duly incorporated under
the laws of Ohio and is a valid and subsisting corporation.
(d) AUTHORIZATION - S&L. S&L has the corporate power and capacity
to enter into the transactions contemplated by this Agreement,
and this Agreement has been duly authorized by all necessary
corporate action on the part of S&L and constitutes valid and
legally binding obligations of S&L enforceable against it in
accordance with its terms.
(e) CONSENTS AND APPROVALS. The Purchaser and S&L have together
obtained all required Governmental Approvals and all consents
or approvals of any Person applicable to or required by them
in respect of the entering into and completion by them of the
transactions contemplated in this Agreement.
(f) SKOLLSBERG GUARANTEES. The Purchaser and S&L have used
reasonable efforts to extinguish the personal guarantees
granted by the Company, Skollsberg and Anne-
<PAGE> 24
-24- Exhibit #2
Christine Skollsberg on behalf of the Company to CIBC by
either paying off the CIBC bank financing or assuming the
personal guarantees of Skollsberg."
(g) LEASE. The Company will continue to lease the premises located
at 185-11960 Hammersmith Way, Richmond from the Vendor until
April 30, 2000 at the existing lease rate.
(h) COMPETITION ACT. The transaction contemplated under this
Agreement is not subject to pre-notification under the
Competition Act (Canada) and the Purchaser is not aware of any
reason why the Director of Investigations and Research under
the Act would not approve the transactions contemplated in
this Agreement.
(i) INVESTMENT CANADA. There is no requirement under the
Investment Canada Act (Canada) to file for pre-approval to the
transactions contemplated in this Agreement prior to Closing
and the Purchaser will file a notification within the
requisite 30 day period following Closing.
(j) ABSENCE OF CONFLICTING AGREEMENTS. The performance of this
Agreement will not be in violation of the constating documents
of the Purchaser or S&L nor of any agreement or material
contract to which the Purchaser is a party and will not give
any Person any right to terminate or cancel any agreement of
the Purchaser nor this Agreement.
(k) DISCLOSURE. No representation or warranty of the Purchaser or
S&L made in this Agreement omits to state a material fact
necessary to make the statement, in light of the circumstances
in which they were made, not misleading.
PART 6
INDEMNITY
6.1 VENDOR'S AND SKOLLSBERG'S INDEMNITY. Notwithstanding any
investigations or enquiries made by the Purchaser or S&L prior to the date of
this Agreement, the Vendor and Skollsberg jointly and severally covenant and
agree to indemnify and save harmless S&L, the Purchaser and the Company of and
from any direct or indirect loss whatsoever arising out of, under or pursuant
to:
(a) any assessment or reassessment for all taxes (including
without limitation income taxes and corporate taxes), interest
and/or penalties for any period up to and including the date
of this Agreement for which no adequate reserve has been
provided for and disclosed in the Closing Statements;
<PAGE> 25
- 25 - Exhibit #2
(b) for a period of four (4) years following the Closing Date, any
actions or suits against or affecting the Company at law or in
equity or before or by any Governmental Authority, whether or
not known to any of the Vendor or Skollsberg, the basis for
which arose prior to the date of this Agreement and are not
caused by the status of the Purchaser as described in section
4.5 and for which no adequate reserve has been provided for
and disclosed in the Closing Statements;
(c) for a period of four (4) years following the Closing Date, any
default on the part of the Company with respect to any
Requirement of Law, including any Environmental Law, relating
or applicable to its business as conducted prior to the
Closing, whether or not known to any of the Vendor or
Skollsberg (unless the default relates to a matter governed by
section 4.5 in which case the default must be known to the
Vendor), the basis for which arose or existed prior to the
date of this Agreement and for which no adequate reserve has
been provided for and disclosed in the Closing Statements;
(d) for a period of four (4) years following the Closing Date, any
loss suffered by S&L, the Purchaser or the Company directly or
indirectly as the result of or arising out of any
representation or warranty made by the Vendor or Skollsberg in
this Agreement being untrue or incorrect when made;
(e) the breach of any covenant of any of the Vendor or Skollsberg
in this Agreement; and
(f) all claims, demands, costs and expenses in respect of the
foregoing.
6.2 S&L'S AND PURCHASER'S INDEMNITY. Notwithstanding any investigations or
enquiries made by the Vendor or Skollsberg prior to the date of this Agreement,
S&L and the Purchaser jointly and severally covenant and agree to indemnify and
save harmless the Vendor or Skollsberg of and from any direct or indirect loss
whatsoever arising out of, under or pursuant to:
(a) any loss suffered by the Vendor or Skollsberg directly or
indirectly as the result of or arising out of any
representation or warranty made by S&L and the Purchaser in
Part 5 of this Agreement being untrue or incorrect or the
breach of any covenant of the Purchaser in Part 5 of this
Agreement; and
(b) all claims, demands, costs and expenses in respect of the
foregoing.
(c) the personal guarantees granted by the Company, Skollsberg and
Anne-Christine Skollsberg on behalf of the Company to CIBC in
the event that the Purchaser does not pay off the CIBC bank
financing.
<PAGE> 26
- 26 - Exhibit #2
6.3 NOTICE OF CLAIM. After the Closing, any Party will promptly give
notice to the other of any bona fide claim by any of them acting in good faith
for indemnification pursuant to Sections 6.1 or 6.2 (a "Claim", which term will
include more than one Claim). Such notice will be given within the said four (4)
year period identified in section 6.1 (if relevant) and will specify whether the
Claim arises as a result of a claim by a third party (a "Third Party Claim") or
otherwise (an "Inter-Party Claim"), and will also specify with reasonable
particularity (to the extent the information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, or, if an amount is not then
determinable, an approximate and reasonable estimate of the
likely amount of the Claim.
6.4 MATERIAL AMOUNT. No Claim may be made by any Party hereunder unless
the amount of any such Claim is equal to or exceeds Cdn. $500.
6.5 MATERIAL AMOUNT - CLOSING STATEMENTS. No Claim may be made with
respect to the Closing Statements unless the Claim is equal to or greater than
Cdn.$10,000. No other Claim may be made by any party unless the amount of any
such Claim is equal to or exceeds Cdn.$500.
6.6 PROCEDURE FOR INDEMNIFICATION.
(a) Following receipt of notice by a Party or Parties (the
"Indemnitor") from the other Party or Parties (the
"Indemnitee") of notice of a Claim, the Indemnitor will have
thirty (30) days to make such investigation of the Claim as it
considers necessary or desirable. For the purpose of such
investigation, the Indemnitee will make available to the
Indemnitor and its authorized representatives the information
relied upon by the Indemnitee to substantiate the Claim. If
the Indemnitee and the Indemnitor agree at or prior to the
expiration of such thirty (30) day period (or any mutually
agreed upon extension thereof) to the validity and amount of
such Claim, the Indemnitor will immediately pay to the
Indemnitee the full agreed upon amount of the Claim. If the
Indemnitor and Indemnitee do not agree within such period (or
any mutually agreed upon extension thereof), the provisions of
Part 7 will apply.
(b) With respect to any Third Party Claim, the Indemnitor will
have the right, at its own expense, to participate in or
assume control of the negotiation, settlement or defence of
such Third Party Claim and, in such event, the Indemnitor will
reimburse the Indemnitee for all the Indemnitee's
out-of-pocket expenses as a result of such participation or
assumption. If the Indemnitor elects to assume such control,
the Indemnitee will co-operate with the Indemnitor, will have
the right to participate in the negotiations, settlement or
defence of such Third Party Claim at its own expense and will
have the right to disagree on reasonable grounds with the
selection and
<PAGE> 27
- 27 - Exhibit #2
retention of counsel, in which case counsel satisfactory to
the Indemnitor and the Indemnitee will be retained by the
Indemnitor. If the Indemnitor, having elected to assume such
control, thereafter fails to defend any such Third Party Claim
within a reasonable time, the Indemnitee will be entitled to
assume such control and the Indemnitor will be bound by the
results obtained by the Indemnitee with respect to such Third
Party Claim and will reimburse the Indemnitee for all its
out-of-pocket expenses as a result of such assumption.
(c) The obligation of the Indemnitor to indemnify the Indemnitee
in respect of Claims will also be subject to the following:
(i) in the event that any Third Party Claim is of a
nature such that the Indemnitee is required by
applicable law to make a payment to any third party
with respect to such Third Party Claim before the
completion of settlement negotiations or related
legal proceedings, the Indemnitee may make such
payment and the Indemnitor will, forthwith after
demand by the Indemnitee, reimburse the Indemnitee
for any such payment. If the amount of any liability
of the Indemnitee under the Third Party Claim in
respect of such a payment was made as finally
determined, in less than the amount which was paid by
the Indemnitor to the Indemnitee, the Indemnitee
will, forthwith after receipt of the difference from
the Third Party, pay the amount of such difference to
the Indemnitor;
(ii) except in the circumstances contemplated by (i)
above, and whether or not the Indemnitor assumes
control of the negotiation, settlement or defence of
any Third Party Claim, the Indemnitee will not
negotiate, settle, compromise, or pay any Third Party
Claim except with the prior written consent of the
Indemnitor;
(iii) the Indemnitee will not permit any right of appeal in
respect of any Third Party Claim to terminate without
giving the Indemnitor notice thereof and an
opportunity to contest such Third Party Claim; and
(iv) the Indemnitee and the Indemnitor will co-operate
fully with each other with respect to Third Party
Claims and will keep each other fully advised with
respect thereto (including supplying copies of all
relevant documentation promptly as it becomes
available).
6.7 SUBSEQUENT RECOVERY. If an Indemnitee subsequently recovers from any
other Person an amount which is referable to any Claim for which the Indemnitee
has already received indemnification under this Agreement, the Indemnitee will
forthwith repay to the Indemnitor such
<PAGE> 28
- 28 - Exhibit #2
part of the payment made by way of indemnity hereunder as equals the loss
suffered by the Indemnitee so recovered.
6.8 REDUCTION OF PURCHASE PRICE. All amounts paid to the Purchaser in
respect of any Claim will be deemed to constitute a reduction of the Purchase
Price and will be allocated proportionately among all the Shares.
PART 7
DISPUTE RESOLUTION
7.1 NEGOTIATION, MEDIATION, ARBITRATION. Except for settlement of the
Closing Statements as provided for in Part 3, any dispute between the Parties in
connection with this Agreement:
(a) will first be attempted to be resolved by the Parties through
good faith negotiations and in connection therewith, any Party
may request in writing that the other Party or Parties meet
and commence such negotiations within a reasonable period of
time (in no event later than seven (7) days) after such
request;
(b) if within seven (7) days after commencement of negotiations
under Section 7.1(a) above the Parties cannot come to
agreement, the Parties will attempt to resolve the dispute by
mediated negotiation and will use best efforts to agree on the
choice of mediator within seven (7) days of a request for
mediation by one Party to the others;
(c) if the matter cannot be resolved by mediation within fourteen
(14) days of appointment of a mediator, or if the Parties
cannot agree on a mediator within seven (7) days of a request
of a Party to appoint a mediator, the matter will be referred
to arbitration in accordance with the provisions set out
below;
(d) any dispute between the Parties which cannot be settled by
negotiation or mediation will be determined by arbitration in
accordance with the Commercial Arbitration Act (British
Columbia) and arbitration will be the exclusive method for
final resolution of such dispute;
(e) there will be a single arbitrator who will be disinterested in
the dispute or controversy and will be impartial with respect
to all Parties hereto. If the Parties cannot agree on an
arbitrator within seven (7) days of the dispute going to
arbitration pursuant to Section 7.1(c) above, the appointment
will be according to the Commercial Arbitration Act (British
Columbia);
(f) the determination of the arbitrator will be final and binding
on the Parties;
<PAGE> 29
- 29 - Exhibit #2
(g) each Party will bear its own costs in any such arbitration,
provided that, if the arbitrator finds that any Party will
have acted unreasonably he may, in his discretion, award costs
against such Party;
(h) the arbitrator will have the discretionary authority to grant
injunctive relief and specific performance as may be requested
by a Party;
(i) any order of an arbitrator may be entered with a Court of
competent jurisdiction for the purposes of enforcement;
(j) the place of arbitration will be Vancouver;
(k) the arbitrator will give effect insofar as possible to the
desire of the Parties hereto that the dispute or controversy
be resolved in accordance with good commercial practice; and
(l) the arbitrator will decide such dispute in accordance with the
laws of the Province of British Columbia.
PART 8
NOTICES
8.1 NOTICE. In this Agreement:
(a) any notice or communication required or permitted to be given
under this Agreement will be in writing and will be considered
to have been given if delivered by hand, transmitted by
facsimile transmission or mailed by prepaid registered post in
Canada, to the address or facsimile transmission number of
each Party set out below:
(i) if to S&L, the Purchaser or the Company:
52 Surrey Road
Mansfield, Ohio 44901
Attention: Bill Stearns, President, and John
Chuprinko, Chief Financial Officer
Fax No: (419) 522-1152
with a copy to:
<PAGE> 30
- 30 - Exhibit #2
Davis & Company
2800 Park Place
666 Burrard Street
Vancouver, B.C. V6C 2Z7
Attention: D.B. Buchanan
Fax No: (604) 687-1612
(ii) if to the Vendor or Skollsberg:
185-11960 Hammersmith Way
Richmond, B.C. V7A 5C9
Attention: Jan Skollsberg
Fax No: (604) 275-2792
with a copy to:
Campbell Froh May & Rice
Barristers & Solicitors
200 - 5611 Cooney Road
Richmond, B.C. V6X 3J6
Attention: Mark Standerwick
Fax No: (604) 273-4729
(b) notice or communication will be considered to have been
received:
(i) if delivered by hand during business hours on a
business day at the recipient's location, upon
receipt by a responsible representative of the
recipient, and if not delivered during business
hours, upon the commencement of business on the next
business day at the recipient's location; and
(ii) if sent by facsimile transmission during business
hours on a business day at the recipient's location,
upon the sender receiving confirmation of the
transmission, and if not transmitted during business
hours, upon the commencement of business on the next
business day at the recipient's location.
Any Party may change its address for notice to the other Parties by notice in
the manner set forth above.
<PAGE> 31
- 31 - Exhibit #2
PART 9
GENERAL
9.1 TIME OF ESSENCE. Time will be of the essence of this Agreement.
9.2 CALCULATION OF TIME. Unless otherwise specifically provided herein, in
calculating the period of time within which or following which any act or thing
is to be done or any step is to be taken pursuant to this Agreement, the date
which is the initial reference date in calculating such period will be excluded.
9.3 EXPIRY OF TIME PERIOD. In this Agreement, if any period ends on a day
other than a Business Day, that period will be extended to the next following
Business Day.
9.4 GENDER AND NUMBER. Words of one gender include all genders, and words
in the singular include the plural and vice versa.
9.5 INTERPRETATION NOT AFFECTED. In this Agreement, using separate Parts,
providing a table of contents, and inserting headings are for convenient
reference only and will not affect how this Agreement is interpreted.
9.6 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with British Columbia laws and applicable Canadian law and will be
treated in all respects as a British Columbia contract.
9.7 SUBMISSION TO JURISDICTION. Each of the Parties will:
(a) submit to the jurisdiction of British Columbia;
(b) if not resident, incorporated or registered in British
Columbia, appoint an agent to receive service of any process
in British Columbia; and
(c) if any appointed agent is required, notify the others of the
name and address of its appointed agent.
9.8 ENTIRE AGREEMENT. This Agreement is the entire Agreement among the
Parties and, except as stated in this Agreement and in the instruments and
documents to be executed and delivered under it, contains all the covenants,
representations, and warranties of the respective parties and expressly
supersedes the Letter of Intent between S&L and Skollsberg dated August 5, 1999.
There are no oral representations or warranties of any kind among the Parties.
This Agreement may not be amended or modified in any respect except by written
instrument signed by each of the Parties.
<PAGE> 32
- 32 - Exhibit #2
9.9 SEVERABILITY. The invalidity, illegality, or unenforceability of any
provision of this Agreement will not affect the validity, legality, or
enforceability of any other provision of this Agreement.
9.10 CURRENCY. Except where otherwise specifically set out, all
transactions referred to in this Agreement will be made in lawful currency of
Canada in immediately available funds.
9.11 LEGISLATION. In this Agreement, any reference to legislation includes
a reference to the legislation and to any regulations made under that
legislation as that legislation or those regulations may be amended or
re-enacted from time to time.
9.12 ACCOUNTING PRINCIPLES. Except where otherwise expressly set out, all
calculations made or referred to in this Agreement will be made in accordance
with GAAP. All accounting terms used in this Agreement which are not defined in
this Agreement will have the meaning assigned to them in accordance with GAAP.
9.13 ENUREMENT. This Agreement will enure to the benefit of and will be
binding upon the Parties and their respective heirs, executors, administrators,
successors and assigns.
9.14 FURTHER ASSURANCES. Each of the Parties hereto will at all times
hereafter execute and deliver at the request of any other Party all such further
documents, deeds and instruments, and will do and perform all such further acts
as may be reasonably necessary to give full effect to the intent and meaning of
this Agreement.
9.15 LEGAL FEES. Each Party will be responsible for its own legal fees and
other charges incurred in connection with the purchase and sale of the Shares
and all negotiations between the Parties and the consummation of the
transactions contemplated and without limiting the generality of the foregoing,
Skollsberg and the Vendor, rather than the Company, will pay for all legal,
accounting and other advice obtained on behalf of their respective interests,
rather than the interests of the Company.
9.16 TENDER. Any tender of documents, notices or money hereunder may be
made upon the Vendor or the Purchaser or the solicitor acting for any of them.
9.17 ASSIGNMENT. The Vendor acknowledge and agree that the Purchaser may
assign its rights and obligations under this Agreement to a nominee of the
Purchaser.
9.18 EQUITABLE RIGHTS. Nothing herein will limit a Party's right to apply
to a court of competent equitable jurisdiction for such relief by way of
restraining order, injunction, decree or otherwise as may be appropriate to
ensure compliance with the provisions of this Agreement.
<PAGE> 33
- 33- Exhibit #2
9.19 NON-MERGER. None of the provisions of this Agreement will merge in the
transfer of the Shares and all of the provisions of this Agreement will survive
the Closing Date and the completion of this transfer of the Shares.
9.20 PUBLIC ANNOUNCEMENTS. The Parties agree that no disclosure or public
announcement with respect to this Agreement or any of the transactions
contemplated by this Agreement will be made by any of the Parties without the
prior written consent of the others, except that nothing herein contained will
prevent or restrict S&L from making, or permitting its shareholders from making,
any public announcement or filing with respect to the transactions herein
contemplated to the extent that S&L, in its sole discretion reasonably
exercised, is of the view that such an announcement or filing is required to be
made in order to comply with rules of regulatory bodies having jurisdiction or
in order to permit S&L to meet obligations as a publicly traded security issuer.
9.21 COUNTERPART. This Agreement may be signed by original or by facsimile
in one or more counterparts and upon execution in counterparts by each Party
hereto, such counterpart will constitute an original of this Agreement and
execution and delivery by facsimile will be legally binding upon the Parties.
TO EVIDENCE THEIR AGREEMENT each of the Parties has executed this Agreement as
of the date set out on the initial page hereof.
WARGO HOLDINGS LTD. 19035 YUKON INC.
per: __________________________ per: __________________________
OSCAR SKOLLSBERG'S FOOD STEARNS & LEHMAN, INC.
TECHNIQUE LIMITED
per: __________________________ per: __________________________
- --------------------------------
JAN SKOLLSBERG
<PAGE> 34
- 34 - Exhibit #2
SCHEDULE 1
FINANCIAL STATEMENTS
<PAGE> 35
- 35 - Exhibit #2
SCHEDULE 2
ACCOUNTING PRINCIPLES
[Intentionally Deleted]
<PAGE> 1
- Page 1 - Exhibit 99(a)
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C>
$800,000.00 09-28-1999 10-01-2004 0192775970 0010 116
</TABLE>
References In the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
BORROWER: 19035 YUKON INC; ET. AL. LENDER: FIRST-KNOX NATIONAL BANK
SUITE 200 304 JARVIS ST COMMERCIAL LOAN DEPARTMENT
WHITEHORSE, YUKON, Y1A 2H2 ONE SOUTH MAIN STREET
MOUNT VERNON, OH 43050
THIS BUSINESS LOAN AGREEMENT BETWEEN 19035 YUKON INC STEARNS & LEHMAN INC AND
OSCAR SKOLLSBERG'S FOOD TECHNIQUE LIMITED (REFERRED TO IN THIS AGREEMENT
INDIVIDUALLY AND COLLECTIVELY AS "BORROWER") AND FIRST-KNOX NATIONAL BANK
(REFERRED TO IN THIS AGREEMENT AS "LENDER") IS MADE AND EXECUTED ON THE
FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS
FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER
FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT
OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN"
AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN
GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE
SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL
BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.
TERM. This Agreement shall be effective as of September 28, 1999, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined In this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower moans Individually and collectively 19035
YUKON INC, STEARNS & LEHMAN INC and OSCAR SKOLLSBERG'S FOOD TECHNIQUE
LIMITED and all other persons and entities signing Borrowers' Note.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or In the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
<PAGE> 2
- 2 - Exhibit 99(a)
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security interest.
GUARANTOR. The word "Guarantor means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may become otherwise
unenforceable.
LENDER. The word tender means First-Knox National Bank, its successors and
assigns.
LIQUID ASSETS. The words liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
LOAN. The word loan" or loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations In
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising In the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower In the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender In writing;
and (f) those liens and security Interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
<PAGE> 3
- 3 - Exhibit 99(a)
SECURITY INTEREST. The words "Security Interest" mean and Include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrowers total
assets excluding all Intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar Intangible items,
but including leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words 'Working Capital" mean Borrowers current assets,
excluding prepaid expenses, less Borrowers current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lenders obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lenders satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security Interests in the Collateral, (c)
Financing Statements perfecting Lenders Security Interests; (d) evidence of
insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Restated Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who
are referred to herein individually, collectively and interchangeably as
"Borrower." Unless specifically stated to the contrary, the word "Borrower" as
used in this Agreement, including without limitation all representations,
warranties and covenants, shall include all Borrowers. Borrower understands and
agrees that, with or without notice to Borrower, Lender may with respect to any
other Borrower (a) make one or more additional secured or unsecured loans or
otherwise extend additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms any indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) release, substitute, agree not to sue, or
deal with any one or more of Borrower's sureties, endorsers, or other guarantors
on any terms or in any manner Lender may choose; (e) determine how, when and
what application of payments and credits shalt be made on any indebtedness; (f)
apply such security and direct the order or manner of sate thereof, including
without limitation, any nonjudicial sate permitted
<PAGE> 4
- 4 - Exhibit 99(a)
by the terms of the controlling security agreement or deed of trust, as Lender
in its discretion may determine; (g) sell, transfer, assign, or grant
participations in all or any part of the indebtedness; (h) exercise or refrain
from exercising any rights against Borrower or others, or otherwise act or
refrain from acting; (i) settle or compromise any indebtedness; and (j)
subordinate the payment of alt or any pad of any indebtedness of Borrower to
Lender to the payment of any liabilities which may be due Lender or others.
REPRESENTATIONS AND WARRANTIES. The reference to 'Borrower in this
"REPRESENTATIONS AND WARRANTIES" section of this Agreement means 19035 YUKON INC
only and does not apply to any other co-borrower. Borrower represents and
warrants to Lender, as of the date of this Agreement, as of the date of each
disbursement of Loan proceeds, as of the date of any renewal, extension or
modification of any Loan, and at alt times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duty organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation and is validly existing and in good standing in alt states in
which Borrower is doing business. Borrower has the full power and authority
to own its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower also is duty
qualified as a foreign corporation and is in good standing in alt states in
which the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by alt
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws
or code of regulations, or any agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court decree, or order
applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to alt of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender In writing, Borrower represents and warrants that:
(a) During the period of Borrower's ownership of the properties, there has
been no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release
of any hazardous waste or substance on, under, about or from the properties
by any prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use,
generate, manufacture, store, treat, dispose
<PAGE> 5
- 5 - Exhibit 99(a)
of, or release any hazardous waste or substance on, under, about or from
any of the properties; and any such activity shalt be conducted in
compliance with alt applicable federal, state, and local laws, regulations,
and ordinances, including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and its agents to
enter upon the properties to make such inspections and tests as Lender may
deem appropriate to determine compliance of the properties with this
section of the Agreement. Any inspections or tests made by Lender shall be
at Borrower's expense and for Lender's purposes only and shalt not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating the
properties for hazardous waste and hazardous substances. Borrower hereby
(a) releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes viable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties,
and expenses which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release
or threatened release of a hazardous waste or substance on the properties.
The provisions of this section of the Agreement, including the obligation
to indemnify, shalt survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at SUITE 200 304 JARVIS ST, WHITEHORSE, YUKON, Y1A
2H2. Unless Borrower has designated otherwise in writing this location is
also the office or offices where Borrower keeps its records concerning the
Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such
<PAGE> 6
- 6 - Exhibit 99(a)
information is dated or certified; and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in making the above referenced Loan to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. The reference to "Borrower" In this "AFFIRMATIVE
COVENANTS" section of this Agreement means Stearns & Lehman, Inc. only and does
not apply to any other co-borrower. Borrower covenants and agrees with Lender
that, while this Agreement is In effect, Borrower will:
LITIGATION. Promptly Inform Lender In writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records In accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not less
than $3,500,000.00.
WORKING CAPITAL. Maintain Working Capital in excess of $500,000.00.
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.45 to 1.00.
QUICK RATIO. Maintain a ratio of Liquid Assets to Current Liabilities
in excess of 0.60 to I .00. Except as provided above, all computations
made to determine compliance with the requirements contained in this
paragraph shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies reasonably acceptable to Lender. Borrower,
upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
Including stipulations that coverages will not be canceled or
diminished without at least ten (10) days' prior written notice to
Lender. Each Insurance policy also shall Include an endorsement
providing that coverage in favor of Lender wilt not be impaired In any
way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security Interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent
<PAGE> 7
- 7 - Exhibit 99(a)
appraiser satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such appraisal
shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender Immediately In writing of any default in
connection with any other such agreements.
LOAN FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: 100.00.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, Income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested In good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and In the Related Documents In a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, Including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth In this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply In all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by
<PAGE> 8
- 8 - Exhibit 99(a)
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or Instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, Instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the Interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local Income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) Increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation In reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. The reference to "Borrower" in this "NEGATIVE COVENANTS"
section of this Agreement means 19035 YUKON INC only and does not apply to any
other co-borrower. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume Indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in
<PAGE> 9
- 9 - Exhibit 99(a)
Borrower's financial condition, in the financial condition of any Guarantor, or
in the value of any Collateral securing any Loan; (d) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith
deems itself insecure, even though no Event of Default shall have occurred.
SPECIAL PROVISIONS. 1). This Note will not create any liability or obligation on
the part of Oscar Skollsberg's Food Technique Limited until October 1, 1999. 2).
Stearns and Lehman, Inc. is listed as a co-borrower for the purpose of defining
Stearns and Lehman, Inc. as a guarantor to this loan.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
In the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts,
and, at Lenders option, to administratively freeze all such accounts to allow
Lender to protect Lenders charge and setoff rights provided on this paragraph.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sates
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security interest) at any time
and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrowers property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
<PAGE> 10
- 10 - Exhibit 99(a)
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness. Lender, at its option, may, but
shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
EVENTS AFFECTING CO-BORROWERS. Any of the preceding events occurs with
respect to any co-borrower of any of the Indebtedness or any co-borrower
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any of the Indebtedness. Lender, at its option, may, but
shall not be required to, permit the co-borrower's estate to assume
unconditionally the obligations on the Indebtedness in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrowers financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
YEAR 2000 COMPLIANCE FAILURE. Failure to meet the deadlines required in the
Year 2000 Compliance Agreement to be Year 2000 Compliant or a reasonable
Iikelihood that Borrower cannot be Year 2000 Compliant on or before
December 31, 1999.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a pad of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF OHIO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF KNOX
COUNTY, THE STATE OF OHIO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO
ANY JURY TRIAL IN ANY ACTION, PROCEEDING,
<PAGE> 11
- 11 - Exhibit 99(a)
OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF OHIO.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sate or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy It may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or Insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post--judgment collection services. Borrower also will pay any
court costs, In addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shalt be
given In writing, may be sent by telefacsimite (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Borrower, notice to any Borrower wilt constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current address(es).
SEVERABILITY. if a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shalt not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shalt remain valid and enforceable.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shalt Inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
In this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shalt be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence In the performance of this
Agreement.
<PAGE> 12
- 12 - Exhibit 99(a)
WAIVER. Lender shalt not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shalt
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lenders rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
EACH BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND EACH BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 28, 1999.
BORROWER:
19035 YUKON INC
By:
---------------------------------
JOHN CHUPRINKO, SECRETARY
STEARNS & LEHMAN INC, CO-BORROWER
By:
---------------------------------
JOHN CHUPRINKO, CFO
OSCAR SKOLLSBERG'S FOOD TECHNIQUE LIMITED, CO-BORROWER
By:
---------------------------------
JOHN CHUPRINKO, SECRETARY
LENDER:
FIRST-KNOX NATIONAL BANK
By:
---------------------------------
JAMES BRINKER, Authorized Officer
<PAGE> 13
- 13 - Exhibit 99(a)
PROMISSORY NOTE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C>
$800,000.00 09-28-1999 10-01-2004 0192775970 0010 116
</TABLE>
References In the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
BORROWER: 19035 YUKON INC; ET. AL. LENDER: FIRST-KNOX NATIONAL BANK
SUITE 200 304 JARVIS ST COMMERCIAL LOAN DEPARTMENT
WHITEHORSE, YUKON, Y1A 2H2 ONE SOUTH MAIN STREET
MOUNT VERNON, OH 43050
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $800,000.00 INITIAL RATE: 8.250% DATE OF NOTE: SEPTEMBER 28, 1999
</TABLE>
PROMISE TO PAY. 19035 YUKON INC, STEARNS & LEHMAN INC AND OSCAR SKOLLSBERG'S
FOOD TECHNIQUE LIMITED (REFERRED TO IN THIS NOTE INDIVIDUALLY AND COLLECTIVELY
AS "BORROWER") JOINTLY AND SEVERALLY PROMISE TO PAY TO FIRST-KNOX NATIONAL BANK
("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF EIGHT HUNDRED THOUSAND & 00/100 DOLLARS ($800,000.00),
TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM SEPTEMBER 28, 1999,
UNTIL PAID IN FULL.
PAYMENT. SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT SCHEDULE:
SUBJECT TO ANY PAYMENTS CHARGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN IN 60 INTEREST PAYMENTS AND ONE PRINCIPAL
PAYMENT. BORROWERS FIRST INTEREST PAYMENT IS DUE NOVEMBER 1, 1999, AND ALL
SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER
THAT. EXCEPT IN THE CASE OF BORROWER'S DEFAULT, ALL PRINCIPAL OWED UNDER
THIS NOTE WILL NOT BE PAYABLE UNTIL OCTOBER 1, 2004. ON THAT DATE ALL
PRINCIPAL AND ACCRUED INTEREST NOT YET PAID WILL BE DUE.
The annual Interest rate for this Note is computed on a 365/360 basis; that Is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Prime Rate as
published In the Wall Street Journal (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on Its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each 12 months. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO
THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250% PER ANNUM. NOTICE: Under no
circumstances will the Interest rate on this Note be more than the maximum rate
allowed by applicable law. Whenever increases occur in the interest rate,
Lender, at its option, may do one or more of the following: (a) Increase
Borrower's payments to ensure Borrower's loan will pay off by its original final
maturity date, (b) increase Borrower's payments to cover accruing interest, (c)
increase the number of Borrower's payments, and (d) continue Borrower's payments
at the same amount and Increase Borrower's final payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender In writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due.
<PAGE> 14
- 14 - Exhibit 99(a)
Borrower agrees that all loan fees and other prepaid finance charges are earned
fully as of the date of the loan and will not be subject to refund upon early
payment (whether voluntary or as a result of default), except as otherwise
required by law. Except for the forgoing, Borrower may pay without penalty all
or a portion of the amount owed earlier that it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation
to continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due. The Borrower will be entitled to prepay all or
any part of the principal amounts outstanding under this Note provided that: any
partial prepayment is in an amount equal to or greater that $11,000 plus
integral multiples of $100; the Borrower pay concurrently with such prepayment
all accrued unpaid interest on the amount thereof; the principal amount of the
Note is permanently reduced by such amount on the date of payment by the amount
thereof; the Bank receives written notice of such prepayment at lest five (5)
Banking days prior to the proposed day of the prepayment and any notice of
prepayment given by the Borrower pursuant hereto will be irrevocable and the
Borrower will be bound to prepay in accordance with such notice.
LATE CHARGE. if a payment Is 5 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $50.00, WHICHEVER IS LESS.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrowers property or Borrower's ability to repay this Note or perform Borrowers
obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrowers behalf is false or misleading in any material respect either now or at
the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any pad of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Failure
to meet the deadlines required in the Year 2000 Compliance Agreement to be Year
2000 Compliant or a reasonable likelihood that Borrower cannot be Year 2000
Compliant on or before December 31, 1999. (j) Lender in good faith deems itself
insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 2.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lenders
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or Injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, In
addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF OHIO. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF KNOX COUNTY, THE STATE OF OHIO. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO.
<PAGE> 15
- 15 - Exhibit 99(a)
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any
attorney-at-law, including an attorney hired by Lender, to appear In any court
of record and to confess judgment against Borrower for the unpaid amount of this
Note as evidenced by an affidavit signed by an officer of Lender setting forth
the amount then due, plus attorneys' fees as provided in this Note, plus costs
of suit, and to release all errors, and waive all rights of appeal. if a copy of
this Note, verified by an affidavit, shall have been filed in the proceeding, it
will not be necessary to file the original as a warrant of attorney. Borrower
waives the right to any stay of execution and the benefit of all exemption laws
now or hereafter in effect. No single exercise of the foregoing warrant and
power to confess judgment will be deemed to exhaust the power, whether or not
any such exercise shall be held by any court to be invalid, voidable, or void;
but the power will continue undiminished and may be exercised from time to time
as Lender may elect until all amounts owing on this Note have been paid In full.
Borrower waives any conflict of interest that an attorney hired by Lender may
have in acting on behalf of Borrower in confessing judgment against Borrower
while such attorney is retained by Lender. Borrower expressly consents to such
attorney acting for Borrower In confessing judgment.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays Is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrowers accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however au IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts, and, at
Lenders option, to administratively freeze all such accounts to allow Lender to
protect Lenders charge and setoff rights provided on this paragraph.
COLLATERAL. This Note Is secured by a mortgage on real estate located at 30
Paragon Pkwy., Mansfield, OH 44903, as further described in mortgage of even
date.
YEAR 2000. Borrower warrants and represents that all software utilized In the
conduct of its business will have appropriate capabilities and compatibility for
operation to handle calendar dates falling on or after January 1, 2000, and all
information pertaining to such calendar dates, in the same manner and with the
same functionality as the software does respecting calendar dates falling on or
before December 31, 1999. Further, the Borrower warrants and represents that the
data-related user interface functions, data-fields, and data-related programs
Instructions and functions of the Software include the indication of the
century.
FINANCIAL STATEMENTS. At the option of the Bank, the following shall be
considered an item of default and all obligations shall become immediately due
and payable without notice or demand upon failure of the undersigned or any
endorser or guarantor to: (a) furnish the Bank within 90 days after year end
current financial statements; or (b) furnish the Bank with financial statements
as provided In any loan agreement(s) executed with this note by borrower.
SPECIAL PROVISIONS. 1) This Note will not create any liability or obligation on
the part of Oscar Skollsberg's Food Technique Limited until October 1, 1999. 2)
Stearns and Lehman, Inc. is listed as a co-borrower for the purpose of defining
Stearns and Lehman, Inc. as a guarantor to this loan.
SINKING FUND. Borrower agrees to establish a separate sinking fund account at a
Canadian Bank. The balance in the account will be equal to $13,333 U.S.
multiplied by the number of cumulative months since October 1, 1999 less any
voluntary prepayments made by the Borrower. The Borrower shall provide evidence
on a monthly basis as to the balance of this sinking fund account.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. In particular, this section means (among other
things) that Borrower does not agree or intend to pay, and Lender does not agree
or intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount in the
nature of interest or In the nature of a fee for this loan, which would in any
way or event (including demand, prepayment, or acceleration) cause Lender to
charge or collect more for this loan than the maximum Lender would be permitted
to charge
<PAGE> 16
- 16 - Exhibit 99(a)
or collect by federal law or the law of the State of Ohio (as applicable). Any
such excess interest or unauthorized fee shall, instead of anything stated to
the contrary, be applied first to reduce the principal balance of this loan, and
when the principal has been paid in full, be refunded to Borrower. Lender may
delay or forgo enforcing any of its rights or remedies under this Note without
losing them. Each Borrower understands and agrees that, with or without notice
to Borrower, Lender may with respect to any other Borrower (a) make one or more
additional secured or unsecured loans or otherwise extend additional credit; (b)
alter, compromise, renew, extend, accelerate, or otherwise change one or more
times the time for payment or other terms any indebtedness, including increases
and decreases of the rate of interest on the indebtedness; (c) exchange,
enforce, waive, subordinate, fail or decide not to perfect, and release any
security, with or without the substitution of new collateral; (d) apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreements, as Lender in its discretion may determine; (e) release,
substitute, agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; and (f) determine how, when and what application of payments and
credits shall be made on any other indebtedness owing by such other borrower.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shalt be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made. The obligations under this
Note are joint and several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS AND THE NOTICE TO
COSIGNER SET FORTH BELOW. EACH BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
NOTICE: FOR THIS NOTICE "YOU MEANS THE BORROWER AND "HIS" MEANS THE LENDER.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGEMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FORM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
BORROWER:
19035 YUKON INC
By:
-------------------------
JOHN CHUPRINKO, SECRETARY
STEARNS & LEHMAN INC, CO-BORROWER
By:
-------------------------
JOHN CHUPRINKO, CFO
OSCAR SKOLLSBERG'S FOOD TECHNIQUE LIMITED, CO-BORROWER
By:
-------------------------
JOHN CHUPRINKO, SECRETARY
<PAGE> 17
- 17 - Exhibit 99(a)
NOTICE TO COSIGNER
YOU ARE BEING ASKED TO GUARANTEE THIS DEBT. THINK CAREFULLY BEFORE YOU DO. IF
THE BORROWER DOESN'T PAY THE DEBT, YOU WILL HAVE TO. BE SURE YOU CAN AFFORD TO
PAY IF YOU HAVE TO, AND THAT YOU WANT TO ACCEPT THIS RESPONSIBILITY.
YOU MAY HAVE TO PAY UP TO THE FULL AMOUNT OF THE DEBT IF THE BORROWER DOES NOT
PAY. YOU MAY ALSO HAVE TO PAY LATE FEES OR COLLECTION COSTS, WHICH INCREASE THIS
AMOUNT.
THE LENDER CAN COLLECT THIS DEBT FROM YOU WITHOUT FIRST TRYING TO COLLECT FROM
THE BORROWER. THE LENDER CAN USE THE SAME COLLECTION METHODS AGAINST YOU THAT
CAN BE USED AGAINST THE BORROWER, SUCH AS SUING YOU, GARNISHING YOUR WAGES, ETC.
IF THIS DEBT IS EVER IN DEFAULT, THAT FACT MAY BECOME A PART OF YOUR CREDIT
RECORD.
THIS NOTICE IS NOT THE CONTRACT THAT MAKES YOU LIABLE FOR THE DEBT.
<PAGE> 1
- 1 - Exhibit 99 (b)
NON-COMPETITION AGREEMENT
THIS AGREEMENT dated as of October 1, 1999 is among:
WARGO HOLDINGS LTD., (BCCA incorporation No. 0327852)
of 10600 Seaham Crescent, Richmond, British Columbia, V7V 3V3
(the "Vendor")
AND
JAN SKOLLSBERG, of 10600 Seaham Crescent, Richmond,
British Columbia, V7V 3V3
("Skollsberg")
AND
19035 YUKON INC., (Yukon incorporation No.19035) of Suite 200,
304 Jarvis Street, Whitehorse, Yukon, Y1A 2H2
(the "Purchaser")
AND
STEARNS & LEHMAN, INC., an Ohio corporation, of 30 Paragon
Pkwy, Mansfield, Ohio, 44903
("S&L")
AND
OSCAR SKOLLSBERG'S FOOD TECHNIQUE LIMITED, (Federal
Corporation No. 1241991 and extraprovincially registered in
British Columbia under No. A-0029524 ) of 185 - 11960
Hammersmith Way, Richmond, British Columbia, V7A 5C9
(the "Company")
<PAGE> 2
- 2 - Exhibit 99 (b)
WHEREAS, by a share purchase agreement (the "Share Purchase Agreement")
dated October 1, 1999 among the Parties, the Purchaser purchased all of the
issued and outstanding shares in the capital of the Company,
AND WHEREAS it is contemplated by the parties to the Share Purchase
Agreement that the Parties enter into a non-competition agreement,
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which each Party acknowledges, the Parties agree as follows:
PART 1
INTERPRETATION
1.1 DEFINED TERMS. In this Agreement, including the Recitals, the
following terms will have the following meanings:
"BUSINESS" means the business of the Company as presently operated in
respect of beverage-related products and includes, without limiting the
foregoing, the beverage-related business of the Company as it relates
to flavoured syrups, bottle stands, syrup pumps, pour spouts, recipe
books, flavouring syrups, topping syrups, and chocolate syrup;
"CLAIMS" means a "claim" as defined in the Share Purchase Agreement;
"CLOSING DATE" means October 1, 1999;
"GOVERNMENTAL AUTHORITY" means the government of Canada or the United
States, or the government of any province, state, municipality or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions;
"INFORMATION" means all proprietary technology, know-how, trade
secrets, information concerning the ownership and business,
documentation, records, data, customer lists and information, supplier
lists and information, business prospects, materials, samples and
prototypes and like information relevant to or used in connection with
the Business or ownership of the Company, which is not generally known
and available in the public domain, existing as of the Closing Date;
"PARTIES" means the Vendor, Skollsberg, the Purchaser, S&L and the
Company and "PARTY" means any one of them;
<PAGE> 3
- 3 - Exhibit 99 (b)
"PERSON" means an individual, a partnership, a corporation, a trust, an
unincorporated organization, a Governmental Authority and the heirs,
executors, administrators or other legal representatives of an
individual;
"RESTRICTED PERIOD" has the meaning set out in Section 2.2; and
"SHARE PURCHASE AGREEMENT" has the meaning set out in the Recitals.
PART 2
RESTRICTIVE COVENANTS
2.1 CONFIDENTIALITY. Skollsberg covenants and agrees with S&L, the
Purchaser and the Company that he will not, directly or indirectly, divulge to
any Person, any Information and any other information or data which is a trade
secret or confidential or proprietary information of the Company or relating to
the customers, processes or products and services of the Business, including
those relating to research, development, manufacturing, purchasing, accounting,
engineering, marketing, merchandising or selling of products and services.
2.2 RESTRICTIVE COVENANT. Skollsberg covenants and agrees with S&L, the
Purchaser and the Company that he will not, for a period of four (4) years after
the Closing Date (the "Restricted Period") and within Canada or the United
States use any Information in a manner competitive with the Business and,
without limiting the foregoing, he will not during the Restricted Period, within
Canada or the United States:
(a) directly or indirectly manufacture, procure, sell, or
distribute, or facilitate in any manner (including the lending
of money or the guaranteeing of any debts or obligations) the
manufacture, procurement, sale, or distribution of any
products or services materially similar to those of the
Business, either individually or in partnership, or jointly or
in conjunction with, any other Person; or
(b) directly or indirectly assist (as a director, shareholder,
partner, employee or in any other capacity) any Person to
manufacture, procure, sell, or distribute any products or
services materially similar to those of the Business; or
(c) have any direct or indirect interest or concern (as a
director, shareholder, partner, employee or in any other
capacity) in or with any Person, if any part of the activities
of that Person consists of the manufacture, procurement, sale,
or distribution of any products or services materially similar
to those of the Business, or the facilitation in any manner of
the sale of any products or services materially similar to
those of the Business.
<PAGE> 4
- 4 - Exhibit 99 (b)
2.3 NON-SOLICITATION - BUSINESS. Skollsberg covenants and agrees with
S&L, the Purchaser and the Company that during the Restricted Period he will
not:
(a) directly or indirectly solicit any customer or potential
customer of the Business;
(b) directly or indirectly assist (be it as a director,
shareholder, partner, employee or in any other capacity) any
Person directly or indirectly to solicit any customer or
potential customer of the Business; or
(c) have any direct or indirect interest or concern (be it as a
director, shareholder, partner, employee or in any other
capacity) in or with any Person if any of the activities of
that Person consists of soliciting any customer or potential
customer of the Business;
if that solicitation would be, directly or indirectly, calculated to result in a
sale of any products or services materially similar to those of the Business.
2.4 NON-SOLICITATION - EMPLOYEES. Skollsberg will not during the
Restricted Period, directly or indirectly, induce any individual who, to his
knowledge, is then employed or under contract on a full time or substantially
full time basis by the Company to leave the employ of the Company or terminate
any contractual relationship with the Company, without the prior written consent
of S&L, the Purchaser and the Company.
2.5 ACKNOWLEDGEMENTS. Skollsberg acknowledges that:
(a) without the non-competition, non-solicitation and other
covenants set out in this Part 2, S&L, the Purchaser and the
Company would not have entered into the Share Purchase
Agreement and that those covenants are reasonable in the
circumstances, and are necessary to protect the economic
position of S&L, the Purchaser and the Company in connection
with the transactions under the Share Purchase Agreement and
that all defences to the strict enforcement of this Part 2 are
waived by Skollsberg;
(b) the breach by Skollsberg of any of the terms of this Part 2
would cause serious and irreparable harm to S&L, the Purchaser
and the Company, or any of them, which could not adequately be
compensated for in damages, and in the event of a breach of
any of the terms of this Part 2, Skollsberg consents to an
injunction being issued against him, restraining him from any
further breach of any if the terms of this Part 2, but the
provisions of this Section 2.5(b) will not be considered to be
in derogation of any other remedy which any of S&L, the
Purchaser or the Company may have in the event of any breach
of any of the terms of this Part 2; and
(c) Skollsberg has reviewed the provisions of this Part 2 and has
turned his mind to the reasonableness of the scope of this
Part 2 including geographical scope, time period,
<PAGE> 5
- 5 - Exhibit 99 (b)
and nature of business restricted, and he has received the
advice of legal counsel who has explained the implications of
this Part 2, and that he understands the implications of this
Part 2, and is satisfied that the provisions of this Part 2
are both necessary and reasonable for the protection of the
legitimate business interests of S&L, the Purchaser and the
Company, and that the provisions reflect the mutual desire and
intent of Skollsberg and S&L, the Purchaser and the Company
and should be upheld in their entirety and be given full force
and effect.
2.6 INVESTMENTS PERMITTED. Nothing in this Part 2 will prevent Skollsberg
from directly or indirectly owning up to an aggregate of 5% of the issued
capital stock of any public company, the price of whose shares is quoted in a
published newspaper of general circulation.
2.7 CONSIDERATION. As consideration for the covenants and
acknowledgements of Skollsberg set out in this Part 2, S&L will pay to
Skollsberg a fee equal to Cdn. $13,350 per month for each month of the
Restricted Period, such fee to be paid to Skollsberg on the last day of each
month.
2.8 NO DEFENSE. The existence of any claim, or cause of action, of
Skollsberg against any of S&L, the Purchaser or the Company, whether under this
Agreement (including pursuant to Section 2.7) or any other agreement, will not
constitute a defence to the enforcement by S&L, the Purchaser and the Company of
any of the terms of this Part 2.
2.9 VENDOR COVENANT. The Vendor covenants with S&L, the Purchaser and the
Company to cause Skollsberg to comply in all respects with his obligations under
this Part 2.
PART 3
PURCHASER'S AND S&L'S REPRESENTATIONS AND WARRANTIES
In order to induce the Vendor and Skollsberg to enter into this Agreement, the
Purchaser and S&L agree as follows:
3.1 STATUS OF PURCHASER. The Purchaser is a corporation duly incorporated
under the Business Corporations Act (Yukon), is a valid and subsisting
corporation and is in good standing with respect to the filing of annual returns
required under that Act.
3.2 AUTHORIZATION - PURCHASER. The Purchaser has the requisite corporate
power and capacity to enter into the transactions contemplated by this
Agreement, and to perform its obligations hereunder, and the execution and
delivery or observance or performance of this Agreement is not a contravention
or breach of the constating documents or resolutions of directors and
shareholders of the Purchaser or the terms of any agreement, trust or other
document or any Requirement of Law applicable to the Vendor and this Agreement
has been duly authorized by all necessary corporate action on the part of the
Purchaser and constitutes valid and legally binding obligations of the
<PAGE> 6
- 6 - Exhibit 99 (b)
Purchaser enforceable against it in accordance with its terms, subject to the
fact that specific performance is an equitable remedy available only in the
discretion of the courts.
3.3 STATUS OF S&L. S&L is a corporation duly incorporated under the laws
of Ohio and is a valid and subsisting corporation.
3.4 AUTHORIZATION - S&L. S&L has the requisite corporate power and
capacity to enter into the transactions contemplated by this Agreement, and to
perform its obligations hereunder, and the execution and delivery or observance
or performance of this Agreement is not a contravention or breach of the
constating documents or resolutions of directors and shareholders of S&L or the
terms of any agreement, trust or other document or any Requirement of Law
applicable to the Vendor and this Agreement has been duly authorized by all
necessary corporate action on the part of S&L and constitutes valid and legally
binding obligations of S&L enforceable against it in accordance with its terms,
subject to the fact that specific performance is an equitable remedy available
only in the discretion of the courts.
3.5 ABSENCE OF CONFLICTING AGREEMENTS. The performance of this Agreement
will not be in violation of the constating documents of the Purchaser and S&L
nor of any agreement or material contract to which the Purchaser or S&L is a
party and will not give any Person any right to terminate or cancel any
agreement of the Purchaser and/or S&L nor this Agreement.
3.6 DISCLOSURE. No representation or warranty of the Purchaser made in
this Agreement omits to state a material fact necessary to make the statement,
in light of the circumstances in which they were made, not misleading.
PART 4
VENDOR AND SKOLLSBERG'S
REPRESENTATIONS AND WARRANTIES
In order to induce the Purchaser and S&L to enter into this Agreement and the
Share Purchase Agreement, the Vendor and Skollsberg agree as follows:
4.1 STATUS OF VENDOR. The Vendor is a corporation duly incorporated,
validly existing, and in good standing with respect to annual filings under the
laws of the Province of British Columbia.
4.2 CAPACITY OF VENDOR. The Vendor has the requisite power and capacity
to enter into this Agreement and to perform its obligations hereunder and the
execution, delivery or observance or performance of this Agreement is not a
contravention or breach, or will not be a contravention or breach, of the
constating documents or resolutions of directors and shareholders of the Vendor
or the terms of any agreement, trust or other document or any lawful requirement
of the Vendor.
<PAGE> 7
- 7 - Exhibit 99 (b)
4.3 AUTHORIZATION AND BINDING EFFECT OF AGREEMENT. This Agreement has
been duly authorized in the case of the Vendor and the Company and duly executed
and delivered by each of the Vendor, Skollsberg and the Company and constitutes
valid and legally binding obligations of the Vendor, Skollsberg and the Company,
enforceable against each of them in accordance with its terms, subject to the
fact that specific performance is an equitable remedy available only in the
discretion of the courts.
PART 5
SET-OFF
5.1 SET-OFF. If, under this Agreement or under the Share Purchase
Agreement, Skollsberg becomes obligated to pay any sum of money to S&L, the
Purchaser or the Company, then Skollsberg hereby agrees that, after he and the
Vendor have been given reasonable notice and the right to pay directly:
(a) if the amount is the proper subject of a Claim, is bona fide
and is owed to S&L, then such amount may, at S&L's election,
and without limiting or waiving any right or remedy of S&L
under this Agreement, be set-off against amounts owing by S&L
to Skollsberg pursuant to this Agreement; or
(b) if the amount is the proper subject of a Claim, is bona fide
and is owed to the Purchaser or the Company, Skollsberg hereby
irrevocably directs S&L to pay to the Purchaser or Company, as
the case may be, such amount and then such amount may, at
S&L's election, and without limiting or waiving any right or
remedy of S&L under this Agreement, be set-off against amounts
owing by S&L to Skollsberg pursuant to this Agreement.
PART 6
DISPUTE RESOLUTION
6.1 NEGOTIATION, MEDIATION, ARBITRATION.
(a) will first be attempted to be resolved by the Parties through
good faith negotiations and in connection therewith, any Party
may request in writing that the other Party or Parties meet
and commence such negotiations within a reasonable period of
time (in no event later than seven (7) days) after such
request;
(b) if within seven (7) days after commencement of negotiations
under Section 6.1(a) above the Parties cannot come to
agreement, the Parties will attempt to resolve the
<PAGE> 8
- 8 - Exhibit 99 (b)
dispute by mediated negotiation and will use best efforts to
agree on the choice of mediator within seven (7) days of a
request for mediation by one Party to the others;
(c) if the matter cannot be resolved by mediation within fourteen
(14) days of appointment of a mediator, or if the Parties
cannot agree on a mediator within seven (7) days of a request
of a Party to appoint a mediator, the matter will be referred
to arbitration in accordance with the provisions set out
below;
(d) any dispute between the Parties which cannot be settled by
negotiation or mediation will be determined by arbitration in
accordance with the Commercial Arbitration Act (British
Columbia) and arbitration will be the exclusive method for
final resolution of such dispute;
(e) there will be a single arbitrator who will be disinterested in
the dispute or controversy and will be impartial with respect
to all Parties hereto. If the Parties cannot agree on an
arbitrator within seven (7) days of the dispute going to
arbitration pursuant to Section 6.1(c) above, the appointment
will be according to the Commercial Arbitration Act (British
Columbia);
(f) the determination of the arbitrator will be final and binding
on the Parties;
(g) each Party will bear its own costs in any such arbitration,
provided that, if the arbitrator finds that any Party will
have acted unreasonably he may, in his discretion, award costs
against such Party;
(h) the arbitrator will have the discretionary authority to grant
injunctive relief and specific performance as may be requested
by a Party;
(i) any order of an arbitrator may be entered with a Court of
competent jurisdiction for the purposes of enforcement;
(j) the place of arbitration will be Vancouver;
(k) the arbitrator will give effect insofar as possible to the
desire of the Parties hereto that the dispute or controversy
be resolved in accordance with good commercial practice; and
(l) the arbitrator will decide such dispute in accordance with the
laws of the Province of British Columbia.
<PAGE> 9
- 9 - Exhibit 99 (b)
PART 7
GENERAL
7.1 GENDER AND NUMBER. Words of one gender include all genders, and words
in the singular include the plural and vice versa.
7.2 INTERPRETATION NOT AFFECTED. In this Agreement, using separate Parts
and inserting headings are for convenient reference only and will not affect how
this Agreement is interpreted.
7.3 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with British Columbia laws and applicable Canadian law and will be
treated in all respects as a British Columbia contract.
7.4 SUBMISSION TO JURISDICTION. Each of the Parties will:
(a) submit to the jurisdiction of British Columbia;
(b) if not resident, incorporated or registered in British
Columbia, appoint an agent to receive service of any process
in British Columbia; and
(c) if any appointed agent is required, notify the other Parties
of the name and address of its appointed agent.
7.5 SEVERABILITY. The invalidity, illegality, or unenforceability of any
provision of this Agreement will not affect the validity, legality, or
enforceability of any other provision of this Agreement.
7.6 ENUREMENT. This Agreement will enure to the benefit of and will be
binding upon the Parties and their respective heirs, executors, administrators,
successors and assigns.
7.7 ASSIGNMENT. The Vendor acknowledges and agrees that the Purchaser may
assign its rights and obligations under this Agreement to a nominee of the
Purchaser.
<PAGE> 10
- 10 - Exhibit 99 (b)
7.8 COUNTERPART. This Agreement may be signed by original or by facsimile
in one or more counterparts and upon execution in counterparts by each Party
hereto, such counterpart will constitute an original of this Agreement and
execution and delivery by facsimile will be legally binding upon the Parties.
TO EVIDENCE THEIR AGREEMENT each of the Parties has executed this Agreement as
of the date set out on the initial page hereof.
WARGO HOLDINGS LTD. 19035 YUKON INC.
per: __________________________ per: __________________________
OSCAR SKOLLSBERG'S FOOD STEARNS & LEHMAN, INC.
TECHNIQUE LIMITED
per: __________________________ per: __________________________
- --------------------------------
JAN SKOLLSBERG
<PAGE> 1
- 1 - Exhibit 99 (c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
Contact: Laura Martin
Marketing & Sales Assistant of Stearns & Lehman
( 419 )522-2722
OSCARS JOINS STEARNS & LEHMAN FAMILY
MANSFIELD, OHIO, OCTOBER 8, 1999 - Stearns & Lehman, Inc. ( NASDAQ: SLHN ), a
world-class manufacturer of specialty flavoring syrups, smoothies, granitas, and
other specialty beverage products, announced today that as of October 1, 1999
the acquisition of Oscar Skollsberg's Food Technique Limited is complete.
Pursuant to the terms of a Share Purchase Agreement ("Agreement"), dated October
1, 1999, between Stearns & Lehman, Inc. (the "Company") and Wargo Holdings Ltd.
("Wargo"), the Company's newly established Canadian subsidiary 19035 Yukon Inc.
("Yukon") acquired all of the outstanding shares of Oscar Skollsberg's Food
Technique Limited ("Oscars"), a Canadian Company registered in British Columbia.
Oscars is in the business of producing and marketing coffee and espresso
flavoring syrups throughout Canada, the United States and several foreign
countries. Oscars reported unaudited sales of $1,827,551 CDN and unaudited net
income of $83,167 CDN for the calendar year ended December 31, 1998.
As consideration for the shares of Oscars, the Company paid $1,205,000 CDN plus
or minus adjustments pursuant to terms in the Agreement. The Agreement indicates
that the purchase price will be adjusted upwards or downwards by the amount in
which the Net Equity of Oscars differs from $161,291 CDN as of close of business
on September 30, 1999. Yukon used funds available under a business loan
agreement with a bank guaranteed by the Company. This loan agreement provided
$800,000 U.S.
In addition, in conjunction with the Agreement, Jan Skollsberg signed a
non-competition agreement dated October 1, 1999 Mr. Skollsberg will not directly
or indirectly manufacture, procure, sell, or distribute any products or services
materially similar to those products of Oscars' or the Company's for a period of
four years. In consideration for this non-competition agreement, the Company
will pay Mr. Skollsberg $13,350 CDN per month for the four year period.
According to Bill Stearns, President of Stearns & Lehman, "Our acquisition of
Oscars shows our commitment to International business as well as to the Canadian
coffee market. International growth is a stepping stone to market
diversification for Stearns & Lehman, Inc. and I'm excited about the
possibilities that Oscar brings to our outstanding array of products. Oscars
will continue as a Canadian flavoring syrup leader with our innovative thinking
and product development to support them. "
Stearns & Lehman is engaged in the business of developing, manufacturing and
marketing specialty food products, including coffee and espresso flavorings,
syrups, specialty frozen beverage products, oils and toppings, extracts,
flavorings, sauces, dressings, and specialty sugars. The Company's customer list
includes a number of America's top specialty coffee retailers and restaurants.
Stearns & Lehman sells its' products throughout the United States and in certain
foreign countries, including Australia, Canada, Egypt, England, Israel, Japan,
Mexico, New Zealand, Saudi Arabia, Singapore, and the United Arab Emirates.
For further information, visit the Company's web site at www.stearns-lehman.com.
-----------------------
Except for the historical information herein, the matters set forth in this
press release are forward looking statements within the meaning of "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risks and uncertain ties that may
cause actual results to differ materially. These risks are detailed in the
Company's period reports filed with the Securities and Exchange Commission.
These forward-looking statements speak only as of the date hereof. The Company
disclaims any intent of obligation to update these forward-looking statements.
