SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule.14a-12
TREASURY INTERNATIONAL, INC.
Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
Based on aggregate Purchase Price of $4,250,000 for sale of certain assets of
the Registrant.
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------
(5) Total fee paid:
______________________________________________________________________
[X] Fee paid previously with preliminary materials.
- -----------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -----------------------------------------------------------------------
(3) Filing party:
- -----------------------------------------------------------------------
(4) Date filed:
- -----------------------------------------------------------------------
TREASURY INTERNATIONAL, INC.
1183 Finch Avenue West - Suite 508
North York, Ontario, Canada M3J 2G2
(416) 663-0668
November 6, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of Treasury International, Inc. (the "Company") to be held on
Monday, November 16, 1998 at 9:00 a.m., Eastern time, at the offices of the
Company's counsel, Piper & Marbury L.L.P., at 1251 Avenue of the Americas, 29th
Floor, New York, New York, 10020, U.S.A.
At the Special Meeting, you will be asked to consider and vote upon a
proposal (the "Proposal") to approve the sale of all of the issued and
outstanding stock of Mega Blow Moulding Limited, a wholly-owned subsidiary
("Mega Blow") of the Company's wholly-owned subsidiary, Megatran Investments
Limited to 1299004 Ontario Corporation, a corporation organized under the laws
of Ontario, Canada.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSAL AND
UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL.
The reason that the Board of Directors has approved the Proposal is
described in full in the Proxy Statement that accompanies this letter. In
summary, the reason is that by selling Mega Blow, the Company will be able to
leverage its capital which, in turn, will enable the Company to make
acquisitions of larger companies with businesses complimentary to that of the
Company.
In the materials accompanying this letter, you will find a Notice of
Special Meeting of Stockholders and a Proxy Statement relating to the actions to
be taken by the Company's stockholders at the Special Meeting. The Proxy
Statement more fully describes the Sale and includes important information
concerning the Company.
Whether or not you plan to attend the Special Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it has been voted at the Special Meeting. If
you attend the Special Meeting, you may vote in person even if you have
previously returned your proxy card. Your prompt cooperation will be greatly
appreciated.
Sincerely,
James Hal
Chairman of the Board, President
and Chief Executive Officer
TREASURY INTERNATIONAL, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 16, 1998
Notice is hereby given that a Special Meeting of Stockholders (the
"Special Meeting") of Treasury International, Inc., a Delaware corporation (the
"Company"), will be held at the office of the Company's counsel, Piper & Marbury
L.L.P., at 1251 Avenue of the Americas, 29th Floor, New York, New York 10020,
U.S.A., on Monday, November 16, 1998 at 9:00 a.m., Eastern Time, for the
following purposes:
1. To approve the sale of 100% of the stock of its indirect subsidiary
Mega Blow Moulding Limited, a company engaged in the manufacture and marketing
of custom plastic containers, to 1299004 Ontario Corporation, an Ontario
corporation (the "Sale") on the terms contained in that certain Stock Purchase
Agreement dated August 11, 1998 and amendment thereto dated as of September 30,
1998, which is described in the accompanying Proxy Statement.
2. To act upon such other matters as may properly come before the Special
Meeting or any postponements or adjournments thereof.
Each of the above proposals is more fully described in the accompanying
Proxy Statement.
Approval of the Sale will require the affirmative vote by holders of a
majority of the outstanding shares of the Company's common stock, $0.0001 par
value per share, entitled to vote at the Special Meeting.
Only stockholders of record at the close of business on November 5, 1998
shall be entitled to notice of and to vote at the Special Meeting or any
postponement or adjournments thereof. All stockholders are cordially invited to
attend the Special Meeting in person.
Sincerely,
James Hal
Chairman of the Board, President
and Chief Executive Officer
November 6, 1998
North York, Ontario
IF YOU DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND WISH YOUR SHARES
OF COMMON STOCK TO BE VOTED, YOU ARE REQUESTED TO SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY CARD WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES IS ENCLOSED FOR THAT PURPOSE.
TREASURY INTERNATIONAL, INC.
---------------
PROXY STATEMENT
FOR
THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 1998
-----------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Treasury International, Inc., a Delaware
corporation (the "Company"), for use at the Special Meeting of Stockholders (the
"Special Meeting") to be held on November 16, 1998, at 9:00 a.m., Eastern Time,
at 1251 Avenue of the Americas, 29th Floor, New York, New York 10020, U.S.A.,
and at any postponements or adjournments thereof.
The Company intends to mail this Proxy Statement, the Notice of Special
Meeting of Stockholders, and the accompanying proxy card to stockholders
entitled to vote at the Special Meeting on or about November 6, 1998.
At the Special Meeting, holders of the Company's common stock, par value
$0.0001 per share (the "Common Stock"), will be asked to consider and vote upon
the following proposal (the "Proposal"): to approve the sale (the "Sale") of all
of the issued and outstanding stock of Mega Blow Moulding Limited, a
wholly-owned subsidiary ("Mega Blow") of the Company's wholly-owned subsidiary,
Megatran Investments Limited ("Megatran") to 1299004 Ontario Corporation, a
corporation organized under the laws of Ontario, Canada ("Ontario")
substantially on the terms contained in the Stock Purchase Agreement (defined
herein).
RECORD DATE; VOTING
The Board of Directors of the Company (the "Board") has fixed the close of
business on November 5, 1998 as the record date (the "Record Date") for the
determination of holders of Common Stock entitled to notice of and to vote at
the Special Meeting or any and all postponements or adjournments thereof. As of
the Record Date, there were [ ] shares of Common Stock issued and outstanding.
Each share of Common Stock is entitled to one vote on the Proposal. The
presence, whether in person or by proxy, of a majority of the outstanding shares
of Common Stock is necessary to constitute a quorum at the Special Meeting. The
affirmative vote by holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting is required to approve the
Proposal. Abstentions from voting and broker non-votes (which occur if a broker
or other nominee does not have discretionary authority and has not received
voting instructions from the beneficial owner with respect the Proposal) on the
Proposal will be counted for purposes of determining the presence of a quorum
but will not be counted as an affirmative or negative vote on the Proposal.
Accordingly, abstentions and broker non-votes will have the same legal effect as
a vote against the Proposal.
As of the Record Date, the directors and executive officers of the
Company, together with their respective affiliates, held 12,021,906 shares of
Common Stock, representing approximately 17.90% of the votes that may be cast at
the Special Meeting. James Hal, the Chairman of the Board, President and Chief
Executive Officer, of the Company, has informed the Company that he intends to
vote his shares of Common Stock FOR the Proposal. As of the Record Date, Mr. Hal
held 12,000,006 shares of Common Stock or 17.87% of all outstanding shares of
Common Stock.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, stockholders of the Company
are not entitled to appraisal rights in connection with the Sale.
REVOCABILITY OF PROXIES
If a person who has executed and returned a proxy is present at the
meeting and wishes to vote in person, such person may elect to do so and thereby
revoke the power of the proxy holders to vote such proxy. A proxy also may be
revoked before it is exercised by filing with the secretary of the Company a
duly signed revocation or a proxy bearing a later date.
SOLICITATION
This solicitation is being made by the Company, and the Company will bear
the entire cost of the solicitation of proxies from its stockholders, including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. Original solicitation of proxies
by mail may be supplemented by telephone, facsimile, telegram or personal
solicitation by directors, officers, regular employees and other representatives
of the Company. No additional compensation will be paid to such persons for such
services.
-2-
INDEPENDENT AUDITORS
Representatives of Bromberg & Associates, the Company's independent
auditors, are expected to attend the Special Meeting by telephone conference and
to be available by telephone to answer appropriate questions. Such
representatives will have the opportunity to make a statement to the
stockholders if they desire to do so.
THE COMPANY
The Company is a holding company which, through its wholly-owned
subsidiaries, Megatran and Mega Blow, engages in the international
manufacturing, sourcing and distribution of quality consumer and industrial
products. The Company's plan is to become an international manufacturing,
distribution and marketing conglomerate. To expand its business, the Company
seeks to make acquisitions in niche industries of companies having strong brand
recognition and/or significant market share and/or marketing capabilities, with
the intent of growing these businesses into leaders in their respective markets.
Through these subsidiaries, the Company manufactures, distributes and
exports a combined total of more than 3,000 products. The Company has the
capacity to provide private labeling services for unique product specifications;
tailored packaging services for all product lines; complete warehousing
facilities; marketing services via a network of marketing and sales
representatives; and specialized multi-lingual sales associates. By utilizing
its customized computer information and production systems, the Company strives
at all times to ensure access to the broadest range of quality products.
As a holding company, the Company is responsible for supplying its
subsidiaries with administrative and management assistance, accounting,
consulting and necessary funding to complete projects or initiate endeavors.
The Common Stock is publicly traded on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System Over the Counter
("OTC") Market under the symbol "TREY."
Corporate Summary and Growth Strategies
The Company is aggressively pursuing potential acquisitions and strategic
alliances which management believes would significantly increase revenues,
profits and value for its stockholders in accordance with its business
objectives. The Company's "Leveraged Build-Out" strategy consists of growth
through internal expansion of sales and profits in existing operations through
an aggressive acquisitions program. Businesses targeted for acquisition must
meet or exceed management's stringent revenue and profit objectives. Management
must also believe that the targeted corporations have outstanding North American
and International prospects for rapid growth in both top line revenues and
bottom line profits. Management is committed to expanding its global presence by
-3-
entering the emerging markets within Latin America, Eastern Europe and Africa.
In furtherance of this plan, the Company anticipates utilizing existing
marketing channels of the acquired companies. Management's objective is to
obtain additional distribution capacity, gain market share for its existing
product lines and diversify the products and services the Company can offer to
its expanding client base.
In addition to internal growth and acquisitions, the Company is also
active in the business of creating and maintaining international strategic
trading links. The purpose of this plan is to obtain alternate production
sources and new channels of marketing and distribution for both consumer and
industrial products in North America and, in particular, the United States. The
Company is also continually attempting to develop and implement systems to
popularize its products through the promotion of high quality private label
branded products at competitive prices.
The Company's Markets in General
The Company believes it can achieve widespread acceptance for its products
in developing countries where mass consumption of goods is in its infancy.
Management believes the Company can take advantage of a very competitive global
situation by delivering highly knowledgeable and experienced cultural liaisons
that stand behind internationally recognized products. The Company should then
be able to maintain an upward momentum in world markets including the aggressive
penetration of important emerging markets on a global scale.
These international businesses involve complex and dynamic processes of
political and economic issues in addition to traditional issues of market and
firm related concerns. For these reasons, The Company has pursued strategies
that include complementary networks of culturally experienced individuals with
the principal objectives of growth and development through leveraged
acquisitions.
Management believes that one of The Company's major long term
opportunities is in Latin America. Latin America has a population of over 450
million, and has countries with large urban populations, well in excess of those
in Canada and Europe, and developing economies. With the recent widespread move
towards democratization of the region and development of market oriented
economies, experts predict positive future prospects in the region. In fact, the
value of contemporary foreign direct investment (debt and equity investment) in
some Latin American countries is almost twelve times the size of levels before
the South American debt crisis in the 1980's. The debt crisis created a
situation where consumers had little access to imported products or services and
little ability to purchase even if such products had been available. With the
easing of this crisis, these markets are in need of goods and services. Similar
situations are developing in Eastern Europe and Africa which also present
potential opportunities for the Company. It is one of The Company's major
objectives to expand its global presence by meeting the needs in these "emerging
markets" whose rapid growth is fueling demand for industrial and consumer
products.
-4-
Customized Commercial Plastic Containers Business
Overview. The Company, through Mega Blow, operates as a specialized custom
molder of plastic bottles and containers for use in the pharmaceutical, health
and beauty, household cleaner and food product industries. Plastic is a
disposable material which is in high demand in today's environmentally friendly
and industrializing world. Management believes that demand will continue to grow
significantly well into the next century. Currently, the estimated North
American market for plastic products is in excess of $15 billion.
Customers. Mega Blow concentrates on manufacturing products for customers
who are the end user or manufacturer agents. Mega Blow has fostered
relationships with many major North American corporations, including Johnson &
Johnson, G.K. Packaging, Fenton Webber, Novo Pharm, Jones Packaging and the
Canadian shampoo division of L'Oreal. Management believes that Mega Blow has an
excellent reputation for quality and customer service and prides itself on its
ability to consistently maintain a zero percent defect rate. This has resulted
in long-standing customer relationships, many in excess of 10 years.
Facilities/Equipment. Mega Blow operates from a leased, 46,000 square foot
manufacturing facility in metropolitan Toronto, Canada. Mega Blow operates nine
Bekum blowing machines. The Bekum machine is considered by industry experts to
be the best currently available and gives Mega Blow a state-of-the-art
manufacturing capacity. The Bekum machine can be operated almost indefinitely
when properly maintained and updated. All machines are computerized and
controlled by special tracking devices which monitor all aspects of machine
productivity. Further, the Company's computerized systems give the manufacturing
process numerous diagnostic features which maximize productivity and quality
control. All manufacturing machines are constantly serviced and maintained to
the highest degree possible by a specially trained maintenance staff, as well as
by 24 hour on-call maintenance professionals. Mega Blow seeks to maximize
productivity and utilization of fixed overhead costs by operating the plant 24
hours a day with four shifts.
Personnel. Mega Blow employs more than one hundred non-unionized regular
employees, including production, management, foremen and office staff. Its
management is experienced in every facet of operations, including machine
operation, machine repairs and maintenance, completing setups, mold maintenance,
purchasing, distribution and marketing.
Materials. The Company's major raw material usage consists of the following
resins: Pet G, H.D.P.E. (High Density Polyethylene) and L.D.P.E. (Low Density
Polyethylene). Management is not aware of any environmental concerns in respect
of Mega Blow, its manufacturing facilities or its products. Mega Blow presently
uses six major suppliers of the above resins. In the event that its existing
sources of supply become insufficient to meet its needs, management believes
that alternative supplies would be available at competitive prices from one of
its other major suppliers or from outside alternative suppliers.
-5-
Research and Development
During its last three fiscal years, the Company has incurred no material
expenditures on account of research and development, as management believes that
the success of the Company and its business operations did not require
significant research and development efforts.
Currency, Foreign Exchange and Banking
As most of the Company's operations have been based primarily in North
America, the Company believes that the current exchange rate environment has
been favorable to it, and as such has not under-taken active foreign exchange
hedging activities. Management monitors world exchange conditions on a regular
basis and should the current favorable environment change, management will
implement a more active foreign currency hedging policy.
Investment Policies
The Company has no limitations on the amounts which it may invest in any
one investment or type of investment. The Company has no holdings in real
estate, real estate mortgages and similar securities or publicly traded
securities. As well, the Company does not have any investment in persons or
companies primarily devoted to such investments and it is not the policy of the
Company to make investments for the purpose of capital gain or passive income.
Presently, all available monies are being used for day-to-day operations.
Patents and Trademarks
Due to the nature of the Company's operations, it does not currently hold
any existing or pending patents or trademarks outside of the Company's and its
subsidiary's names.
Government Regulation and Legal Proceedings
The Company is not subject to any government regulation for the operation
of its business. The Company is not currently engaged in any legal proceedings
and is not aware of any pending or threatened litigation that could have a
material adverse effect on the Company's business, financial condition or
results of operations.
-6-
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On April 12, 1996, the Common Stock of the Company was accepted for
quotation on the NASDAQ-OTC. The following table sets forth the range of high
and low closing representative bid prices for the Company's Common Stock for
each fiscal quarter since the Common Stock began trading on the NASDAQ-OTC,
which represent inter-dealer prices, without retail mark-up, mark-down or
commission and may not reflect actual transactions:
High Bid Low Bid
-------- -------
Fiscal Year 1996
- ----------------
First quarter ended April 30, 1996
(from April 12, 1996) $0.50 $0.25
Second quarter ended July 31, 1996 1.31 0.50
Third quarter ended October 31, 1996 1.07 0.19
Fourth quarter ended January 31, 1997 0.44 0.16
Fiscal Year 1997
- ----------------
First quarter ended April 30, 1997 $0.50 $0.25
Second quarter ended July 31, 1997 1.13 0.50
Third quarter ended October 31, 1997 0.47 0.19
Fourth quarter ended January 31, 1998 0.31 0.16
Fiscal Year 1998
- ----------------
First quarter ended April 30, 1998 $0.05 $0.02
Second quarter ended July 31, 1998 0.15 0.04
As of November 5, 1998, there were [ ] holders of record of the Company's
Common Stock. The Company has not declared or paid any cash dividends on its
Common Stock since its inception, and its Board of Directors currently intends
to retain all earnings for use in the business for the foreseeable future. Any
future payment of dividends will depend upon the Company's results of
operations, financial condition, cash requirements and other factors deemed
relevant by the Company's Board of Directors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained in this section contains "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Actual results may materially differ
from those projected in the forward looking statements as a result of certain
risks and uncertainties set forth in this proxy statement. Although management
believes that the assumptions made and expectations reflected in the forward
looking statements are reasonable, there is no assurance that the underlying
assumptions will, in fact, prove to be correct or that actual future results
will not be different from the expectations expressed herein.
-7-
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company included elsewhere in this
Proxy Statement.
Fiscal 1998 Compared to Fiscal 1997
Net sales increased during the fiscal year ended January 31, 1998 to over
$6.1 million, up approximately 189% from $2.1 million in the fiscal year ended
January 31, 1997. The increase in net sales reflects the inclusion of Mega
Blow's results of operations from the twelve month period. The Company
experienced a net loss of $1,437,986 for its fiscal year ended January 31, 1998,
an increase of approximately 40% when compared to the Company's net loss of
$1,032,084 in the fiscal year ended January 31, 1997. Among the significant
items impacting the 1998 results were increased expenses resulting from the
disposition of Silver 925, Inc. ("Silver") as well as extensive marketing and
consulting arrangements undertaken by the Company. The cost of sales for fiscal
1998 represented 76% of net sales, or $4,628,960, a 166% increase compared to
82% of net sales, or $1,743,380, in fiscal 1997. The increase was attributable
to significantly greater net sales from Mega Blow's operations.
Operating, general and administrative expenses increased in fiscal 1998 to
$1,846,345, or approximately 30% of sales, compared to $1,151,128, or
approximately 54% of sales, in fiscal 1997. The increase was attributable to
significantly higher sales and expenses related to the disposition of Silver.
Fiscal 1997 Compared to Fiscal 1996
Net sales increased during fiscal year 1997 to approximately $2.12
million, up approximately 91% from $1.1 million in fiscal year 1996. The
increase in net sales also reflected the inclusion of Mega Blow for the three
months ended January 31, 1997 (67%). The Company experienced a net loss of
$1,032,084 for its fiscal year ended January 31, 1997, an increase of
approximately 99.8% when compared to the Company's net loss of $516,656 in the
fiscal year ended January 31, 1996. Among the significant items impacting 1997
results were increased expenses resulting from the Mega Blow and Silver
acquisitions as well as extensive marketing and consulting arrangements
undertaken by the Company.
The cost of sales for fiscal 1997 represented 82% of net sales, or
$1,743,380, a 161% increase compared to 60% of net sales, or $667,083, in fiscal
1996. The increase was attributable to the write down of obsolete and slow
moving inventories, higher prices of raw materials, increased sales of lower
margin products and, to a lesser extent, pricing incentives to major customers.
Operating, general and administrative expenses increased in fiscal 1997 to
$1,151,128, or approximately 54% of sales, compared to $957,607, or
approximately 86% of sales, in fiscal 1996. The increase was attributable to the
write-off of uncollectible accounts receivable, expenses related to the October
30, 1996 acquisition of Megatran, expenses related to the acquisition of Silver
which was consummated subsequent to year end, consulting services rendered (see
note 15 of the Financial Statements) and marketing and promotion activities.
-8-
Six Months Ended July 31, 1998 Compared to Six Months Ended July 31, 1997
During the six months ended July 31, 1998 the Company's sales decreased by
40% to $2,028,737 from $3,393,115 in the six months ended July 31, 1997. The
Company experienced a net loss of $189,595 in the six months ended July 31, 1998
compared to a net loss of $3,131,348 in the six months ended July 31, 1997. The
decrease in net loss was due to the sale of Silver and decreased expenses. The
cost of products sold by the Company was 90% of sales during the six months
ended July 31, 1998, up from 85% of sales in the six months ended July 31, 1997.
The increase in the cost of products sold is attributable to relatively higher
demand for goods.
General and administrative expenses decreased in the six months ended July
31, 1998 to $265,653 or 13% of sales, compared to $1,122,835 or 33% of sales in
the six months ended July 31, 1997. The decrease was attributable to better
purchasing practices, tighter operation controls, and no losses resulting from
the disposition of Silver.
In August 1995, the Company issued 2,750,000 shares of Common Stock to
five private investors for an aggregate cash price of $275,000 pursuant to a
private placement offering. From August through November 1995, the Company
issued 1,449,878 shares of Common Stock for an aggregate price of $724,794
pursuant to a private placement offering. Each of the private placement
offerings was made pursuant to an exemption from registration provided by Rule
504 of Regulation D promulgated under the Securities Act.
In July, 1996, the Company issued 1,000,000 shares of Common Stock to two
investors for an aggregate cash price of $198,000. The sales were exempt from
registration pursuant to Regulation S of the Securities Act promulgated by the
Securities and Exchange Commission thereunder.
In October, 1996, the Company sold 0% Convertible Debentures in the
aggregate principal amount of $1,000,000 due October 29, 1997 and October 30,
1999, respectively. In the same month, the Company also sold an 8% Senior
Subordinated Convertible Debenture in the principal amount of $500,000, due
October 29, 1997. As of July 16, 1997, the holder of the 8% Debentures elected
to convert the outstanding amount of such debentures into shares of the
Company's Common Stock. The sales of the debentures were made pursuant to an
exemption from registration provided by Regulation S.
The Company believes it will generate sufficient positive cash flow from
operations to meet its operating requirements for the next twelve months.
However, there can be no assurance that the Company will be able to repay those
debentures which mature in 1999 if they are not converted. If the funds
available under the Company's financing agreements, together with its current
cash and cash equivalents, are not sufficient to meet the Company's cash needs,
the Company may, from time to time, seek to raise capital from additional
sources including the extension of its current lending facilities,
project-specific financing and additional public or private debt or equity
financings.
On June 30, 1998, the Company entered into a Debenture Conversion and
Support Agreement with certain prospective purchasers of the Company's 0%
Convertible Debentures and 8% Senior Subordinated Convertible Debentures. Under
the terms of the Debenture Conversion Agreement, upon the completion of the
purchase of the Debentures, the purchasers have agreed to convert the debentures
into 33,670,000 shares of the Company's Common Stock, thereby retiring the
debentures in their entirety.
-10-
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement, as it may be amended or supplemented, and certain
documents incorporated by reference herein, contain or may contain both
statements of historical fact and "forward-looking statements" within the
meaning of Section 21E of the Exchange Act. In particular, reference is made to
the description of the Company's plans and objectives for the conduct of its
business following the Sale. Any such statements are based on management's
current expectations and are subject to a number of factors and uncertainties
that could cause actual results to differ materially from those described in the
forward-looking statements. Factors which could cause future results to differ
materially from those anticipated by management in the forward-looking
statements included herein are the inability of the Company to purchase a
larger, more profitable subsidiary than Mega Blow and the highly competitive
environment of the custom plastics industry.
PROPOSAL 1
SALE OF THE CUSTOMIZED PLASTIC CONTAINER BUSINESS
The Company proposes to sell its customized plastic container
manufacturing and marketing business to Ontario by selling 100% of the stock of
Mega Blow. The Sale will be pursuant to that certain Stock Purchase Agreement,
dated August 11, 1998 and amendment thereto, dated as of September 30, 1998 (the
"Purchase Agreement"), a copy of which is attached to this Proxy Statement as
Annex A.
The purchase price is $4,250,000. Of such purchase price, $250,000 will be
paid in cash as a non-refundable deposit. The remaining $4,000,000 will be paid
by Ontario in the form of a non-interest bearing, 190-day promissory note (the
"Promissory Note").
Immediately following the sale of Mega Blow, the Company's remaining
operations will be those of Megatran. Megatran's operations will consist solely
of acquiring entities in the plastics industry that are larger than Mega Blow.
-11-
NEGOTIATIONS RELATING TO THE SALE
The management of the Company was approached on or about July 3, 1998 by
former debenture holders of the Company who were already familiar with the
Company and Mega Blow. These debenture holders expressed an interest in
purchasing Mega Blow. Subsequently, the parties had several discussions,
primarily by telephone, regarding the price and terms of the Sale. As a result,
the parties came to an agreement, in principle, on the Sale.
The debenture holders then formed Ontario for the purpose of purchasing
Mega Blow. The attorneys for Ontario prepared and delivered to the Company the
Purchase Agreement setting forth the principal terms and conditions of the Sale.
Following a few revisions, the parties executed the Purchase Agreement on August
11, 1998. When the Sale was not consummated by September 30, 1998, the closing
date specified in the Purchase Agreement, the parties agreed to extend the time
for the Sale to occur until four business days after the Special Meeting. The
parties signed this amendment to the Purchase Agreement as of September 30,
1998.
REASONS FOR THE SALE
The Board of Directors believes that the Sale of Mega Blow is in the best
interest of the Company and its stockholders and unanimously recommends that the
stockholders of the Company vote FOR approval of the Sale.
Prior to reaching its conclusions, the Board of Directors and the
Company's management reviewed the proposed Sale with the Company's outside
accountants and legal advisors. The Company did not hire a financial advisor in
connection with the proposed Sale. The following are the material factors
considered by the Board in reaching its conclusions:
(i) The purchase price agreed to by Ontario was approximately twice the
purchase price that the Company paid for Mega Blow less than two years ago.
(ii) The Board compared the size and revenues of Mega Blow to the size and
revenues of the company, or other entity, that the Company would have the
potential to acquire with cash received from the Sale and determined that the
Company should be able to purchase a company or entity approximately three times
the size and revenues of Mega Blow.
(iii) As a result of the Sale, the Company will be able to focus its
attention on its aggressive acquisitions program.
In view of the factors considered in connection with its evaluation of the
proposed Sale, the Board did not find it practical to, and did not, quantify or
otherwise attempt to assign relative weights to specific factors considered in
reaching its determinations.
-12-
TERMS OF THE SALE
The following is a summary of the material provisions of the Purchase
Agreement and the terms of the Promissory Note. This Summary and all other
discussions of the terms and conditions of the Sale, the Purchase Agreement, and
the Promissory Note included elsewhere in this Proxy Statement are qualified in
their entirety by reference to such documents, copies of which are attached as
Appendix A hereto and incorporated by reference herein.
The Sale. On the terms and subject to the conditions of the Purchase
Agreement, on the closing date, the Company will sell and transfer to Ontario
100% of the outstanding capital stock of Mega Blow.
Purchase Price. Upon execution of the Purchase Agreement and delivery of
the certain irrevocable proxies coupled with an interest by the majority
stockholders of the Company in favor of Ontario, Ontario paid the Company
$250,000 in cash. At the Closing, Ontario will deliver the Promissory Note in
the principal amount of $4,000,000.
The Promissory Note. The Promissory Note will obligate Ontario to pay to
the Company the principal sum of $4,000,000 and will bear no interest. Following
the Closing, principal may be paid at any time or times by Ontario without
notice or bonus. All amounts owing under the Promissory Note shall become due
and payable 190 days following the Closing Date or, if such date is not a
business day, the next business day.
There can be no assurances that Ontario will not default on its
obligations under the Promissory Note.
Stock Pledge. Megatran has pledged the stock in Mega Blow to the Royal
Bank of Canada ("RBC") as further and continuing collateral security for all of
the Company's indebtedness, liabilities and obligations to RBC.
Transfer of Certain Liabilities. Due to the fact that Ontario is
purchasing the stock of Mega Blow, Ontario will not assume any liabilities of
the Company.
Transaction Costs. Ontario has agreed to pay all transaction expenses,
including those of the Company.
Agreements Prior to Closing. The Company has agreed to continue to operate
Mega Blow in the ordinary course of business consistent with past practices
prior to the Closing with a view to the maintenance and preservation of the
assets and business thereof.
Conditions to Closing; Termination. Closing is scheduled to occur upon
approval of the Sale by the stockholders of the Company and satisfaction or
waiver of each party's respective closing conditions, which include the absence
of a material breach of the Purchase Agreement by the other party and the
-13-
absence of any pending or threatened litigation existing at the time of the
closing that seeks to enjoin or prevent the Sale. The transaction does not
require any regulatory approvals which have not yet been obtained.
Under the original Purchase Agreement, if the transaction did not close by
September 30, 1998, the Purchase Agreement was to terminate, and Ontario was to
instruct its counsel to deliver $250,000 Cdn to RBC. Pursuant to the September
30, 1998 amendment to the Purchase Agreement, the $250,000 will be delivered to
RBC whenever the closing occurs. Further, either party may terminate the
Purchase Agreement if the party's conditions to closing are not satisfied, other
then as a result of such terminating party's breach of the Purchase Agreement.
Representations and Warranties. The Company has made standard
representations and warranties concerning its due organization and corporate
power, its authorization to enter into the transaction, the absence of adverse
changes and undisclosed liabilities, title to and condition of its assets,
certain tax matters, litigation, outstanding contracts and property matters.
Covenants. The Company has made standard covenants including, but not
limited to, its compliance with the Purchase Agreement, tax filings, valid
transfer of the outstanding shares of Mega Blow, obtaining third-party consents
if needed, and using its best efforts to obtain stockholder approval of the
Sale.
FEDERAL INCOME TAX CONSEQUENCES
The Company estimates that it will recognize approximately $2.6 million of
total capital gains income in connection with the Sale. Of that total, the
Company will immediately recognize approximately $250,000 of income as a
consequence of it receiving from Ontario a non-refundable cash payment at the
signing of the Stock Purchase Agreement. The approximately $2,350,000 of income
will be recognized for federal income tax purposes when the Company receives
cash in satisfaction of the Promissory Note received from Ontario.
As of April 30, 1998, the Company had approximately $2,348,000 in net
operating loss carryforwards for federal income tax purposes, which it intends
to utilize, as appropriate under the tax laws, to reduce the income recognized
in the transaction.
Accordingly, consummation of the Sale will likely not be a taxable event
for income tax purposes for the Company's stockholders.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations for the year ended January 31, 1998 and for the six months ended July
31, 1998 have been prepared to reflect the proposed Sale of Mega Blow and
-14-
assuming that such sale took place on February 1, 1997. The statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
January 31, 1998 and for the six months ended July 31, 1998 in the Company's
Quarterly Report on Form 10-QSB, which financial statements are included
elsewhere in this Proxy Statement. The pro forma condensed consolidated
statements of operations are not necessarily indicative of the results of
operations of the Company as they may be in the future or as they might have
been had the Sale actually been effective February 1, 1997.
Pro Forma Consolidated Statement of Operations
for the Year Ended January 31, 1998
Historical Adjustments Pro Forma
Cost DR CR Balance
---------- --- -- ---------
Sales $6,128,827 6,128,613(3) 214
Cost of sales 4,620,250 4,628,960(3) 8,710
--------- ------------ ----------- -------
Gross margin (loss) 1,499,867 6,128,613 4,620,250(3) (8,496)
---------- ------------ ------------ -------
Expenses
Warehouse and factory 568,465 568,465(3)
Operating, general 1,403,193 91,796(2) 985,351
and administrative 326,046(3)
Selling and Delivery 155,340 155,340(3)
---------- ----------- ---------- -------
2,126,998 -- 1,141,647 985,847
--------- ----------- ------------ -------
Loss from operations (627,131) 6,128,613 5,761,897 (993,847)
Interest expense 128,191 88,191(3) 40,000
---------- ----------- ------------ -------
Loss before income taxes (755,322) 6,128,613 5,850,088 (1,033,847)
Deferred income taxes
(recovery) (1,204) (1,204)(3)
---------- ---------- ----------- ----------
Loss before sale of
subsidiary (754,118) 6,129,817 5,850,088 (1,033,847)
Gain on sale of
subsidiary 2,236,818(1) 2,236,818
---------- --------- ------------ ---------
Net income (loss) (754,118) 6,129,817 8,086,906 1,202,971
---------- --------- ------------ ---------
Income per common share $ 0.067
=========
Weighted average number
of common shares outstanding 17,955,714
==========
-14-
Notes to Pro Forma Consolidated Financial Statements
as at and for the Year Ended January 31, 1998
1. This relates to the capital gain that arises on the sale of the shares of
Mega Blow Moulding Limited, calculated as follows:
Selling price of the shares 5,100,000
Cost of shares 2,863,182
---------
Gain on sale of subsidiary 2,236,818
---------
2. This relates to the consolidated entry amortizing the goodwill on the
purchase of Mega Blow Moulding Limited over a twenty year period.
Goodwill 1,835,918 = 91,796
--------- ------
20 Years 20
3. All other adjustments reflect the elimination of all revenues and expenses of
Mega Blow Moulding Limited for the year ended January 31, 1998, therefore, the
Pro Forma statement consists only of Treasury International, Inc. operations.
4. Subsequent Event
These Pro Forma statements were prepared for SEC purposes in connection
with the sale of the common shares of Mega Blow Moulding Limited. Accordingly,
the results of operations of Mega Blow Moulding Limited have been excluded from
these Pro Forma financial statements.
-15-
Pro Forma Consolidated Balance Sheet
as at July 31, 1998
(Unaudited)
Historical Adjustments Pro Forma
Cost DR CR Balance
---------- -- -- ----------
ASSETS
Current
12,231(6)
Cash -- 37,231
25,000(1)
Accounts receivable 440,017 440,017(8) --
Inventories 361,584 361,584(8) --
Sundry assets 23,465 23,465(8) --
Promissory note
receivable -- 4,000,000(1) 4,000,000
------- ----------- ---------- ---------
825,066 4,037,231 825,066 4,037,231
Goodwill 1,698,224 1,698,224(2) --
Capital 561,644 553,960(8) 7,684
LIABILITIES
Current
Bank indebtedness 546,779 546,779(8) --
-------- --------- ----------- ------
Accounts payable 819,315 670,924(8) 148,391
Current portion 152,119 152,119(8) ---
-------- --------- -------
of Long-Term debt 1,518,213 1,369,822 148,391
--------- ----------- -------
Deferred Income Taxes 52,957 52,957(8) --
Long-Term Debt 531,474 531,474(8) --
Loan Payable to Subsidiary -- -- 390,602(3) 390,602
------- ---------- --------- -------
584,431 584,431 390,602 390,602
------- ---------- ------- -------
2,102,644 1,954,253 390,602 538,993
---------- ---------- ------- --------
Shareholders' Equity
Share Capital 7,429 7,429
Contributed Surplus 4,277,317 4,277,317
149,120(7)
137,694(4)
Deficit (3,302,456) -- 2,236,818(5) (778,824)
--------- --------- ----------- --------
982,290 -- 2,523,632 3,505,922
---------- --------- ------------ ---------
3,084,934 1,954,253 2,914,234 4,044,915
========== ========== =========== =========
-16-
Notes to Pro Forma Consolidated Balance Sheet
as at July 31, 1998
1. This relates to the cash and promissory note received upon consummation of
the sale of Mega Blow Moulding Limited.
2. This relates to the elimination of the goodwill remaining at July 31, 1998
on the purchase of Mega Blow Moulding Limited.
3. This balance is arrived at as follows:
Set up loan balance owed by Treasury International,
Inc. to Mega Blow Moulding Limited 1,240,602
Less balance of funds received on the sale
(5,100,000- 4,250,000). This is to be used to
reduce the bank indebtedness of Mega Blow Moulding
Limited. 850,000
---------
390,602
=========
4. This balance represents accumulated profits of Mega
Blow Moulding Limited. 149,120
-------
5. This balance represents the gain on the sale of the
shares of Mega Blow Moulding Limited. 2,236,818
---------
6. This balance represents cash of Treasury International,
Inc. 12,231
------
7. This relates to elimination of amortization of goodwill
set up on the purchase of Mega Blow Moulding Limited. 137,694
-------
8. This represents all other entries which relate to
the elimination of remaining Mega Blow Moulding
Limited balances. --
-------
-17-
Pro Forma Consolidated Statement of Operations
for the Six Months Ended July 31, 1998
(Unaudited)
Historical Adjustments Pro Forma
Cost DR CR Balance
---- -- -- --------
Sales $6,128,827 6,128,613(3) $ 214
Cost of sales 4,620,250 4,628,960(3) 8,710
--------- ---------- ------------ -----
Gross margin (loss) 1,499,867 6,128,613 4,620,250(3) (8,496)
--------- --------- ----------- ------
Expenses
Warehouse and factory 568,465 568,465(3)
Operating, general and
administrative 1,403,193 91,796(2) 985,351
326,046(3)
Selling and Delivery 155,340 155,340(3) --
------- -------- ---------- -------
2,126,998 -- 1,141,647 985,847
--------- -------- --------- -------
Loss from operations (627,131) 6,128,613 5,761,897 (993,847)
Interest expense 128,191 88,191(3) 40,000
------- ------- ------
Loss before income taxes (755,322) 6,128,613 5,850,088 (1,033,847)
Deferred income taxes
(recovery) (1,204) (1,204) --
------- ------- ---------- ---------
Loss before sale of (3)
subsidiary (754,118)6,129,817 5,850,088 (1,033,847)
Gain on sale of subsidiary -- 2,236,818(1) 2,236,818
-------- ------ ----------- ---------
Net income (loss) (754,118) 6,129,817 8,086,906 1,202,971
-------- --------- --------- ---------
Income per common share $ 0.067
=========
Weighted average number 17,955,714
of common shares outstanding ==========
-18-
Notes to Pro Forma Consolidated Statement of Operations
for the Six Months Ended July 31, 1998
(Unaudited)
1. This relates to the capital gain that arises on the sale of the shares of
Mega Blow Moulding Limited, calculated as follows:
Selling price of the shares 5,100,000
Cost of the shares 2,863,182
---------
Gain on sale of subsidiary 2,236,818
=========
2. This relates to the consolidated entry amortizing goodwill on the purchase
of Mega Blow Moulding Limited over a twenty-year period.
The amortization is calculated as follows:
Goodwill 1,835,918 = 91,796 91,796 x 6 months = 45,898
-------- ------
20 yrs 12 months
3. All of these adjustments reflect the elimination of all revenues and
expenses of Mega Blow Moulding Limited for the fiscal period ended July
31, 1998. Therefore, the pro forma statement consists only of Treasury
International, Inc.
operations.
4. Subsequent event
These pro forma financial statements were prepared for SEC purposes in
connection with the sale of all of the common shares of Mega Blow Moulding
Limited. Accordingly the financial position and results of operations of
Mega Blow Moulding Limited have been excluded from these pro forma
financial statements.
-19-
DESCRIPTION OF THE COMPANY FOLLOWING THE SALE
If the Sale is consummated, the Company will have no actual operations
remaining. As explained above, the Company intends to pursue the strategic
acquisition of a company or companies in the custom plastics or similar industry
with substantially greater revenues than Mega Blow. See "REASONS FOR THE SALE."
USE OF PROCEEDS
The proceeds of the Sale will be used for the Company's strategic
acquisition program, for general corporate purposes and for working capital.
Until such time as the Company acquires a suitable company or entity, it will
invest the proceeds of the Sale in short-term certificates of deposit, money
market funds or other short-term, investment-grade, interest-bearing
investments.
MANAGEMENT AND EMPLOYEES
As of the Record Date, the Company had five full time officers and,
including its subsidiaries, 141 employees. None of the Company's employees are
represented by a labor union or are subject to a collective bargaining
agreement. The Company considers its relations with its employees to be good.
Upon the Closing of the Sale, the Company will retain all employees currently
engaged by the Company. The employees of Mega Blow will not remain employed by
the Company and may or may not be retained by Ontario. James Hal will remain as
the Company's Chairman of the Board, President and Chief Executive Officer, and
Howard Halpern will remain as the Company's Chief Financial Officer and
Executive Vice President. The number of employees remaining in the Company after
the Closing of the Sale will be four.
FACILITIES
Upon the Closing of the Sale, the Company will continue to maintain its
corporate headquarters at 1183 Finch Avenue West, Suite 508, North York,
Ontario, Canada M3J 2G2.
-20-
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning ownership of the
Company's Common Stock as of the Record Date by: (i) each director and executive
officer of the Company; (ii) each person known to the Company to be the
beneficial owner of more than five percent of its Common Stock; and (iii) all
executive officers and directors of the Company as a group.
Name and Address Beneficial Ownership Current Percent of Class(1)
- ---------------- -------------------- --------------------------
James Hal 12,000,006 17.9%
1183 Finch Avenue West
North York, Ontario
Canada M3J 2G2
Howard Halpern 600 (2) *
160 Theodore Place
Thornhill, Ontario
Canada L4J 8E3
Halpern Family Trust 8,140,006 12.1%
650 Briar Hill Avenue
Suite 301
Toronto, Ontario
Canada M5N 1N3
Mark Halioua 20,700 (2) *
147 Beverly Glen Blvd.
Thornhill, Ontario
Canada L4J 4Y2
Robert Abourmad 600 (2) *
87 Bayhampton Crescent
Thornhill, Ontario
Canada L4J 4Y2
All directors and executive officers 12,021,906 17.9%
as a group (4 persons)
- -----------------------------------
* Less than 1%
(1) Based on 67,147,316 shares of Common Stock outstanding as of
the record date.
(2) Includes 300 shares of Common Stock held by such person's
wife.
-21-
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board knows of no
other matters to be presented for action at the Special Meeting. As stated in
the accompanying proxy card, if any other business should come before the
Special Meeting, proxies have discretionary authority to vote their shares
according to their best judgment, including, without limitation, a motion to
adjourn or postpone the Special Meeting to another time and/or place for the
purpose of soliciting additional proxies in order to approve the Sale or
otherwise.
By order of the Board of Directors
--------------------------
James Hal
Chairman of the Board, President
and Chief Executive Officer
-22-
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF TREASURY INTERNATIONAL, INC.
Fiscal Years Ended January 31, 1998 and 1997 (audited) Page
- ------------------------------------------------------ -----
Auditor's report...................................... F-1
Consolidated balance sheet............................. F-2
Consolidated statement of deficit...................... F-4
Consolidated statement of operations.................. F-5
Consolidated statement of changes in shareholders'
equity............................................... F-7
Consolidated statement of cash flows.................. F-9
Notes to consolidated financial statements........... F-11
Six Months Ended July 31, 1998 and 1997 (unaudited)
- --------------------------------------------------
Consolidated balance sheet............................ F-15
Consolidated statement of deficit.................... F-17
Consolidated statement of operations.................. F-18
Consolidated statement of changes in shareholders'
equity................................................ F-20
Consolidated statement of cash flows.................. F-21
Notes to consolidated financial statements............ F-22
Bromberg & Associate 1177 Finch Avenue West Suite 21
Chartered Accountants Downsview, Ontario M3J 2E9
Office:(416)663-1974
Fax:(416)630-1235
AUDITORS' REPORT
Board of Directors and Shareholders
Treasury International, Inc.
We have audited the consolidated balance sheets of Treasury International, Inc.
as at January 31, 1998 and 1997, and the consolidated statements of operations
deficit, shareholders' deficiency and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the corporation as at January 31,
1997 and 1996 and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Bromberg & Associate
CHARTERED ACCOUNTANTS
TORONTO, CANADA
June 5, 1998
F-1
TREASURY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
AS AT JANUARY 31, 1998
ASSETS
CURRENT 1998 1997
Accounts Receivable $ 608,659 $ 812,357
Inventories (Notes 2 and 4) 345,783 385,915
Sundry assets 72,020 144,541
Income taxes receivable ------- 6,182
------- -------
1,026,462 1,348,995
GOODWILL 1,835,918 1,835,918
CAPITAL ASSETS (Notes 2 and 5) 620,279 723,299
---------- ----------
$3,482,659 $3,908,212
========== ==========
LIABILITIES
CURRENT
Bank indebtedness (Note 6) $ 492,012 $ 394,407
Accounts payable and accrued 997,188 1,018,928
liabilities
Current portion of long-term debt 1,007,676 1,147,812
--------- ---------
2,496,876 2,561,147
DEFERRED INCOME TAXES 52,957 54,161
LONG-TERM DEBT (Note 7) 1,117,392 1,304,461
--------- ---------
3,667,225 3,919,769
--------- ---------
SHAREHOLDERS' DEFICIENCY
SHARE CAPITAL
Authorized
50,000,000 common shares at $.0001
Issued
24,610,495 common shares 2,461 1,494
Contributed surplus (Note 12) 2,788,140 1,543,861
F-2
DEFICIT (2,975,167) (1,556,912)
---------- ----------
(184,566) (11,557)
-------- -------
$ 3,482,65 $ 3,908,212
========== ===========
APPROVED ON BEHALF OF THE BOARD
James Hal, Director Robert Abourmad, Director
F-3
TREASURY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF DEFICIT
YEAR ENDED JANUARY 31, 1998
1998 1997
Balance, beginning of year $(1,556,912) $ (524,828)
Net loss for the year (1,437,986) (1,032,084)
Adjustments to prior year taxes 19,731 -----------
---------- ------------
Balance, end of year $(2,975,167) $(1,556,912)
============ ============
F-4
TREASURY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1998
1998 1997
REVENUE $6,128,827 $2,123,631
COST OF GOODS SOLD 4,628,960 1,743,380
----------- ---------
GROSS PROFIT 1,499,867 380,251
--------- -------
EXPENSES
Warehouse and factory 568,465 139,660
General and administrative 1,122,540 956,086
Selling and deliver 155,340 55,382
------- ------
1,846,345 1,151,128
--------- ---------
LOSS FROM OPERATIONS before
undernoted items (346,478) (770,877)
-------- --------
Management fees 51,203 193,316
Financial 128,191 31,390
Amortization 137,654 39,941
------- ------
317,048 264,647
------- -------
LOSS BEFORE INCOME TAXES (663,526) (1,035,524)
------- ---------
Provision for income taxes (recovery) ------------(1,542)
Deferred income taxes (recovery) (1,204) (1,898)
------ -----
(1,204) (3,440)
------ -----
NET LOSS FROM CONTINUED
OPERATIONS (662,322) (1,032,084)
F-5
NET LOSS FROM DISCONTINUED
OPERATION (282,260) -
NET LOSS ON DISPOSAL OF
DISCONTINUED OPERATIONS (493,404) -
------- -----
NET LOSS $(1,437,986) $(1,032,084)
=========== ============
Loss per common share $(0.08) $(0.08)
Weighted average number of
common shares outstanding 17,955,714 13,221,096
========== ===========
F-6
TREASURY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED JANUARY 31, 1998
COMMON PAID-IN CAPITAL
SHARES CONTRIBUTED SURPLUS
------ ----------- --------
Balance-January 31, 1997 14,942,566 $1,494 $1,543,861
Issued 555,000 common shares
for consulting and public
relations services 555,000 56 554,944
Issued 150,000 common shares
toward the purchase price
of Silver 925, Inc. 150,000 15 149,985
------- -- -------
Balance-April 30, 1997 15,647,566 1,565 2,248,790
Issued 500,000 common shares
for consulting and public
relations services 500,000 50 111,196
Issued 225,000 common
shares toward the purchase
price of Silver 925, Inc. 225,000 22 224,978
Issued 507,614 common
shares toward reduction
of debentures payable 507,614 51 49,949
------- -- ------
Balance-July 31, 1997 16,880,180 1,688 2,634,913
Issued 1,150,000 common
shares for consulting and
public relations services 1,150,000 15 13,585
F-7
Issued 750,000 common
shares toward reduction
of debentures payable 750,000 75 29,225
Balance-October 31, 1997 18,780,180 1,878 2,677,723
Issued 2,830,315 common
shares toward reduction
of debentures payable 2,830,315 283 59,717
Issued 3,000,000 common
shares for consulting and
public relations services 3,000,000 300 5,700
--------- --- -----
Balance-January 31, 1998 24,610,495 $2,461 $2,788,140
========== ===== =========
F-8
TREASURY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JANUARY 31, 1998
1998 1997
Cash flows from operating
activities
Net loss $(1,437,986) $(1,032,084)
Adjustments to reconcile net
loss to net cash used in
operating activities
Adjustments to prior year 19,731 -
income taxes
Increase(decrease)in deferred (1,204) 54,161
income taxes
Amortization 137,654 39,941
Decrease (increase) in 203,698 (632,053)
accounts receivable
Increase(decrease)in income 6,182 (6,182)
taxes
receivable
Increase(decrease)in 40,132 (268,077)
inventories
Decrease (increase) in sundry 72,521 (142,689)
assets
Increase (decrease) in accounts
payable (21,740) 969,611
------- -------
Net cash used in operating (981,012) (1,017,372)
activities
Cash flows from financing
activities
Long-term debt (327,205) 2,452,273
Proceeds on issue of common 1,245,246 466,267
shares --------- ---------
Cash provided by financing 918,041 2,918,540
activities -------- ---------
Cash flows from investing
activities
Goodwill - (1,835,918)
F-9
Purchase of capital assets (34,634) (752,268)
------- -------
Cash used for investing (34,634) (2,588,186)
------- ---------
activities
Decrease in cash and (97,605) (687,018)
short-term deposits
Cash and short-term deposits,
(bank indebtedness) beginning (394,407) 292,611
of year ------- -------
(Bank indebtedness),end of year $(492,012) $(394,407)
======== =======
F-10
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT JANUARY 31, 1998
1. Nature of business
Treasury International, Inc. is a holding company which,
through its wholly-owned subsidiaries, Megatran Investments
Ltd. and Mega Blow Moulding Limited, distributes a variety
of consumer and industrial products. The company was
incorporated on August 18, 1995 in the State of Delaware.
2. Summary of significant accounting policies
(a) Basis of consolidation
These consolidated financial statements include the
accounts of the company and its wholly-owned
subsidiaries, Megatran Investments Ltd. and Mega Blow
Moulding Limited.
(b) Inventories
Raw materials are valued at the lower of cost (first-in, first-out
method) and net realizable value. Finished goods are valued at the
lower of cost and net realizable value with cost being determined by
the retail method.
(c) Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is provided as follows:
Leasehold improvements - straight line over term of lease
Machinery and equipment - 20% diminishing balance
Office equipment - 20% diminishing balance
(d) Revenue recognition
Revenue is generally recognized as customers are invoiced for
products shipped by the company.
(e) Loss per share
Loss per share is calculated based on the weighted average number of
shares outstanding during the period of 17,955,714.
F-11
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT JANUARY 31, 1998
(f) General
These financial statements have been prepared in
accordance with U.S. generally accepted accounting principles
(GAAP), as they relate to these financial statements.
3. Business combination
On October 30, 1996, the Company acquired 100% of the issued and
outstanding common shares of Megatran Investments Ltd., parent company of
Mega Blow Moulding Limited.
4. Inventories
January 31, January 31,
Inventories 1998 1997
consist of: ---- ----
Raw materials $144,183 $151,241
Packaging 20,135 24,345
Finished goods 181,465 210,329
------- -------
$345,783 $385,915
======== ========
5. Capital assets
January 31, January 31,
1998 1997
---- ----
Accumulated Net Net
Cost amortization book value book value
---- ------------ ---------- ----------
Leasehold $4,221 1,665 $2,556 $2,893
improvements
Machinery and 2,473,153 1,897,665 575,488 668,585
equipment
Office equipment 103,314 61,079 42,235 51,821
------- ------ ------ ------
$2,580,688 1,960,409 $620,279 $ 723,299
========= ========= ======== ========
F-12
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT JANUARY 31, 1998
6. Bank indebtedness
The bank indebtedness consists of two operating demand loans totaling
$483,680 which are secured by a registered general assignment of book
debts and general security agreements of Mega Blow Moulding Limited.
7. Long term debt
The long-term debt consists of two term loans and three debentures
payable. The term loans are secured by a registered general security
agreement having first charge over all assets excluding real property of
Mega Blow Moulding Limited. The term loans bear interest at rates varying
from 6.47% to bank prime plus 1.75%. One of the three debentures in the
amount of $500,000 is subject to 8% interest. The remaining two are
interest-free debentures.
The term loans and debentures are payable as follows:
Term loans Debentures Total
---------- ---------- -----
1999 $147,049 $860,627 $1,007,676
2000 157,213 250,627 407,840
2001 165,443 250,626 416,069
2002 174,339 - 174,339
2003 and 137,365 - 137,365
------- -------- -------
following
781,409 1,361,880 2,143,289
Less 147,049 860,627 1,007,676
current ------- ------- ---------
portion
$634,360 $501,253 $1,135,613
======== ======== ==========
8. Income taxes
As of January 31, 1998, the Company had a net operating loss carryover of
approximately $ 2,259,500 expiring in various years through 2013.
F-13
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT JANUARY 31, 1998
9. General and administrative expenses
General and administrative expenses for the year ended January 31, 1998
include fees paid by the Company for consulting and public relations in
the amount of $ 808,397.
10. Discontinued operations
On July 31, 1997, the Company disposed of its subsidiary, Silver 925, Inc.
The results of Silver 925, Inc. have been reported as discontinued
operations in these financial statements.
11. Contingent Liabilities
The Company has been named as a defendant in three lawsuits in respect of
disputed accounts payable. After reviewing the merits of these lawsuits
with counsel, it is management's opinion that the ultimate cost of
settlement will be no more than $67,000 and therefore will not materially
affect the company's financial position.
12. Contributed surplus
Contributed surplus represents the premium paid on the issuance of common
shares.
F-14
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED BALANCE SHEET
AS AT JULY 31, 1998
(UNAUDITED)
ASSETS
CURRENT JULY 31, JANUARY 31,
1998 1998
Accounts Receivable $440,017 $608,659
Inventories (Notes 2 and 4) 361,584 345,783
Sundry assets 23,465 72,020
------ ------
825,066 1,026,462
GOODWILL 1,835,918 1,835,918
CAPITAL ASSETS (Notes 2 and 5) 561,644 620,279
------- -------
$3,222,628 $3,482,659
========== ==========
LIABILITIES
CURRENT
Bank indebtedness (Note 6) $546,779 $492,012
Accounts payable and
accrued liabilities 819,315 997,188
Current portion of long-
term debt 152,119 1,007,676
--------- ---------
1,518,213 2,496,876
DEFERRED INCOME TAXES 52,957 52,957
LONG-TERM DEBT (Note 7) 531,474 1,117,392
------- ---------
2,102,644 3,667,225
========= =========
F-15
SHAREHOLDERS' DEFICIENCY
SHARE CAPITAL
Authorized
100,000,000 common shares at $.0001
Issued
74,296,927 common shares 7,429 2,461
Contributed surplus (Note 12)4,277,317 2,788,140
DEFICIT (3,164,762) (2,975,167)
--------- ---------
(1,119,984) (184,566)
--------- -------
$3,222,628 $3,482,659
========== ==========
F-16
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF DEFICIT
SIX MONTHS ENDED JULY 31 1998
(UNAUDITED)
JULY 31, JULY 31,
1998 1997
Balance, beginning of period $(2,975,167) $(1,556,912)
Net loss for the period (189,595) (3,131,7348
Balance, end of period $(3,164,762) $(4,688,260)
F-17
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1998
(UNAUDITED)
JULY 31, JULY 31,
1998 1997
REVENUE $920,459 $1,732,035
COST OF GOODS SOLD 909,459 1,503,933
------- ---------
GROSS PROFIT 10,915 228,102
------ -------
General and administrative
(Note 9) 151,526 306,214
LOSS FROM OPERATIONS
Before undernoted items (140,611) (78,112)
Financial 15,018 31,333
Amortization 32,820 36,935
------ ------
47,838 68,268
------ ------
NET LOSS FROM CONTINUED
OPERATIONS (188,449) (146,380)
NET LOSS FROM DISCONTINUED
OPERATIONS - (200,562)
NET LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS - (2,095,642)
----------
NET LOSS $(188,449) $(2,442,584)
======= =========
LOSS PER SHARE
Continued operations $(0.004) $(0.009)
Discontinued operations - (0.139)
------- -------
$(0.004) $(0.148)
======= ========
Weighted average number of
common shares outstanding 48,716,510 16,466,771
========== ==========
F-18
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
JULY 31, JULY 31,
1998 1997
REVENUE $2,028,737 $3,393,115
COST OF GOODS SOLD 1,833,049 2,844,529
--------- ---------
GROSS PROFIT 195,688 508,586
------- -------
General and administrative (Note 9)265,653 1,122,835
LOSS FROM OPERATIONS
Before undernoted items (69,965) (614,249)
Financial 51,149 64,784
Amortization 68,481 74,413
------ ------
119,630 139,197
------- -------
NET LOSS FROM CONTINUED
OPERATIONS (189,595) (753,446)
NET LOSS FROM DISCONTINUED
OPERATIONS - (282,260)
NET LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS - (2,095,642)
---------- ----------
NET LOSS $(189,595) $(3,131,348)
======= =========
LOSS PER SHARE
Continued operations $(0.004) $(0.046)
Discontinued operations - (0.144)
------- --------
$(0.004) $(0.190)
======= ========
Weighted average number of
common shares outstanding 48,716,510 16,466,771
========== ==========
F-19
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
COMMON PAID-IN CONTRIBUTED
SHARES CAPITAL SURPLUS
------ --------- -----------
Balance - January 31, 1998 24,610,495 $2,461 $2,788,140
Issued 4,500,000 shares of 4,500,000 450 61,750
common stock for cash
consideration of $62,200
Issued 5,332,500 common shares 5,332,500 533 49,792
for consulting and public
relations services
Issued 2,353,932 common shares 2,353,932 235 39,765
toward reduction of debentures
payable
------------ ------------ ------------
Balance - April 30, 1998 36,796,927 $3,679 $2,939,447
========== ===== =========
Issued 33,760,000 common 33,760,000 3,376 1,318,504
shares toward reduction of
debentures payable
Issued 3,740,000 common shares 3,740,000 374 19,366
for consulting and public
relations services
Balance - July 31, 1998 74,296,927 7,429 4,277,317
========== ===== =========
F-20
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
JULY 31, JULY 31,
1998 1997
Cash flows from operating activities
Net loss $(189,595) $(3,131,348)
Adjustments to reconcile net loss
to net cash used in operating activities
Increase in deferred income taxes - (393)
Amortization 68,481 74,413
Decrease in accounts
receivable 168,642 123,337
Decrease in income taxes
receivable - 6,182
Increase in inventories (15,801) (71,822)
Decrease in sundry assets 48,555 98,260
Decrease in accounts payable(177,873) (39,976)
-------- -------
Net cash used for operating
activities (97,591) (2,941,347)
------- ---------
Cash flows from financing activities
Long-term debt (1,441,475) (126,398)
Proceeds on issue of
common shares 1,494,145 1,091,246
--------- ---------
Cash provided by financing
activities 52,670 964,848
------ -------
Cash flows from investing activities
Purchase of capital assets (9,846) (13,116)
----- -------
Discontinued operations - (1,977,738)
----- ---------
Cash provided by financing
activities (9,846) 1,964,622
----- ---------
Decrease in short-term deposits
(Bank indebtedness) (54,767) (11,877)
Cash and short-term deposits
(Bank indebtedness),
beginning of period (492,012) (394,407)
------- --------
end of period $(546,779) $(406,284)
======= =======
F-21
TREASURY INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT JULY 31, 1998
(UNAUDITED)
The financial information for the six-month periods ended July 31, 1998
and 1997 presented in this Proxy Statement has been prepared from accounting
records of Treasury International, Inc. (the "Company") without audit. The
information furnished reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results of interim periods.
The results of operations for the six months ended July 31, 1998 are not
necessarily indicative of the results to be expected for a full year.
1. Nature of business
Treasury International, Inc. is a holding company which through its
wholly-owned subsidiaries, Megatran Investments Ltd. and Mega Blow Moulding
Limited, distributes a variety of consumer and industrial products. The company
was incorporated on August 18, 1995 in the State of Delaware.
2. Summary of significant accounting policies
(a) Basis of consolidation
These consolidated financial statements include the accounts of the company
and its wholly-owned subsidiaries, Megatran Investments Ltd. and Mega Blow
Moulding Limited.
(b) Inventories
Raw materials are valued at the lower of cost (first-in, first-out method)
and net realizable value. Finished goods are valued at the lower of cost and net
realizable value with cost being determined by the retail method.
(c) Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is provided as follows:
Leasehold improvements - straight line over term of lease
Machinery and equipment - 20% diminishing balance Office
equipment - 20% diminishing balance
F-22
TREASURY INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT JULY 31, 1998
(UNAUDITED)
(d) Revenue recognition
Revenue is recognized when customers are invoiced for products
shipped by the company.
(e) Loss per share
Loss per share is calculated based on the weighted average number of
shares outstanding during the period of 48,716,510.
(f) General
These financial statements have been prepared in accordance with
United States generally accepted accounting principles (GAAP), as
they relate to these financial statements.
3. Business combination
On October 30, 1996, the company acquired 100% of the issued and
outstanding common shares of Megatran Investments Ltd., parent company of
Mega Blow Moulding Limited. The purchase price of $2,863,182 consisted of
$1,361,302 cash and debentures of $1,501,880.
4. Inventories
July 31 January 31
Inventories consist of: 1998 1998
--------- ---------
Raw materials $142,265 $144,183
Packaging 21,420 20,135
Finished goods 197,899 181,465
--------- ---------
$ 361,584 $ 345,783
======== ========
F-23
TREASURY INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT JULY 31, 1998
(UNAUDITED)
5. Capital assets
July 31 January 31
1998 1998
------ ------- ----- ----------
Accumulated Net Net
Cost Amortization book value book value
---- ------------ ---------- ----------
Leasehold improvements $4,221 $1,862 $2,359 $2,556
Machinery and equipment 2,474,422 1,960,530 513,892 575,488
Office equipment 111,891 66,498 45,393 42,235
--------- --------- ------- -------
$2,590,534 $2,028,890 $561,644 $620,279
========== ========== ======== ========
6. Bank indebtedness
The bank indebtedness includes three operating demand loans in the amount
of $484,000 which are secured by a registered general assignment of book
debts and general security agreements of Mega Blow Moulding Limited.
7. Long term debt
The long-term debt consists of two term loans. The term loans are secured
by a registered general security agreement having first charge over all
assets excluding real property of Mega Blow Moulding Limited. The term
loans bear interest at rates varying from 6.47% to bank prime plus 1.75%.
The term loans are payable as follows:
1999 $ 152,119
2000 162,347
2001 172,615
2002 182,964
2003 and following 13,548
-------
683,593
Less current portion 152,119
-------
$ 531,474
=========
F-24
TREASURY INTERNATIONAL, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT JULY 31, 1998
(UNAUDITED)
8. Income taxes
As of July 31, 1998 the company had a net operating loss
carryover of approximately $2,431,000 expiring in various years through
2014.
9. General and administrative expenses
General and administrative expenses for the six months ended July 31, 1998
include fees paid by the company for consulting and public relations
services in the amount of $72,144.
10. Discontinued operations
On July 31, 1997, the company disposed of its subsidiary, Silver 925, Inc.
11. Contributed surplus
Contributed surplus represents the premium paid on the issuance of common
shares.
12. Subsequent events
Subsequent to July 31, 1998, the company entered into an agreement to sell
all of the common shares of its wholly-owned subsidiaries, Megatran
Investments Ltd. and Mega Blow Moulding Limited, for cash consideration of
$5,100,000.
F-25
1299004 ONTARIO CORPORATION
FINANCIAL STATEMENTS
AS AT DATE OF INCORPORATION
JUNE 3, 1998
CONTENTS
As at June 3, 1998 - Date of Inception (audited)
Auditors report............................. F-27
Balance sheet............................... F-28
Notes to financial statements............... F-29
F-26
LESLIE Z. GERENDASI, C.A., C.G.A.
CHARTERED ACCOUNTANT
3101 BATHURST STREET
SUITE 600
TORONTO, ONTARIO, CANADA
M6A 2A6
DIRECT LINES:
OFF: (416) 787-7377
RES: (416) 787 2882
FAX: (416) 787-9831
AUDITOR'S REPORT
I have examined the balance sheet of 1299004 Ontario Corporation as at date of
incorporation June 3, 1998. These financial statements are the responsibility of
the Corporation's management. My responsibility is to express an opinion on
these financial statements based on my audit. I conducted my audit in accordance
with generally accepted auditing standards. Those standards require that I plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. In my opinion, these financial statements
present fairly, in all material respects, the financial position of the
Corporation as at date of incorporation June 3, 1998 in accordance with
generally accepted accounting principles.
/s/ Leslie Z. Gerendasi
Chartered Accountant
Toronto, Ontario
June 30, 1998
F-27
1299004 ONTARIO CORPORATION
BALANCE SHEET
AS AT DATE OF INCORPORATION
JUNE 3, 1998
ASSETS
CASH $ 100
========
SHAREHOLDERS EQUITY
CAPITAL STOCK $ 100
========
APPROVED ON BEHALF OF THE BOARD
- --------------------------------
DIRECTOR
F-28
1299004 ONTARIO CORPORATION
BALANCE SHEET
AS AT DATE OF INCORPORATION
JUNE 3, 1998
1. The company was formed for the sole purpose of acquiring the
shares of Mega Blow Moulding Limited.
2. CAPITAL STOCK
Issued 100 common shares at $1.00 each. $100
----
F-29
ANNEX A
STOCK PURCHASE AGREEMENT
SEE ATTACHED
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made the 11th day of August, 1998.
B E T W E E N:
TREASURY INTERNATIONAL, INC. ("Treasury"), a
company incorporated under the laws of
Delaware and MEGATRAN INVESTMENTS LIMITED
("Megatran"), a company incorporated under
the laws of Ontario (Treasury and Megatran
shall be collectively referred to herein as
the "Vendor")
- and -
1299004 ONTARIO CORPORATION, a company
incorporated under the laws of Ontario
(referred to herein as the "Purchaser")
WHEREAS:
A. Treasury is the legal and beneficial owner of all of the
issued and outstanding shares in the capital stock of
Megatran;
B. Megatran is the legal owner and Treasury is the beneficial
owner of all of the issued and outstanding shares in the
capital stock of Mega Blow Moulding Limited (the "Company");
C. The Purchaser has agreed to sell all of its right, title and
interest in and to the Purchased Shares to Total World
Telecommunications, Inc. ("TWTI") pursuant to the terms of a
stock purchase agreement (the "TWTI Agreement") made as of
the 19th day of June, 1998 (the "TWTI Transaction");
D. Royal Bank of Canada ("RBC") has taken a pledge of the
Purchased Shares from Megatran as further and continuing
collateral security for all of the Company's indebtedness,
liabilities and obligations to the Bank; and
E. The Vendor wishes to sell and the Purchaser wishes to purchase all of
Vendor's right, title and interest in and to the Purchased Shares subject
to the terms and conditions more particularly set out herein.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
payments and mutual covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1. - INTERPRETATION
1.1 Definitions
In addition to other terms defined in this Agreement, the following terms
shall have the following meanings:
(a) "Business" means the business presently carried on by the
Company consisting of the development and production of blow
moulded plastic products;
(b) "Business Day" means a day other than Saturday, Sunday or
legal holiday in Ontario;
(c) "Closing" means the completion of the purchase and sale of
the Purchased Shares in accordance with Article 11 hereof;
(d) "Closing Date" means the closing date for the TWTI
Transaction;
(e) "Financial Statements" mean the Company's financial statement for its last
fiscal year end (and as may be available), together with notes to such
statements, all as reported upon by the Company's accountant;
(f) "Irrevocable Proxies" means the irrevocable proxies coupled
with an interest executed by Majority Shareholders in favour
of the Purchaser;
(g) "Liens" means all mortgages, claims, charges, liens, pledges,
encumbrances, security interests, adverse claims and other restrictions of
any kind and nature whatsoever;
(h) "Majority Shareholders" means those persons, corporations and partnerships
holding not less than 51% of Treasury's issued and outstanding shares as
demonstrated by Treasury's transfer agent;
(i) "Purchase Price" shall have the meaning ascribed to it in
Article 3 hereof;
-2-
(j) "Purchased Shares" means all of the issued and outstanding shares in the
capital of the Company owned and being sold by the Vendor, being two
hundred and forty (240) shares in the Company's capital stock all of which
are being purchased by the Purchaser;
(k) "RBC" means Royal Bank of Canada;
(l) "RBC Indebtedness" means all of the Company's indebtedness,
liabilities and obligations to RBC, howsoever and
wheresoever incurred;
(m) "RBC Security" means the security issued by the Company to
RBC charging all of the Company's property, assets and
undertaking;
(n) "Taxes" means all taxes, duties, levies, assessments,
reassessments or governmental charges, including without
limitation, income, corporation, capital, real or personal
property, excise, payroll (including Unemployment Insurance
and Canada Pension Plan contributions), franchise, sales,
and goods and services taxes imposed by any jurisdiction
(whether federal, provincial or municipal) applicable to the
Vendor or the Company and any interest, penalties and fines
therein; and
(o) "TWTI Agreement" and "TWTI Transaction" shall have the meanings ascribed
to such terms in recital C hereof.
1.2 Certain definitions
"Agreement", "this Agreement", "hereto", "hereof", "herein", "hereunder"
and similar expressions refer to this Agreement and not to any particular
Article, Section, paragraph or other portion of this Agreement and include every
amendment or instrument supplementary hereto or in implementation hereof.
1.3 Number and Gender
Except where the context otherwise indicates, words importing the singular
number only shall include the plural, and vice versa, and words importing the
masculine gender shall include the feminine gender and "persons" shall include
individuals, partnerships, joint ventures, associations, corporations and all
other forms of business organizations, governments, regulatory or governmental
agencies, commissions, departments and instrumentalities.
-3-
ARTICLE 2. - GENERAL
2.1 Dollar Amounts
All dollar amounts referred to herein are in lawful currency of the United
States unless otherwise stated.
2.2 Accounting Terms
Each accounting term used herein, unless a contrary definition is
provided, shall have the meaning given to it under generally accepted accounting
principles in Canada existing at the date hereof.
ARTICLE 3. - PURCHASED SHARES AND PURCHASE PRICE
3.1 Purchased Shares
Subject to the terms and conditions contained in this Agreement, the
Vendor agrees to sell, assign, transfer and deliver to the Purchaser all of the
Vendor's beneficial right, title and interest and, to the extent possible, legal
ownership in and to the Purchased Shares and the Purchaser agrees to purchase
the Purchased Shares.
3.2 Deposit
Upon the execution of this Agreement and the delivery of the Irrevocable
Proxies, the Purchaser shall deliver the sum of $250,000 U.S. Funds to the
Vendor, which shall be held by it as a non-refundable deposit (the "Deposit")
pending completion of the transactions contemplated by this Agreement.
3.3 Consideration
In consideration for the transfer of the Vendor's right, title and
interest in and to the Purchased Shares, the Purchaser shall pay to the Vendor
the sum of $4,250,000 U.S. Funds (the "Purchase Price") of which the Purchaser
shall receive a credit against the Deposit and the balance shall be paid or
satisfied at Closing by issuing to the Vendor at Closing a promissory note (the
"Promissory Note") in the amount equal to the balance of the Purchase Price
which shall include the following terms and conditions:
(a) all amounts outstanding under the Promissory Note shall not
bear any interest;
(b) the indebtedness represented by the Promissory Note may be
paid by the Purchaser at any time or times without notice or
bonus; and
-4-
(c) all amounts owing as evidenced by the Promissory Note, including principal
and accrued interest, shall become due and payable on the date that is 190
days following the Closing Date or, if that date is not a Business Day,
the Business Day next following.
3.4 Failure to Complete Agreement
If the Closing shall not have occurred on or prior to 11:59 p.m. eastern
standard time on September 30, 1998 for any reason save and except for the
Vendor's failure to obtain stockholder approval for the transactions
contemplated hereby or a breach by the Vendor of any of its other obligations to
the Purchaser under this Agreement, then:
(a) this Agreement shall terminate provided that the parties rights against
the other for any such breach shall survive such termination; and
(b) the Purchaser shall irrevocably instruct its counsel, Gowling, Strathy &
Henderson ("GSH"), to deliver to RBC the sum of $250,000 Cdn. Funds
currently held in trust by GSH under the same terms and conditions as if
this Agreement had not been terminated.
ARTICLE 4. - VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying upon such representations and
warranties in connection with this Agreement:
4.1 Share Ownership of the Company
Treasury and Megatran are the beneficial and legal owners, respectively,
of the Purchased Shares.
4.2 Authorized and Issued Capital
The authorized capital of the Company consists of an unlimited number of
common shares, of which two hundred and forty (240) common shares are issued and
outstanding. The Purchased Shares have been duly and validly authorized and
issued and are outstanding as fully paid and non-assessable shares.
-5-
4.3 Corporate Power
The Company has the corporate power to own or lease its property and to
carry on its business and is qualified as a corporation to do business and is in
good standing in each jurisdiction in which its business is conducted or the
property owned or leased by it makes such qualification necessary.
4.4 Guarantees, etc.
The Company is not a party to or bound by any agreement of guarantee,
indemnification, surety or similar commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person, corporation or
partnership.
4.5 Corporate Authority
Subject to the approval of the majority of the Vendor's stockholders
(which shall be obtained on or prior to Closing), the execution, delivery and
performance by the Vendor of this Agreement, and each and every agreement,
document and instrument of conveyance contemplated hereby, and the consummation
of the transactions herein, have been duly and validly authorized by all
necessary corporate action of the Vendor.
4.6 Real Property Lease
The lease of the Company's premises is the only lease to which the Company
is a party, whether as lessor or lessee, in respect of any real property.
4.7 Equipment Leases
The Company is not a party to any lease or agreement in the nature of a
lease, conditional sale agreement, installment obligation or similar obligation
(all such obligations and agreements being referred to herein as a "Lease"),
whether as lessor or lessee, in respect of personal party.
4.8 Conformity with Laws
There are no violations, notices of violations, outstanding work orders,
notices or similar requirements relating to the business carried on by the
Company by or from any police or fire department, sanitation, health, building,
labour safety or environmental authorities or from any other federal, provincial
or municipal authority and there are no matters under discussion with any such
departments or authorities relating to work orders, notices or similar
requirements which, in either case, would have a material adverse effect on the
Company or its Business.
-6-
4.9 Laws and Regulations
The Company is conducting its business in compliance, in all material
respects, with all applicable laws, rules, regulations, notices, approvals and
orders of Canada and Ontario and any municipality thereof in which its business
is carried on, is not in breach in any material respect of any such laws, rules,
regulations, notices, approvals or orders and is duly licensed, registered or
qualified, and duly possesses all such licenses in Ontario and any municipality
thereof in which the Company carried on its business to enable its business to
be carried on as now conducted (except for such licenses, registrations or
qualifications the failure of which to have obtained, will not cause a material
adverse effect on the Company or its Business) and all such licenses,
registrations, qualifications and permits are valid and subsisting and in good
standing.
4.10 Incorporation and Organization
The Company is a corporation duly incorporated and organized and validly
subsisting under the laws of Ontario and is duly qualified as a corporation to
do business in Ontario.
4.11 Binding Agreement
Subject to the approval of the majority of the Vendor's stockholders
(which shall be obtained on or prior to Closing), this Agreement constitutes a
legal, valid and binding obligation of the Vendor, enforceable against it in
accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditor's
rights generally; and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
4.12 Non-Contravention; Consents
The execution and delivery of this Agreement and the completion by the
Vendor of the transactions contemplated herein will not result in any material
violation or breach of any of the provisions of the constating documents or
by-laws of the Company, or to the Vendor's knowledge breach any material
contract or lease, written or oral, to which the Company or the Vendor is a
party or by which they are bound, nor to the Vendor's knowledge require the
Company or the Vendor to obtain any consents, authorizations or approvals, save
for the approval of the Vendor's and the Company's directors and stockholders,
or to the Vendor's knowledge result in the creation of any Lien on the Purchased
Shares.
-7-
4.13 No Other Purchase Agreements
No person, company, partnership or other entity has any Agreement or
option or any right or privilege capable of becoming an Agreement for the
purchase of the Purchased Shares save and except as provided for in this
Agreement.
4.14 Title to Assets; Permitted Liens
The assets owned or used by the Company (other than those leased by the
Company) are owned by the Company as the beneficial and legal owner thereof with
a good and marketable title or leaseholds therein and thereto and with full
right of use thereof subject only to the RBC Security.
The Purchaser acknowledges and confirms that the RBC Security shall remain as
valid and binding obligations of the Company until the RBC Indebtedness has been
satisfied in full.
4.15 Financial Statements
(a) The Financial Statements of the Company provided to the Purchaser has been
prepared in accordance with Canadian generally accepted accounting
principles.
(b) There are no liabilities or obligations of the Company, in respect of
which the Company or the Purchaser is or may become liable on or after the
consummation of the transactions contemplated by this Agreement other
than:
(i) liabilities disclosed on the Financial Statements and
those liabilities and obligations specifically
disclosed in this Agreement; and
(ii) liabilities incurred in the ordinary course of business
of the Company.
4.16 Residency of Vendor
The Vendor is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada).
4.17 Truth on Closing
The Vendor shall deliver a certificate to the Purchaser certifying that
each of the representations and warranties of the Vendor contained herein are
true and correct on and as of the Closing Date with the same force and effect as
though made on such date.
-8-
4.18 Litigation
There is no litigation, suit, proceeding, action, claim or investigation,
at law or in equity, pending or to the Vendor's knowledge, information and
belief after due inquiry threatened against, or effecting in any way the
Company's ability to own and conduct its business as presently conducted nor is
the Company subject to any judgment, order, writ, injunction or decree of any
court or governmental authority, department, commission, board, bureau, agency
or other instrumentality which would have a material effect on its business or
on the transactions contemplated herein.
ARTICLE 5. - PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor as follows and
acknowledge that the Vendor is relying upon such representations and warranties
in connection with this Agreement:
5.1 Corporate Power
The Purchaser has the corporate power to own or lease its property and to
carry on its business and is qualified as a corporation to do business and is in
good standing in each jurisdiction in which its business is conducted or the
property owned or leased by it makes such qualification necessary.
5.2 Corporate Authority
Subject to the approval of the Purchaser's shareholders (which shall be
obtained on or prior to Closing), the execution, delivery and performance by the
Purchaser of this Agreement, and each and every agreement, document and
instrument of conveyance contemplated hereby, and the consummation of the
transactions herein, have been duly and validly authorized by all necessary
corporate action of the Purchaser.
5.3 Incorporation and Organization
The Purchaser is a corporation duly incorporated and organized and validly
subsisting under the laws of Ontario and is duly qualified as a corporation to
do business in Ontario.
5.4 Binding Agreement
This Agreement constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditor's
rights generally; and
-9-
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
5.5 Non-Contravention
The execution and delivery of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby will not result in any
material violation or breach of any material contract or lease, written or oral,
to which the Purchaser is a party or by which it is bound.
5.6 Truth on Closing
The Purchaser shall deliver a certificate to the Vendor certifying that
each of the representations and warranties of the Purchaser contained herein are
true and correct on and as of the Closing Date with the same force and effect as
though made on such date.
ARTICLE 6. - COVENANTS OF THE VENDOR
The Vendor hereby covenants with the Purchaser that the following will be
done or caused to be done at or prior to Closing or earlier as herein provided:
6.1 Vendor's Compliance with Agreement
The Vendor shall have used its best efforts to take all steps necessary to
ensure that the representations and warranties contained in this Agreement are
true and correct on the Closing Date as if made on and as of such date and shall
have done all things necessary to facilitate the transactions provided for
herein.
6.2 Resignation and Release of Directors and Officers
The Vendor shall cause all of the Company's officers and directors to
resign effective as of Closing and deliver to the Company release of any claims,
actions or causes of action that any such officer or directors has or may have
against the Company; provided that, notwithstanding the obligation of the
Vendors to deliver such releases, the Vendor shall have the right nominate two
designees to the Company's board of directors which shall consist of four
individuals in total until the Purchase Price has been paid or satisfied in full
following which the Vendor's designees shall forthwith tender their resignations
as directors of the Company.
6.3 Tax Filings
The Vendor shall cause the Company to promptly pay, or set aside for
payment, all Taxes due and owing by the Company up to the date of this
Agreement, unless other satisfactory arrangements have been made by the Vendor
and the Purchaser in writing.
-10-
6.4 Transfers
The Vendor shall cause all necessary resolutions to be enacted and other
steps to be taken so as to validly and effectively transfer the Purchased Shares
to the Purchaser at Closing in accordance with this Agreement.
6.5 Third Party Consents
The Vendor shall co-operate with the Purchaser and its representatives to
obtain any third party consents which may be required.
6.6 Purchaser's Investigation
The Vendor shall cause the Company to permit the Purchaser and its agents
and professional advisors, at the Purchaser's expense during regular business
hours and upon prior written notice, to make such inspections of the assets,
books and records, liabilities and financial and legal condition of the Company
and the Business as the Purchaser deems necessary or advisable, acting
reasonably.
6.7 No Additional Shares
Until Closing, Treasury shall not issue any additional shares in its
capital stock to any person, corporation or partnership unless such person,
corporation or partnership agrees to execute and deliver to the Purchaser an
irrevocable proxy coupled with an interest to vote such shares in favour of the
transactions contemplated hereby such proxy to be in the identical form as the
Irrevocable Proxies.
6.8 Stockholder Approval
Forthwith following the execution of the Agreement, the Vendor shall use
its best efforts to obtain stockholder approval for the transactions
contemplated by this Agreement.
6.9 RBC Consent
The Vendor shall use its best efforts to obtain RBC's consent to the
transactions contemplated hereby.
ARTICLE 7. - COVENANTS OF THE PURCHASER
The Purchaser hereby covenants with the Vendor that the following will be
done at or prior to Closing or earlier as herein provided:
-11-
7.1 Purchaser's Compliance with Agreement
The Purchaser shall have taken all steps necessary to ensure that his
representations and warranties contained herein are true and correct on the
Closing Date as if made on and as of such date and shall have done all things
necessary to facilitate the transactions herein provided for.
7.2 Confidentiality
Prior to Closing and, if the transaction contemplated herein is not
completed, at all times after Closing, the Purchaser will keep confidential all
information obtained by it relating to the Company and the Business, except for
such information which must reasonably be disclosed in the Plan or in the
process of confirming the Plan. The Purchaser further agrees that such
information will be disclosed only to those of its representatives and advisors
who need to know such information for the purposes of evaluating and
implementing the transactions contemplated hereby. If the transactions
contemplated herein are not completed for any reason, the Purchaser will return
forthwith, without retaining any copies thereof, any and all information and
documents obtained from the Vendor and the Company.
7.3 Third Party Consents
The Purchaser shall co-operate with the Vendor and its representatives to
obtain any further consents required by any third party.
7.4 Payment to RBC
On Closing, the Purchaser shall advance or caused to be advanced to the
Company the sum of $250,000 Cdn. which advance shall be used to reduced the RBC
Indebtedness and which shall be secured by all of the Company's property, assets
and undertaking, present and future, subsequent in priority only to the RBC
Security.
7.5 Business in the Ordinary Course
Until the Purchase Price has been paid or satisfied in full, the Purchaser
shall:
(a) ensure that the Business is managed in the ordinary course;
(b) ensure that the Company's signing authority with RBC provide
that any cheques written by the Company in excess of $5,000
Cdn. be co-signed by the Vendor's nominee to the Company's
board of directors;
(c) cause to be delivered to the Vendor by the 15th day of the month
following, the Company's internally generated financial statements for the
month prior in the same form as the Company may deliver to RBC;
(d) ensure that the Company's Business is managed prudently; and
which may have a material adverse effect on the Business.
-12-
7.6 Agreement by TWTI
On or before Closing, the Purchaser shall obtain an agreement from TWTI as
contemplated by section 10.3 of this Agreement.
7.7 Legal Fees
On or prior to Closing, the Purchaser shall reimburse the Vendor for its
legal fees and disbursements in connection with the transactions contemplated by
this Agreement up to $20,000 U.S. Funds subject to receipt of reasonably
detailed breakdown of such fees and disbursements.
7.8 No Transfer of Purchased Shares
Until the indebtedness represented by the Promissory Note has been paid or
satisfied in full, the Purchaser shall not transfer the Purchased Shares to any
person, corporation or partnership, save and except to TWTI as contemplated by
the TWTI Transaction.
ARTICLE 8. - SURVIVAL
8.1 Survival of Vendor's Representations and Warranties
The Vendor's representations and warranties contained in this Agreement
shall survive the Closing of the purchase and sale of the Purchase Shares
provided for and, notwithstanding such closing, nor any investigation made by or
on behalf of the Purchaser, shall continue in full force and effect for the
benefit of the Purchaser for a period of 12 months following Closing.
8.2 Survival of Vendor's Covenants
The Vendor's covenants contained in this Agreement shall survive the
Closing of the purchase and sale of the Purchase Shares herein provided for and,
notwithstanding such Closing, shall continue in full force and effect for the
benefit of the Purchaser in accordance with the terms thereof.
8.3 Survival of Purchaser's Representations and Warranties
The Purchaser's representations and warranties contained in this Agreement
shall survive the Closing of the purchase and sale of the Purchase Shares herein
provided for and, notwithstanding such Closing, nor any investigation made by or
on behalf of the Vendor, shall continue in full force and effect for a period of
12 months following Closing.
-13-
8.4 Survival of Purchaser's Covenants
The Purchaser's covenants contained in this Agreement shall survive the
closing of the purchase and sale of the Purchase Shares herein provided for and,
notwithstanding such closing, shall continue in full force and effect for the
benefit of the Vendor in accordance with the terms thereof.
ARTICLE 9. - CONDITIONS IN FAVOUR OF THE PURCHASER
The purchase and sale of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Purchaser to be fulfilled
or performed by the Vendor or waived by the Purchaser at or prior to Closing:
9.1 Full Performance
The Vendor shall have performed in all material respects all the terms,
covenants and conditions of the Vendor under this Agreement.
9.2 No Adverse Change
At the Closing Date, there shall have been no material adverse change in
the financial condition of the Business. For purposes of this Section, a
"material adverse change" does not include any change in the affairs,
operations, prospects, assets or condition of the Business arising directly or
indirectly from (i) any activities of the Purchaser, his employees, officers,
agents or representatives (whether pursuant to this Agreement or otherwise) or
(ii) any activities arising in the ordinary course of business.
9.3 Litigation
No action or proceeding shall be pending or, to the knowledge of the
Vendor, threatened by any person to enjoin, prohibit or materially affect the
transactions herein contemplated or which may have a material adverse effect on
the Company, but excluding any litigation, action or proceeding arising, in
whole or in part, from the acts or omissions of the Purchaser, its agents or
representatives, whether pursuant to this Agreement or otherwise.
9.4 Consent of RBC
On or prior to Closing, the Purchaser shall have received RBC's written
consent to or approval of the transactions contemplated by this Agreement.
9.5 Evidence re: Debentures
On or prior to Closing, the Vendor shall deliver to the Purchaser
confirmation from the holders of the following debentures that the Company has
no obligations or liabilities whatsoever in connection with the following
debentures:
-14-
(a) certain debentures issued by Treasury to and in favour of
Leslie Z. Gerendasi in the outstanding principal amount of
US$250,000;
(b) certain debentures originally issued by Treasury to and in favour of
Firmcorp Equities Limited and which were subsequently assigned to DHS
Properties Inc., in the outstanding aggregate principal amount of
US$320,000; and
(c) a certain debenture originally issued by Treasury to and in favour of
David Bereskin, as nominee, and which was subsequently assigned by the
beneficial owner thereof to 1274328 Ontario Inc., in the outstanding
principal amount of Cdn. $1,000,000.
9.6 Stockholders Approval
On or prior to Closing, the Vendor shall deliver to the Purchaser evidence
that the Vendor's stockholders have approved the transactions contemplated
hereby.
If any of the foregoing conditions set forth in Article 9 hereof has not
been fulfilled by the Vendor or waived by the Purchaser on or prior to the
Closing Date, the Purchaser may rescind this Agreement by notice in writing to
the Vendor (except where failure to fulfill such conditions arises as a result
of the Purchaser's actions or omissions). In such event the Purchaser shall be
released from all its obligations hereunder and and unless the Purchaser can
demonstrate the condition or conditions for the non-performance of which they
have rescinded this Agreement are reasonably capable of being performed by the
Vendor, the Vendor shall also be released form all of its obligations.
ARTICLE 10. - CONDITIONS IN FAVOUR OF THE VENDOR
The purchase and sale of the Purchased Shares is subject to the following
terms and conditions for the exclusive benefit of the Vendor, to be fulfilled or
performed by the Purchaser or waived by the Vendor at or prior to Closing:
10.1 Full Performance
The Purchaser shall have performed in all material respects all the terms,
covenants and conditions of the Purchaser under this Agreement.
-15-
10.2 Payment or Satisfaction of Purchase Price
The Purchaser shall have paid the cash portion of the Purchase Price to
the Vendor and issued the Promissory Note as described herein.
10.3 Assumption of Obligations by TWTI
TWTI or the the Purchaser shall have entered into an agreement with the
Vendor, which agreement shall provide that:
(a) TWTI shall assume or take such steps as may be reasonably necessary to
ensure that the Purchaser's obligations to the Vendor set out in sections
6.2 and 7.5 hereof and that the same are satisfied;
(b) provided that the amounts owing as evidenced by the
Promissory Note have not been paid or satisfied in full in
accordance with the terms hereof, then the Vendor shall have
the right for a period of 30 days following such due date to
give notice (the "Call Notice") to TWTI in writing that it
wishes to purchase all of TWTI's right, title and interest
in and to the Purchased Shares which, the Vendor
acknowledges, may be subject to a pledge in favour of RBC;
(c) the transaction of purchase and sale initiated by the Call Notice shall be
completed within 30 days from the date that TWTI receives the Call Notice;
(d) as security for TWTI's obligations in respect of the sale of the Purchased
Shares to the Vendor as set forth above, TWTI shall deliver to the Vendor
a pledge of the Purchased Shares subordinate to any pledge given by TWTI
to RBC; and
(e) until the indebtedness evidenced by the PromissoryNote has been paid or
satisfied in full TWTI shall not transfer the Purchased Shares without the
Vendor's prior written consent.
If any of the foregoing conditions set forth in Article 10 has not been
fulfilled by the Purchaser or waived by the Vendor on or prior to the Closing
Date, the Vendor may rescind this Agreement by notice in writing to the
Purchaser. In such event, the Vendor shall be released from all its obligations
hereunder and unless the Vendor can demonstrate the condition or conditions for
the non-performance of which it has rescinded this Agreement are reasonably
capable of being performed by the Purchaser, the Purchaser shall also be
released form all of its obligations hereunder.
-16-
ARTICLE 11. - CLOSING ARRANGEMENTS
11.1 Place of Closing
The closing of the transactions contemplated by this Agreement shall take
place at Closing on the Closing Date at the offices of Gowling, Strathy &
Henderson, Suite 4900, Commerce Court West, Toronto, Ontario, or at such other
place as the
parties hereto may agree.
11.2 Deliveries by the Vendor
Subject to the satisfaction and fulfilment of all conditions provided for
in this Agreement (unless waived in writing by the Purchaser at or prior to
Closing) the Vendor shall deliver to the Purchaser the following documents or
matters duly executed by all persons other than the Purchaser or do the
following acts or things which delivery and performance constitute a condition
precedent in favour of the Purchaser to the completion of the transactions
herein provided for:
(a) the share certificates representing the Purchased Shares
duly endorsed in blank for transfer to the Purchaser;
(b) a copy of a resolution of the board of directors of the Company and the
Vendor authorizing the transfer of the Vendor's right, title and interest
in and to the Purchased Shares to the Purchaser;
(c) the Irrevocable Proxies;
(d) the confirmations referred to in Section 9.5 hereof; and
(e) the Company's minute book and other corporate records.
11.3 Deliveries by the Purchaser
Subject to the satisfaction and fulfilment of all conditions provided for
in this Agreement (unless waived in writing by the Vendor at or prior to
Closing), the Purchaser shall deliver to the Vendor the Promissory Note.
ARTICLE 12. - GENERAL MATTERS
12.1 Notice
Any notice required or permitted to be given for purposes of this
Agreement shall be in writing and shall be sufficiently given if personally
delivered, at the applicable address set out below, or sent by registered
letter, postage prepaid or transmitted by telecopier (confirmed on the same day
or following day by prepaid mail or by return telecopier transmittal):
-17-
- ------------------------------------------
(a) if to the Vendor, addressed to:
1183 Finch Avenue West
Suite 508
North York, Ontario
M3J 2G2
Attention: The President
Facsimile No.: (416) 663-5509
with a copy to:
Piper & Marbury
1251 Avenue of the Americas
New York, New York
10020 - USA
Attention: Mr. Paul Pollock
Facsimile No.:(212) 835-6001
- ------------------------------------------
- ------------------------------------------
(b) if to the Purchaser addressed to:
3101 Bathurst Street
Suite 600
Toronto, Ontario
M6A 2A6
Attention: The President
Facsimile No.:(416) 787-9831
- ------------------------------------------
or at such other address as the party to whom such writing is to be given shall
have notified the party giving the same in the manner provided in this Section.
Any notice delivered to the party to whom it is addressed as hereinbefore
provided shall be deemed to have been given and received on the date it is so
delivered at such address, provided that if such day is not a Business Day, then
a notice shall be deemed to have been given and received on the next Business
Day following such day. Any notice mailed as aforesaid shall be deemed to have
been given and received on the date it is so delivered at such address, provided
that if such day is not a Business Day, then a notice shall be deemed to have
been given and received on the next Business Day following such day. Any notice
mailed as aforesaid shall be deemed to have been given and received on the fifth
Business Day next following the date of its mailing. Any notice transmitted by
telecopier shall be deemed given and received on the first Business Day after
its transmission.
-18-
12.2 Entire Agreement
This Agreement and all other documents delivered in connection herewith
constitutes the entire agreement between the parties hereto and supersedes all
prior agreements, understandings, negotiations and discussions between the
parties hereto with respect to the subject matter of this Agreement. There are
not and shall not be any verbal statements, representations, warranties,
undertakings or agreements between the parties with respect to the subject
matter of this Agreement and this Agreement may not be amended or modified in
any respect except by written instrument signed by the parties hereto.
12.3 Waiver
No waiver of any of the provisions of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar) nor shall
such waiver be effective or binding unless in writing and, unless otherwise
provided, shall be limited to the specific breach waived.
12.4 Applicable Law
This Agreement shall be governed by and construed in accordance with the
laws of Ontario and the laws of Canada applicable therein.
12.5 Enurement
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors and legal personal
representatives, and shall not be assignable by any of the parties hereto
without the written consent of the other party.
12.6 Counterparts
This Agreement may be executed in one or more counterparts, all of which
when executed and delivered (including by facsimile transmission) shall be
considered one and the same agreement, and each of which shall be deemed an
original. If executed by facsimile the party(s) so executing shall forthwith
deliver an original thereof to the other.
12.7 Further Assurances
From time to time subsequent to the Closing Date, each of the parties
hereto shall, at the request and expense of the requesting party, execute and
deliver such additional conveyances, transfers and other assurances, as may, in
the opinion of counsel for such party, be required to effectually carry out the
intent of this Agreement in accordance with the terms hereof.
-19-
12.8 Severability
If any provision of this Agreement is determined to be invalid or
unenforceable by a court of competent jurisdiction from which no further appeal
lies or is taken, the provision shall be deemed to be severed herefrom, and the
remaining provisions of this Agreement shall not be affected thereby and shall
remain valid and enforceable.
12.9 Independent Legal Advice
This Agreement has been drafted by Gowling, Strathy & Henderson, as
solicitor for the Vendor. The Purchaser has been advised to obtain independent
legal advice before signing this Agreement and acknowledges that it has obtained
or has had the opportunity to obtain but has declined independent legal advice
prior to the execution of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties hereto on the date first above written.
TREASURY INTERNATIONAL, INC.
a corporation incorporated under the
laws of Delaware
Per:
Name:
Title:
I have authority to bind the Corporation
MEGATRAN INVESTMENTS LIMITED
a corporation incorporated under the
laws of Ontario
Per:
Name:
Title:
I have authority to bind the Corporation
1299004 ONTARIO CORPORATION
a corporation incorporated under the
laws of Ontario
Per:
Joseph Lebovics, Director
I have the authority to bind the
Corporation
-20-
As of September 30, 1998
1299004 Ontario Corporation
3101 Bathurst Street, Suite 600
Toronto, Ontario M6A 2A6
Canada
Gentlemen:
Reference is made to that certain Stock Purchase Agreement, dated August
11, 1998 (the "Stock Purchase Agreement"), by and among Treasury International,
Inc. ("Treasury"), Megatran Investments Limited ("Megatran") and 1299004 Ontario
Corporation (the "Purchaser"). Unless otherwise defined herein, capitalized
terms shall have the meanings ascribed to them in the Stock Purchase Agreement.
Pursuant to discussions among Treasury, Megatran and the Purchaser, the
parties have agreed to extend the Closing (referred to in Section 3.4 of the
Purchase Agreement) to a date within five (5) business days after the date of
the special meeting of shareholders of Treasury (the "Special Meeting") to be
held for the purpose of voting on the Stock Purchase Agreement and the
transactions contemplated thereby (the "New Closing Date"); provided, however,
that in no event shall the New Closing Date occur after January 31, 1999.
Subject to approval by the U.S. Securities and Exchange Commission (the "SEC")
of the preliminary proxy statement for the Special Meeting, Treasury has
selected November 16, 1998 as the date of the Special Meeting (the "Special
Meeting Date"). The Purchaser acknowledges that the Special Meeting Date is
subject to change should the SEC fail to timely approve such proxy statement.
By setting forth your signature below, Treasury, Megatran and the
Purchaser hereby agree that the Stock Purchase Agreement is amended as described
in the second paragraph of this letter, and, except as set forth therein, all
terms and provisions of the Stock Purchase Agreement shall remain in full force
and effect.
This letter agreement shall be governed by and construed in accordance
with the laws of Ontario and the laws of Canada applicable therein.
Very truly yours,
TREASURY INTERNATIONAL, INC.
By:_____________________________
James Hal, President
MEGATRAN INVESTMENTS LIMITED
By:_____________________________
James Hal, President
Accepted and agreed to:
1299004 ONTARIO CORPORATION
By:_____________________________
Joseph Lebovics, Director
- --------------------------------------------------------------------------------
PROXY TREASURY INTERNATIONAL, INC. PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and , or either of them, with power
of substitution, as proxies, to appear and vote, as designated below, all the
shares of Common Stock of Treasury International, Inc. (the "Company"), held of
record by the undersigned on November 5, 1998 at the Special Meeting of
Stockholders to be held on November 16, 1998 and any adjournments or
postponements thereof.
1. To approve the sale to 1299004 Ontario Corporation of all of the
capital stock of the Company's indirect subsidiary, Mega Blow Moulding Limited,
on the terms and conditions contained in that certain Stock Purchase Agreement
dated August 11, 1998 and the amendment thereto dated as of September 30, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS INDICATED, THE PROXY WILL
BE VOTED "FOR" THE ABOVE PROPOSAL.
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment or
adjournments thereof.
Dated: _____________________, 1998
---------------------------------------------
Signature
---------------------------------------------
Signature
IMPORTANT: Please sign
exactly as your name or
names appear(s) hereon.
Joint owners should
each sign. If you sign
as agent or in any
other representative
capacity, please set
forth such capacity. If
a corporation, please
give full corporate
name by President or
other authorized
officer. If a
partnership, please
sign in partnership
name by authorized
person.